Ladies and gentlemen, thank you for standing by. Welcome to Hua Hong Grace Semiconductor Second Quarter 2026 Earnings Conference Call. Today's call is hosted by Dr. Peng Bai, chairman and president, and Mr. Daniel Wang, executive vice president and chief financial officer. Please be advised that your dial-in are in a listen-only mode. However, at the conclusion of the management presentation, there will be a question -and -answer session, at which time you will receive instructions on how to participate. The earnings press release and second quarter 2026 summary slides are available to download at our company's website, www.huahonggrace.com. Without further ado, I would like to introduce you to Mr. Daniel Wang, executive vice president and chief financial officer. Thank you. Good afternoon, everyone. Thank you for joining our Q2 2026 earnings conference. Today, we will first have Dr. Peng Bai, our Chairman and President, provide an overview of our second quarterly performance. I will then take you through our financial results in detail and then offer guidance for the upcoming quarter. We will then open the floor for a question and answer session. With that, I turn the call over to Dr. Bai. Thank you, Daniel. Good afternoon, everyone. Thank you for joining our earnings call. We continued to improve our operational performance in the second quarter of 2026, with profitability strengthened further. Revenue hit a record high of $717 million, representing a year-on-year increase of 26.8%. Gross margin stood at 16.5%, up 5.6 percentage points year-on-year. Both metrics beat guidance and achieved sequential growth. Net profits attributable to shareholders of the parent company amounted to $38.6 million, posting substantial growth both year-on-year and quarter-on-quarter. Hua Hong Grace maintained a high fab utilization rate in Q2, delivered growth across all process technology platforms, especially the standalone and embedded non-volatile memory products. The improved business performance came as a result of rising volumes and prices. Since the beginning of the year, the global semiconductor industry has witnessed a strong AI-driven uptick in demand. First, on memory IC products, then spreading to logic and analog IC products that are associated with AI applications. As a specialty technology foundry serving a broad marketplace, we have clearly seen an overall positive impact on our business by the AI wave. We have also seen divergence in intensity and strength of market demand depending on end-user market segments. Amid the rapidly evolving industry landscape, our strategy of steady capacity expansion, ongoing specialty technology upgrades, and continuous capacity product mix optimization will allow us to capture growth opportunity to provide substantial improvement in our business results. Hua Hong Grace has recently obtained registration approval from the China Securities Regulatory Commission for our acquisition of Huali Microelectronics. Integration of the acquired assets into Hua Hong Grace will strengthen our technologies portfolio, increase our operational economy of scale, and improve our profitability, injecting fresh momentum into our future growth. Now, I would like to hand the call over to our CFO, Mr. Daniel Wang, for his comments. Daniel? Thank you, Dr. Bai, for your very inspiring remarks. Now, let me walk you through a summary of our financial performance for the second quarter, again, provide our revenue and the margin outlook for Q3 2026 before opening the floor for the question -and -answer session. First, let's review our financial results for the second quarter. Revenue reached an all-time high of $717.5 million, 26.8% over Q2 2025 and 8.6% above Q1 2026, primarily driven by increased wafer shipment and improved average selling price. Gross margin was 16.5%, 5.6 percentage points over Q2 2025 and 3.5 percentage points above Q1 2026, primarily driven by improved average selling price and the cost reduction efforts. Partially offset by increased depreciation costs. Operating expenses were $109.1 million, 11.4% over Q2 2025, and 3.3% above Q1 2026, mainly due to increased labor expenses. Other income net was $2.2 million, 79.4% lower than Q2 2025, primarily due to increased finance costs and the decrease in government subsidies, partially offset by increased share of profit of associates. The other loss net was $2.4 million, mainly due to increased share of profit of associates. The income tax expenses was $7.6 million, 7.5% over Q2 2025. Profit for the period was $3.9 million compared to a loss of $32.8 million in Q2 2025 and a loss of $17.3 million in Q1 2026. Net profit attributable to shareholders of the parent company was $30.6 million, 385.9% over Q2 2025, and 84.6% above Q1 2026. Basic earnings per share was $0.022, which is $0.022, 340% over Q2 2025, and 83.3% above Q1 2026. Annualized ROE was 2.4%, 2 percentage points over Q2 2025, and 1.2 percentage points above Q1 2026. Now, let's take a closer look at our Q2 2026 revenue performance. From a geographical perspective, revenue from China was $563.7 million, contributing 78.6% of total revenue, and an increase of 20% over Q2 2025, mainly driven by increased demand for MCU, flash, Trench MOSFETs, logic, and smart card ICs. Revenue from North America was $93.8 million, an increase of 77% over Q2 2025, mainly driven by increased demand for other power management IC and MCU products. Revenue from other Asia was $32 million, an increase of 