Welcome everyone to Chroma's 2023 Q4 earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer session. Please follow the instructions given at that time if you'd like to ask a question. For your information, a webcast replay will be available within an hour after the conference is finished. Please visit www.chroma.com.tw under the Investor Relations section. I would like to introduce CFO Paul Ying. Paul, you may begin. Thank you, Regina. Welcome everyone, ladies and gentlemen. This is Paul Ying from Chroma. I'm the CFO of Chroma. Today I will start with the financial performance of Chroma for the year of 2023. Afterwards, Jennifer will follow up with the operations, well, explanation. Well, if you can fetch it from the website, you can see that our corporate profile. From this page, you can see that, with the sales revenue, TWD 18.8 billion at the year of 2023. There are two entities, which is the Chroma, there are Chroma ATE, the parent company, with the MAS, which is the consolidated business unit. This is the first year we move out the NMC, which is the material business, since at the first quarter. After the first quarter of 2022, we terminated the cooperation with the NMC, Japanese company. So starting from this year, you can clearly see the core business of Chroma with itself. So again, the consolidated sales for 2023, TWD 18.7 billion. And the profit we made at the net income, at the TWD 4.1 billion. And with the at the end of 2023, the total headcount for Chroma Group is approximately 3,500 employees. And for the financial performance, again, you can see from the five-year comparison for the consolidated sales and gross margin, you can easily see that the 2022 is the year of record high on the sales revenue. And 2023, we have a little bit down to TWD 18.6 billion. But with the improve of the gross margin, for the consolidated base, you can see that we improved that from 52% of the 2022 to 58%. Again, if we look at the parent company sales and the gross margin and R&D expense chart, you can see from this page, we maintained the gross margin of the parent company pretty stable on the range of 51%-54%. So at the year of 2023, you can see that the parent company top line, we made TWD 12.5 billion with 12% investment on the R&D expenses with 54% on the gross margin. And then if we look at the return on equity, you also can see that the highest one will be on the 24%-25% on the year of 2021 and 2022. But with these two years, the capital gain from the sales of property and also the investment, those capital gains achieved at the 2021 and 2022, well, makes the higher return on equity. but with the approval from the board, our payout ratio, approximately 70% of the year of 2023, which is the EPS of TWD 9.45, we pay out like TWD 6.6, which is approximately at the 70%. And if we look at the 2023 consolidated income statement, you can see from the page of slide number 10, you can see that with the 2023, the total net sales TWD 18.6 billion compared to last year's TWD 22 billion is a 15% drop, which is mainly coming from the instrumentation and measurement equipment business, dropped by 12%. And the MAS consolidated sales dropped by 21%. Well, this is mainly due to the two starting from the second half of 2022 all the way to 2023, the drop of the semiconductor industry. So, again, for the gross margin, you also can see that in the year of 2023 we make TWD 10.7 billion compared to the TWD 11.3 billion. We pretty much improve in the gross margin percent, but we only dropped by 5% in absolute numbers. And operating margin, we make 25% in the year of 2023 compared to 23% in the year of 2022. Again, for the operating income absolute numbers, we dropped by 7%, which reaches TWD 4.6 billion in the year of 2023. And for the net income in the year of 2023, we make TWD 4.09 billion representing 22% of the top line. And compared to last year, this is a 22% drop. So for the year of 2023, the EPS we make is TWD 9.45. For the fourth quarter standalone consolidated income statement, you can see from the slide number 11. This is 4% growth on a Q-over-Q basis at the base of TWD 4.025 billion. Compared to last year's fourth quarter, due to the product mix, it's a 17% drop on the top line. So for the gross margin of the fourth quarter, again, due to the product mix, if you look at the gross margin, that's at 51% of the fourth quarter. It's a 7% drop on a Q-over-Q base. It's another 7% drop on the year-over-year base on the gross margin. But for the operating margin for the fourth quarter, it's approximately over TWD 1 billion compared to the TWD 1.2 billion for the last quarter. It's 6%, it's a 16% drop on the Q-over-Q basis. But compared to last year's fourth quarter, it's a 2% drop on the operating margin. For the net income itself, again, fourth