11.6% over Q2 2025, mainly driven by increased demand for super junction and MCU products. Revenue from Europe was $28 million, an increase of 90.1% over Q2 2025, mainly driven by increased demand for MCU and smart card ICs. With respect to technology platforms, revenue from embedded non-volatile memory was $200.1 million, an increase of 41.8% over Q2 2025, mainly driven by increased demand for MCU and smart card ICs. Revenue from standalone non-volatile memory was $63.3 million, an increase of 149.3% over Q2 2025, mainly driven by increased demand for flash products. Revenue from power discrete was $182.3 million, an increase of 9.4% over Q2 2025, mainly driven by increased demand for Trench MOSFETs products. Revenue from logic and RF was $83.2 million, an increase of 21.3% over Q2 2025, mainly driven by increased demand for logic products. Revenue from analog and power management IC was $183.1 million, an increase of 13% over Q2 2025, mainly driven by increased demand for other power management IC products. Now, turning to our cash flow statement, net cash flows generated from operating activities was $330.1 million, 99.3% over Q2 2025, and 159.2% above Q1 2026, mainly due to increased receipts from customers. Capital expenditures were $356.6 million in Q2 2026, including $325.9 million for the 12-inch facilities and $30.7 million for the eight-inch facilities. Other cash flow generated from investing activities was $25.4 million in Q2 2026, including a $25.4 million receipt of government grants for equipment, $8.6 million interest income, $7.3 million dividends, and $0.2 million receipts from the disposal of equipment, partially offset by a $16.1 million investment in equity instruments. Net cash flows used in financing activities was $406 million. Including $569 million of bank principal repayments, $37.6 million interest payments, and $1 million lease payments, partially offset by $201.5 million proceeds from bank borrowings and $100,000 proceeds from share option exercise. Next, moving to the balance sheet. Cash and cash equivalents was $4.53 billion on June 30th, 2026, compared to $4.8679 billion on March 31st, 2026. Other current assets increased from $894.6 million on March 31st, 2026, to $936.2 million on June 30th, 2026, mainly due to an increased value add tax credit. Property, plant, and equipment was $7,286.3 million on June 30th, 2026, compared to $7,805.9 million on March 31st, 2026, primarily due to capacity expansion. Interest-bearing bank borrowings decreased from $3,897.2 million on March 31st, 2026, to $3,567.5 million on June 30th, 2026, primarily due to repayments of bank borrowings. Total assets increased from $14,947.3 million on March 31st, 2026, to $15,225.8 million on June 30th, 2026. Total liabilities decreased to $5,528.4 million on June 30th, 2026, from $5,663 million on March 31st, 2026. Debt ratio decreased to 36.3% on June 30th, 2026, from 37.9% on March 31st, 2026. Well, finally, let's discuss our outlook for the third quarter of 2026. We expect revenue to be in the range of $770 million-$780 million, with a projected gross margin of 16%-18%. This concludes my financial remarks. We'll now begin the Q&A section. Operator, please assist. Thank you. Thank you. We will now begin the question -and -answer session. If you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. To cancel your request, you can press star one and one again. Our first question comes from the line of Leping Huang of Huatai Securities. Please go ahead. Your line is open. Oh, thank you for taking my question. Dr. Bai, first congratulations for the very strong results. My calculations show that you will deliver another 3% Q-on-Q ASP growth this quarter. Could you unpack what drives this ASP growth and whether it is from pricing or some mix change? How do you see this ASP trend in the second half and beyond? Also, we noticed that the largest foundry in the world now also says they were re-emphasizing this mature and the specialty node process to serve their customers. Plus also the domestic peer also wants to add capacity. What is your view on this mature node supply-demand relation in the next few years, and how Hua Hong can differentiate from peers and further improve their profitability ahead? Thank you. Yeah. Thank you. You have a number of questions in there. Yeah. Let me try to tease them out and answer them one at a time. In terms of pricing, as you know, in our industry, the pricing is set by the market; it is visited by the balance of the supply and demand. Since the beginning of the year, we started to see the demand going up, and the balance is shifting towards tightness in terms of the supply situation. As a result, that has driven up price increases, mostly in the MCU and memory area and PMIC area. Those are the areas that are more associated with the AI applications. Of course, they are also used in the consumer segment, but the AI demand upturn is probably more significant. That is why we see the supply-demand balance shifting towards demand and the supply being tight. In fact, on some of the products, we clearly cannot meet the demand. The order we are receiving is anywhere between 1.5x - 2x of our capacity. As a result, we are doing everything we can to basically optimize our capacity structure and try to produce more across the board, which is somewhat difficult right now because we are being pretty much 100% loaded. It is really through some very hard work and innovation, try to squeeze more. Of course, we are fortunate to have a fab that was still going through the capacity expansion. That is why we can still get a good capacity increase from the Fab 9A that we have that is still going through the capacity ramp-up. In a way, if you ask me what our advantage is, we have all the advantage. I think it comes from two ways. One is our technology capability clearly is, from a domestic standpoint, they are industry-leading in many areas, and some of them are also on par with our international competitors. That gives us a strong foundation to basically build our capacity and serve our customer. Another thing is, since last year, although last year, nobody predicted this year it is going to go up, but since last year, we were quite steady. We were quite determined to continue to increase our capacity. That decision, or that strategy of steadily expanding our capacity, actually, you might say, has paid off somewhat as this year comes in and the market is turning upward. In terms of the future pricing prediction, it is really a function of this latest demand wave, how long is it going to last? There is a debatable point. There is a lot of discussion or debate amongst the industry people. But in the short term, I think for the second half of this year as well as 2027, most people still believe the demand will continue to be strong. I share that view, and so in that sense, I expect our price increases will continue throughout the second half of the year. Some of the pricing action we have taken over the last quarter will start to manifest itself probably in the second half and even next year. I do think that this upturn in demand will be accompanied by our continued ability to increase the price a little bit. I do not want to caution everybody that we are now like a DRAM market. There is a multiple increase in multiple. We are talking about the still percentage in percentage terms. But I do think it is a nice turn for the better, and we should continue to enjoy that for the foreseeable future, at least through the second half of this year and perhaps to next year. Thank you. Okay. [inaudible]. The second question from me is about the memory. The largest China-based DRAM company just listed in Asia recently, and we see very strong investor interest on China's memory industry. At the same time, looking at the global perspective, providing the logic die foundry service to the memory maker has become a new trend these days. Dr. Bai, can you share some of your view on how Hua Hong can benefit from this memory build-out in China and globally? Do you have any view that you plan to, for example, cooperate with the China global memory makers on providing similar logic die service? Thank you. Okay. The memory comes in different types. The one we are seeing, the biggest uptick in demand, is the DRAM. The second comes the NAND. We are not directly participating in DRAM, NOR, and NAND. But we do have a substantial business in NOR Flash business, which we have seen demand increases this year, and they're probably going to continue for the second half of this year and then next year. We do enjoy the demand uptick there. In terms of how do we? I think the fact that the memory is going up is really representing the overall demand for semiconductors is increasing. In that sense, it definitely benefits everybody and benefits the memory more directly because, probably, it would build up there faster. But it does also benefit logic foundry. I would call us a specialty technology foundry, which is that we have a lot of products in logic, in analog, and some specialty memory, like NOR flash. In a way, the fact that the DRAM is seeing the biggest demand increase just represents the fact that the AI has been driving a lot of demand increases overall in the semiconductor. In that sense, it's a definitely good thing. We do benefit from the overall semiconductor demand increase. Specifically to DRAM or even NAND, it is the technology direction there that is such that their product tends to try to basically bifurcate, which is not the right word. It's basically their product; they try to separate the memory elements from the peripheral logic into two different die, and through some kind of 3D assembly, put them together as a product. In that sense, if the memory houses want to spend more time or focus more on the pure memory elements, they might let the peripheral logic die to be manufactured by the larger foundries. In that sense, we do see the larger houses probably will start to explore that collaboration with the larger foundry so they can focus on truly what their specialty is, which is the bit, the memory part of the overall memory product. But that is still probably in the early stages of this technical transition. But overall, it is moving in the direction that they might even create some new demand for logic foundries, because the logic portion of their monolithic die, they might separate out into a separate die and give it to a larger foundry to manufacture. If I explain that clearly. Thank you. Thank you. It's very clear. Thank you. Thank you for the questions. One moment for our next questions. The next question comes from Ziyuan Wang of CITIC Securities. Your line is open. Please go ahead. Okay. Thank you for taking my question. This is Ziyuan from CITIC Securities. My first question is, we see a great guidance show the solid growth in Q3. Could you break down the Q3 revenue guidance to show how much is driven by the ASP