quarter, it's approximately TWD 825 million. Compared to the third quarter, it's a 34% drop. And to last year, it's a 10% drop. So the EPS for the fourth quarter, it's TWD 1.89. Again, it's a 35% drop compared to the on a Q-over-Q basis. It's 8% drop on the on a year-over-year basis. For the balance sheet, again, for the total assets, it doesn't have too much differences. It's only 1% differences. The decrease on the cash and the short-term investment, which will be spending on the CapEx at the second phase of our future expansion on the second phase of our plant. For the debt itself, I think it's pretty much equal to last year. As to the inventory turnover, well, 2022 is a little bit slower than 2022, which is due to the sales revenue is a bit of falloff, compared to 2022. But for the accounts receivable turnover date, I think it's pretty much on the what we expected, around within the 90 days. For the net debt to equity right now is net cash. And again, for the cash positions, the EBITDA is TWD 5.9 billion. And the free cash flow is somewhere TWD 2.0 billion. Well, this is the highlights for all those numbers. And, again, there's any, well, for Jennifer? Okay. Yeah. Give us some of the highlights for the product mix and the sales breakdown. Hi. Good afternoon, everyone. This is Jennifer. I will go through, though, some of the key highlights for our product mix and then some of the guidance regarding to the 2024. In year of 2023, our biggest growth actually comes from our test measurement ATS systems. Last year, this sector has increased by 15%. Then but move on to semiconductor sectors, it was down by 34%. So last year, semiconductor for 20 sectors actually quite weak, which is made up to about TWD 12.5 billion for our parent company sales. Last year, totally, we booked around TWD 2 billion from this so-called EV battery sale. So most of these numbers would be consolidated under our overseas consolidated sales, which is end up with last year, our total consolidated sales from I mean, for testing equipment business is about TWD 17.8 billion. Okay? Add on that, which is about TWD 600 million, and with other minority subsidiaries, last year, our consolidated sales generated about TWD 18.7 billion, okay, which is about 13% down compared to 2022. Move on to 2024, our highlights will be first, we actually expect the semiconductor sector will be the biggest growth driver for this year. And first, because this we actually see the accelerating development and also the function and the performance improvements actually come from these HPC and AI markets. We expecting, actually, the shipment demands will be even better than last year, which is 2023. Second, we also benefit from this kind of recovery from 28 nm, which will increase our sales to our ATE systems. On combination of several factors, which is under semiconductor and power sectors, we actually see it we think we're able to reach up to, like, a 22, the peak of the semiconductor sectors or even better. So this is pretty much wrap up for the 2023 department mix, breakdowns and also some of the colors regarding to 2024. Now we're able to move on to Q&A. Thank you, Jennifer. We will now begin our question and answer session. If you have a question for any of today's speakers, please press star one on your telephone keypad, and you will enter a queue. After you are asked, please ask your question. If you find that your question has been answered before it is your turn to speak, please press star two to cancel the question. As a reminder, press star one on your telephone keypad if you'd like to ask a question. Please press star one on the keypad if you'd like to ask a question. And our first question is from Wen Guancheng of HSBC. Please go ahead. Thank you. Hey, Jennifer. How are you doing? Well, I'm just wondering, what is the drivers behind the increase in 28 nm legacy nodes? I'm assuming this is from China, but if you could provide any additional comment, that would be helpful. Thank you. Okay. Your first question is regarding to our 28 nm, right? The legacy testers? Yep. Okay. Sorry because the voice from your side is not very clear, but so I just want to reconfirm your questions. Regarding to 28 nm, as you know, Chroma for the semiconductor sector, especially for IC testers, we only cover two parts. One is the very high-end, which is HPC and AI sectors, and also the legacy, which is 28 nm round. And the biggest actually, there's no overlap for these two group of, I mean, two different products. For 28 nm, we mostly sell to China. As you could see, last year, maybe because overall, semiconductor sentiments was kind of low. But this year, we do see the quiet ambitions from China want to speed up this kind of 28 nm developments. So, started from this year actually, from last year's fourth