increase and how much is driven by the capacity expansion? Also, regarding the expansion, approximately how much capacity will be added in Q3 and Q4? Thank you. Sure. Let me take on the capacity expansion part. Last earnings, we talked about the guidance for Q3 in terms of how it breaks down between volume increase versus pricing increase. I think that's what he's asking. The capacity increase, our Fab 9A in Wuxi, will ramp up to the peak to the total capacity by Q3, next quarter. You have all the equipment in that fab installed. We will start to load the fab 100% starting in Q3, but the output probably will start to show up in Q4 or next year. I think in 2027, you should expect a full fab worth of output from Fab 9A. As you know, we do have another fab that's under construction that started in March of this year. That fab will start to have equipment installed in Q3 as well. We expect that we get a completed line in Q1, and we will start to have a small volume coming out. Next year, throughout 2027, we expect we will start the capacity ramp-up from the next fab, which we call Fab 9B. I will let Danny talk about the Q3 revenue breakdown and the guidance between volume and the price increases. Hey, Ziyuan. Thank you for the question. We expect the revenue is going to be between $770 million - $780 million. That is our projection for Q3. The increase is largely coming from MCUs. That whole sector, embedded memory, will continue to grow strong. There will be a double-digit growth, and the standalone memory continue to be very strong in Q3. I think this trend will continue throughout the year and into 2027 as well. On power discrete, especially the low voltage products, we are talking about the MOSFETs business and also split the medium voltage products. They are also growing strong. The IGBTs and super junction are virtually flat. On the logic and RF side, I think there is going to be pretty strong momentum from RF as well. Other than that, I think we see strong momentum coming from power management IC and analog business as well. Even though analog is still a small segment at this point, but they are also growing pretty strong in Q3. Overall, when you look at technology platforms, what I just discussed are the major drivers. In terms of revenue increase, when you look at ASP and volume, it is really a split. I think anywhere, when we are looking to 78% increase on revenue, I think, I would say 60% coming from ASP and also another 40% coming from increase in volume. Thank you. Okay. Thank you. [inaudible] My second question is about the capacities transit or switch. Since our demand is strong, is it possible to flexibly switch our capacity between products? Just like, can we shift the CIS capacity to memory products? Which type of capacities allow this kind of conversion? Also, what impact would such conversion have onto the overall ASP in maybe next quarter or second half? Thank you. First of all, the capacity are somewhat fungible to a certain extent. They are fungible, meaning that if you build 1,000 capacity for a certain technology platform with some conversion rate, you can use that capacity to do something else. There is some fungibility. Exactly how much, it depends on the technology platform you're talking about. Specifically CIS, for example, the flow is pretty close to the logic flow. If you try to be fungible with some technology platform that's close to logic flow, then a lot of them can be used. For example, we normally group logic products, CIS, and the driver type of product in one group, because they are very much mutually fungible to a large degree. If you want to use CIS for BCD type of product, there's still some fungibility, but it will be decreased. If you want to use it for a memory product, there are also some fungibility, but you will probably further decrease it somewhat because some of the memory products have some unique tools that require it. A lot of times, your fungibility is limited by those unique tools that are unique to each technology platform. When we build a fab, we try to manage the fungibility. You obviously can't be 100% fungible. We try to maximize the fungibility so that we can react to market demand fluctuations among different technology platforms. Right now, we're certainly exercising that fungibility to the maximum extent. This, of course, is also limited by the fact that we still want to maintain a reasonable volume for each product, because we're into a long-term business. We don't want to basically just look at the next quarter or even just one year. There is some level of strategic decision-making that is going on to make sure that we do have a long-term view, not to be 100% driven by short-term considerations. That is one. Another one is we do use pricing as a tool to manage demand and shift in demand between the technology problems so that the demand pattern matches our capacity pattern better. Overall, I think when the overall demand is tight, in general, we have managed to increase prices across the board, some more than others. Thank you. Okay. Very clear. Thank you. Dr. Bai. One moment for our next question. The next question will come from Ye Zi of Guosen Securities. Your line is open. Please go ahead. Thank you for taking my questions. This is Ye Zi from Guosen Securities. First, it is about the demand of the consumer electronics. The rising memory price may weigh on the demand of the consumer parts, but still, we can see Hua Hong achieve a sequential