quarter, year-on-year comparisons have already not further declined compared to first three quarters last year's. That's the first signs. From, I would say, beginning of this year, we do see a quite strong demand come from China regarding to 28 nm. Okay. Just to clarify, my first part of my question is, so the applications is just broad-based across industrials, I would guess. Would you be able to tell what kind of applications or end markets that 28 nm equipment is being shipped to in China? And then the second part of my question is, is there any change in your expectations of the AI tool SLT product mix, for, say, the leading AI customer in the U.S. compared to the, say, the second customer, AMD, for 2024? So 2/3, the leading customer, and then 1/3, AMD. Thank you. I don't quite understand your second question, but I can comment on the first question. The 28 nm, we cover the biggest part, mostly related to, to something like, MCU or power-man power-related type of IC. But this is kind of very. Got it. Products, so it covers. We actually quite dominate these markets. So there's, there's no, I would say, quite majority of market share. Okay. And then for the AI side in terms of end customer, yeah? You mean 28 nm? for AI. For AI SLT, system level test. Yeah. Okay. Last two years, I think most of the investors already pretty is quite actually, quite familiar. Our biggest customers actually is NVIDIA. And this year, actually, yes, is actually see more newcomers. But, like, ASIC including, like, ASIC maker like Google, Microsoft, and even Meta. And I think there's no point to compare, like, NVIDIA with those newcomers such as, like, AMD or other ASIC makers because their scale is still very much smaller compared to NVIDIA. So we will not doing this kind of comparison. Thanks a lot, Jennifer. Happy holidays to you and Paul. Thank you a lot. Thanks a lot for talking with us. Thank you. Thank you. Thank you. As a reminder, please press star one on the telephone keypad if you'd like to ask a question. Please press star one on your telephone keypad if you'd like to ask a question. And our next question comes from Jeff Ohlweiler with Macquarie. Please go ahead, Jeff. Thank you. Great. Thanks, Paul and Jennifer. A question to follow up. You also said you're gonna see good momentum for photonics this year. Can you give more details on, you know, what geographies or what type of end products that is for? For last year's, especially from the second half last year, we do receive quite decent rush order, especially for regarding to this kind of OFC, optical fiber communications. But, we will not comment on the customer space because, I think in global market, actually, there's not more than five players making these type of wafers. And top three probably about 70%-85% of market share. And they are our, our customers. So we probably will not comment to the customer space. Okay. And then also, you stated that 2024 test instruments and ATS for power testing solutions sustained steady growth. Yes. That means ATS is up this year? What do you mean by up this year? Well, it says testing instruments and ATS for power testing solutions sustained. Steady, I think, steady growth—that means it's already a conservative view. So we didn't comment on strong growth, so we're going to decline. You know, okay, first, ATS sector, which is our power business. This year is our 40-year anniversary. So we have been doing this sector for 40 years. And in the past 40 years, we already make this sector very diversified into different applications and, with a very wide range of customer base. Like, we have 2,000-3,000 customers in portfolio covering greater Asia. So I wouldn't say every sector under power testing will increase. But one sector has declined. The other sectors may pick up this year. So this is our view regarding the ATS sector. But the point of that is, overall, we should see year-on-year growth this year. We will not comment on certain sectors. Each sector, go through each sector's growth rates. But we will. But overall. Give you a clear guidance. No, because we already give. A steady growth. Does that mean year-on-year up this year for the whole? You mean ATS or overall the company? Overall ATS. Just ATS. No, we already say stable growth. Okay. And you mentioned maybe one subsector in there doesn't grow this year. I assume that's EV. Is that? Yeah, you could say that because there's no point. Markets already where EVs, well, I think for our EV sectors, including EV battery cell, we still have order to deliver this year. But we're not going to comment on the time frame. But, you know, I think the demand will be shifting away from China. Most of the growth will actually come from non-China area, particularly highlight to Southeast Asia. Okay. And just. These are all confirmed orders. Okay. To clarify, you said TWD 2 billion and EV cell sales last year. Is that correct? Yes. Around TWD 2 billion. That was down from about TWD 3.6 billion in 2022? 