growth in consumer parts. How do you view the growth of our consumer-related parts in the second half of the year? This is the first question. Thank you. That's actually a good question. Frankly, at the beginning of the year, when everybody started to know that the AI-related product will have high demand, another thing that was discussed in the industry was the fact that when the DRAM is getting to pricing, you're probably going to depress the consumer demand, which is probably true. In some of the end market segments, like a cell phone, for example, clearly is going to see a decline this year. We were expecting, actually, maybe a demand decrease on the consumer segment. For Hua Hong, as I said, we're a broad foundry supporting all different market segments. I think we were a little bit surprised that we actually didn't see as much negative impact from some of the consumer-end market demand decrease. It could be that because we are now a foundry, our direct customers are design houses. Their product, when through them, those IC products, seems to be a different segment of the end market. Maybe because we're not directly providing to the end market, so maybe our direct customers are doing a good job of managing between different end markets. That's one possibility. That's why we don't see much of a negative impact from the consumer end market. Another possibility, which is also possible, is that even the short-term consumer market and end market might be having a bit of a decrease in demand. They still want some inventory level to build some inventory for probably inevitable upturns in the future. Yeah. Those are the two possibilities. The net result is that we do see strong demand with all the AI-related products. I haven't seen that much negative impact from the consumer market at the foundry level. It's hard possibility it could be our product, our technology, as I said earlier. We are pretty strong on the technology. It could be if we're in the low end of the market, which we are not. We're mostly in mid and higher market. Maybe the lower market might see a more negative impact. Thank you. Thank you. My next question is about the progress of the acquisition. Could you update the progress? Also, the technology roadmap after the acquisition. Thank you. The progress we already updated in the statement that we got the final approval from the exchange to proceed. We expect the final step of this long acquisition process is going to take place probably within a month. After that, the whole thing is complete and done. The second part of your question, I probably didn't quite get. We do expect this to be a very positive acquisition for our financial statement. Once the final steps get completed, the Huali Micro results will be included in our financial results. There are no surprises in the Q3 statement, which will include the Huali Micro. Did I answer your question? Yeah. Also, I have a quick follow-up. How about the technology roadmap after the acquisition? Oh, okay. Any new? Yeah. In terms of what Huali Micro is doing, it is quite a synergy with what we have in Hua Hong Grace. We do achieve quite a bit of savings and quite a bit of synergy in terms of technology sharing. In other words, some of the technology development that we do in Hua Hong Grace or in Huali Micro previously now can be combined. We basically, for any given R&D dollar, get a bigger manufacturing scale. That's good for us. In terms of the improved efficiency. Another thing that helps us is that now we have one more fab, so our manufacturing scale for a given technology problem is effectively virtually bigger. We can take on more customers who have bigger capacity needs that we previously might struggle with if we just have two separate entities, especially with Huali Micro. They are by themselves; they are not large. That's another benefit. The third benefit is that now Huali Micro joins the Hua Hong Grace, the overall manufacturing system, so that we can optimize the capacity structure, like what kind of a technology problem place, so that gives us a better ability to respond to changing market demand. Especially right now, because in short supply that, we immediately can start some of the technology problems where we cannot supply in Wuxi, for example, to put it in Huali Micro. Overall, you see, it's really because of the bigger scale, R&D saving, and overall improved efficiency because of the large scale. Also in the procurement now, we also have a bigger volume. Everything is basically positive. We think this is going to be a very—it has been a very good step for us to take. Thank you. Thank you, Dr. Bai. That's all my questions. Questions. Please hold for our next questions. Next questions will come from the line of Qingyuan Lin of Sanford C. Bernstein. Please go ahead. Thanks for taking my question. Congratulations, Dr. Bai and Daniel, for good results for the earnings. My question comes from two angles. The first one is around the future capacity expansion. Dr. Bai, what is your view on the demand sustainability for 2027, 2028? You mentioned it was quite clear for the second half, but I was wondering, do we expect this cycle to continue to be stronger even for the next few years? You mentioned that last year it was a good decision to continue capacity expansion. With this strong demand, do we continue to see that we might need to further accelerate the capacity expansion even for 2027, 2028? That will lead to, I guess, a question for Daniel. Do we have any plan to further ramp up our CapEx? That is my first question. Thank you. Yes. In terms of the capacity expansion, we definitely want to continue the capacity expansion at a steady pace so that we can manage the CapEx expenditure while still maintaining the profitability that we have come a long way to establish at this point. I do think, I said earlier, the second half of the year, the short-term market demand is strong. In 2027, the consensus is also going to be strong. 2028 is when things and people start to have some debate. So it is probably a little bit too early to tell in 2028, but I do think that overall, the secular trend is that I do see a secular growth story in the marketplace that we participate in, which is the specialty technology. So in that sense, that is the reason that gives us confidence that we will continue this to expand capacity. This overall demand increase is based on the new application of the semiconductor and also based on the fact that some of the industry players may start to close down some of the eight-inch fabs. As you know, we do have three eight-inch fabs that also benefit from some of the industry capacity going offline. 12-inch is a different story, but a lot of the growth is mostly on 12-inch in terms of the demand side. I think that in terms of the supply side, eight -inch, nobody is spending eight -inch capacity. So the supply side might decrease, but the 12-inch demand side is probably going to continue to go up. So it is really based on our strategy of steadily expanding our capacity, which is based on our confidence that the market, even with some fluctuation, overall direction is still going up. Our confidence is also based on the second factor, which is that we believe our technology capability relative to our competitors in the industry is also going to strengthen as we go. Because we have the scale, we have the people, we have the track record, and we have the position in China as well as even worldwide now, and we think that our capability will increase. We are not afraid of even if the downturn comes; I think we are still going to keep on growing and keep building, getting more capacity and steadily. Thank you. Thank you. Daniel, any comment on the CapEx guidance or kind of projection for the next two years? I would say, we start to construct the third 12-inch fab early this year, and this fab will start to ramp over the next three years to 55,000 wafer capacity. Overall, it is approximately $6 billion CapEx spending. I would say roughly $2 billion a year for the next three years. Other than that, unless we have other new fabs that we plan to build, this is going to be the major CapEx spending. Just one comment. That $6 billion is not all the CapEx. It is roughly less than $ 2 billion per year. $ 1.5 billion. Over two years. Two to three years. Yeah. Got it. Very clear. My second question is around the earnings; we do call out specifically that we have about $25 million in receipts for the government grants for equipment. May I have a bit more detail behind that? The last time we called that out was in the fourth quarter of 2025. It is about $37 billion. This is kind of related to my question around the plan for the 9B. What is the share of local equipment? Do we plan to go up, and what kind of level should we expect? Thank you. Well, that was actually some subsidy grant we got, not in Wuxi, but it was really for Shanghai. Okay? That is the grant we received in Q2 from local government here. The Wuxi part will most likely be paid, I think, in Q4 2026. The second part of your question about the domestic equipment. I think the domestic equipment sector in China has been getting strong year-over-year. We do expect, as a general trend, the newer fabs will have a higher percentage of the domestic equipment. Very clear. Thank you so much. Thank you. Thank you for the questions. Our next question comes from Lin Tuoni from Daiwa Securities. Your line is open. Please go ahead. Thank you. Hey, thanks for taking my question, and congrats on the great executions. Can I ask your current lead time for products across different technology platforms, and which segment is expanding and which segment is decreasing? Thank you. Sorry, lead time in— Manufacturing time. Oh, how long it takes to manage to get the wafer from start to finish? Exactly, yeah. To deliver to your clients. Oh, okay. That obviously depends on the technology platform. Some process flows are longer, and some are short. Like the discrete power devices, that does not have too many steps. You can get it in a couple weeks if we accelerate it. Then some of the MCU products have 50, 60, or 30, 40 mask layers that will take two months if we accelerate it. The speed of the wafer moving through a fab is also a function with loading. If you have a very heavily loaded fab, they basically have a longer queue time in front of the equipment, so the average speed will be slower. But we also, usually in the fab, the way we manage it is that we have different tiers of the speed. If some of the things are like NTO, the first time you have a new product, we try to give it high priority. They can zip through the fab very fast. But for the volume production, which we tend to maximize the output versus speed. We let that to Nothing takes more than a quarter, I would say. The faster ones can be a month or two months. Really depend on the type of products you have. Great. Thank you. Are there any changes in lead time in terms of when we receive the order until we deliver the product? Are there any changes in lead time? I am trying to understand, is there any. No significant changes. When demand is high and the supply gets high, one of the effects is to tend to make the delivery time a little bit longer. But that is something we work out with our customers. We will basically, when they place an order, we usually have a commitment to say, this will come out in a certain time. If the customer agrees, and it works to their satisfaction, then we will just proceed. That is how that works. But if there is something they need urgently, we can also support that. Not 100% of the time, but a certain percentage of the wafer can come out really fast if we need to. Understood. That's very clear. Thank you. My next question is about our investment plans. I think Dr. Bai mentioned $1.5 billion per year CapEx. What kind of technology platform will we focus more in the coming two to three years? Thank you. Let's get back to our focus. Our business focus is specialty technology. If you look at specialty technology, they are very much application driven. We go where the market is, so to speak. The reason we have those four or five large technology platforms is because there is a large market demand for those, like BCD for pinning, power management, and power devices for all things electric and a lot of power -related things. MCU, microcontroller, nowadays, a lot of AI-related applications require a microcontroller or even an auto. The new EVs have a lot of microcontrollers in them. CIS has been there since the cell phone become a large application that drive a lot of CIS, because the image sensor. Now, CIS is also driven by some security needs, and even the auto, the new EVs, and the autonomous driving car or robots, for that matter, some of the emerging applications or drives a lot of that. There's no short answer to your question, but overall, we look at all the specialty technology we participate in. We look at where the demand is high, and combined with where we have our strengths, like MCU. We are very strong in MCU historically. That's also a growth area. We're going to put a lot of, for example, we're going to put a lot of capacity there. BCD is another area. In general, if you look at our finances, the results over the last couple of quarters, the highest growth is really in MCU, BCD, and even NOR flash. Those areas we're going to put more. On the CIS logic, it is also an area that has very much interest to us. Although the growth rate hasn't been as high as the other two technology platforms or the other three, but we also try to drive it up and try to get a bigger share there. For us, it might become a growth platform. Those are the areas. It's really the capacity we're putting in where the current technology platforms are. Each technology platform also, over time, the technology also evolves, and it goes, MCU probably going to go from 55 nanometers to 40 nanometers MCUs, and we will follow. We will watch for where the sweet spot is in the market and try to build our technology roadmaps to go where the market is and also to go where we think we have a competitive advantage. That's the complex answer I give to you. It's a bit of a complexity because by nature it's complex. We spend a lot of time on those things so that we make sure we get it right so that we can have good growth. That's great. Thank you so much. Thank you for the questions. In the interest of time, we will now take the last two questions. Kindly keep your question brief so we can take all the questions. The next question comes from Tracy Cui of CLSA. Your line is open. Please go ahead. Thank you, Dr. Bai, Danny, and the senior management for giving me this opportunity. My question is regarding the depreciation of Fab 9A ramp-up and also new fab coming. Wondering how much may be the depreciation in the second half and also in next year. Thank you. Good question, Tracy. Look at the second half. Overall, the age business is, it will be around $55 million, okay? I understand you probably, this could be useful for your model. For our first 12-inch fab, it is going to be around $250 million depreciation expense for the second half of 2026. For second half, it is going to be at the 210, roughly $210 million for the second half. These are the forecast numbers. For the third fab, we are just starting. There is virtually not going to be any. If there is anything, it will be minimal for this year. Then for Huali Microelectronics, okay, we are projecting about $30 million for the second half. Okay. For that fab, the depreciation expense is pretty much behind them. We are looking at around $50 million-$60 million a year, and it is going to start to decline even further down in the next few years. Got it. Thanks, Danny. My next question is regarding the new business. I think last earnings call, you talked about expanding to interconnect solutions such as silicon photonics interposers. Wondering if there is any quick update on progress in any of those businesses or any specific area that you see stronger growth potential in? Thank you. Okay. Thank you for the question. I have to be careful what I say here. We are probably the largest specialty foundry in China. You know well the second-largest foundry in China, but in the specialty technology. As I said earlier, in answering earlier questions, we work all where the market goes. In that regard, of course, that is one factor. Another factor is we also go where we think we have a strength or have an advantage. Those are two. Combining those two determines where we go. The part you mentioned, where we look at the AI, is definitely a growth driver. Therefore, anything that is related to AI applications that happens to be in the specialty technology area, we look at very carefully and decide whether we are not already there. We're already in a lot of those areas, the PMIC, MCU I mentioned the power devices; all those things are in there. There are a few, like optic electronics and silicon photonics, for example. We actually, in a way, are already in there. That some of the MCU do go into the module that makes the final silicon photonics. We like to expand the footprint there to probably get into more types of silicon-based devices. It's going to be, because that's where we will have expertise. Yes, we are going to basically look at the application there and look at some of the chips that are inside the optic, the silicon photovoltaic module. We already participate in some of those chips in there. We want to expand a couple more on the IC, silicon-based IC. That's still the plan, and we are still in the early stages of doing that. The power devices—that's another area that is probably going through some technological or market transition that, up to this point, is mostly silicon-based. But now, the silicon carbide, for example, these devices are also becoming part of a power device offering. Again, there, the product is, if you look at a module, where it tends to contain silicon-based devices and increasingly silicon carbide. This is something; if we want to continue in the power device area, we will have to look at it. We have no choice but to look at and see whether we have a more complete offering. We are definitely doing planning, and a lot of the planning—we do need to get a few things together before we say that we officially are in there. But we're not slowing down. We're going forward. Thank you. Got you. That's very clear. Thank you, Dr. Bai and Daniel. That's all from me, and I will go back to the queue. Thank you. Thank you for the questions. With that, I will now take the last question from Jian Kuai of Orient Securities. Your line is open. Please go ahead. Hi. This is Jian Kuai from Orient Securities. Thank you, Dr. Bai and Daniel. My first question is about our revenue from North America and Europe grew very strongly. Could you give us more color about these two regions? Maybe it is from, like, the server PMIC or maybe MCU or these kinds of products. That is my first question. The revenue that is from North America, a large part of it is in the BCD PMIC area. A lot of the product there happens to be related to AI server boxes. That is the reason you see huge increases, because that is directly going to AI. For Europe, the large European companies have this China-for-China strategy. Their product is mostly in MCU and the smart card ICs and some power devices as well. I think as they prosecute their China -for -China strategy, if we are their partner of choice, which we think we are in China, that is the reason we see growth. We expect to continue to see more growth from Europe as well. Thank you, Dr. Bai. My second question is about the equipment and material. People are always talking about the equipment supply being very tight, and the price for materials is increasing—all these kinds of things. From our point, how do we see the supply of equipment and materials? A good question. The equipment supply is getting tighter because all over the world, the semiconductor houses are increasing their capacity. This is true for our overseas suppliers as well as domestic suppliers. The one manifestation is the lead time has been increasing. It is still manageable. It is still at a manageable level, and since, for us, we started this capacity expansion last year, a lot of the equipment we already booked last year. We have not seen a huge impact. They are definitely getting tighter, so we are tightly managing with our suppliers, with our supplier partners, to get the equipment lead time to a point that does not affect our overall capacity growth increase schedule. So far, I think that we, by and large, can do that. For material, there is some isolate. There are a few examples, for example, because of the war in the Middle East or some other region, that we do see tightness and even price increases on some of the, for example, helium gases, because of the war there that it had a temporary spike. Now it has managed to come down. Overall, we do not see a. There are some metals or some metal prices because of general inflation or because of the supply situation. We do see some price increases in some isolated areas. Overall, it has not been a significant impact. We still managed to basically keep the price flat or down. Because the overall market price in terms of our supplier market is still reasonably healthy for us. Thank you. Thank you, Dr. Bai. It is very clear. That is all my questions. Thank you, ladies and gentlemen. That is all the time we have for questions. I will now hand back to Mr. Daniel Wang for closing remarks. This concludes our call today. Once again, thank you all for joining us today and for your valuable questions and input. It has been an exciting quarter. We look forward to seeing you again in the next earnings call. Thank you. Thank you. Ladies and gentlemen, thank you for attending. You may all now disconnect.