3.5 billion in 2022. Okay. Maybe last question. Within testing instruments and ATS, in addition to EV-related, can you talk about some of the other key, you know, subsectors there? Sorry. Like, what other areas, you know, if you break down overall sales in testing instruments and ATS, in addition to EV-related, can you talk a little bit about some of the other key subsectors there, whether, you know, solar, LCD, etc.? What if you can just list some? We only can because we're dealing. We don't deal with manufacturing. We only can give you rough breakdowns. I think we expecting, like, 5G power-related devices will pick up this year and also some of the consumer sectors. We have about 10% that's related to clean tech. Okay. Great. Thank you very much. Thank you. Thank you. As a reminder, press star one on your telephone keypad if you'd like to answer a question. Please press star one on your telephone keypad if you'd like to answer a question. As a reminder, please press star one on your telephone keypad if you'd like to answer a question. Our next question is from Jeff. Please go ahead, Jeff. Thank you. Yeah. Thank you. I guess, a couple follow-ups. You talk about the fourth quarter margin down to 51%. So if I look at your breakdown of sales by product mix, you have ATS down, semi down. So essentially, turnkey is up. So essentially, you're saying the reason why the margin's down is 'cause EV cell was high in fourth quarter. Everything else was a little bit low. Okay. Hi, Jeff. Basically, this is you look at the gross margin that we got regarding to the consolidated sales. And particularly last year, as we state, we booked around TWD 2 billion EV battery cell orders. So most of the around TWD 1.5 billion is come from China, which is booked under, as I say, overseas consolidated sales. And particularly and then you could say mostly booked under in fourth quarter. So this is already show you the product mix. Okay. And then despite very strong AI momentum in the market last year. Yes. Was your SLT. Yes. Sales still down last year? I don't comment on this individual product sector because, as you know, these sectors are particularly dependent on certain customers. Okay. And maybe last question. Can you talk a little bit about margin? Is there a big margin difference between your overall ATS business and your semiconductor tester business? I couldn't comment on gross margin because we do customize systems. Okay. Thank you. Basically, I think our chairman's on-site earnings release already pretty much comment because EV battery cell orders, which is turnkey because blend a lot of especially for China projects, blend a lot of automation. So roughly, the gross margin's about 30%+. The rest of the sectors, we couldn't comment about the testers. I know Paul, he's, you know, most of last year was talking about gross profit margin about 55%. Is that still the case this coming year, around 55% despite the. I think actually. You know, last year's up there. I think actually it's still like 58%. So p still meets our target. Okay. This year, still 55% kind of target. Annually. Okay. Thank you. Thank you. Thank you. As our next question comes from Will Chen of JP Morgan. Please go ahead, Willie. Thank you. Hey, Jennifer. Can you hear me? Hi, Willie. Yes. Hi. Thank you for taking my question. So just regarding your guidance for 2024 semi and photonics, right, did you mention that your sales in 2024 will be comparable to 2022? Is that what? Yes. 'Cause I could, okay. So you think that, you know, the growth will be comparable, I mean, the sales number will be comparable to 2022, right? Yes. If you look at the TWD 3 billion sales you generated last year, can you give us a? Yes. breakdown between AI and the amount of opportunities in SLT and the traditional IC testers? Give a good breakdown. Roughly 25%-30% is come from photonics sectors. Remaining's IT testers. Okay. Remaining's IC testers. Okay. Got you. All right. Thank you so much. Thank you. Thank you. As a reminder, please press star one on your telephone keypad if you'd like to ask a question. Please press star one on your telephone keypad if you'd like to ask a question. Excuse me. Jennifer, there are currently no questions. Hi, everyone. Thanks for your attention. I think your continued consideration to Chroma will be our momentum for the growth in the future. So thank you for your attention. Well, [Foreign language]恭喜发财. Well, this is a pretty late, kind of, you know, Chinese New Year congratulations to all of you. Thank you. Bye-bye. Bye. Thank you. Thank you. Thank you for your participation in Chroma's conference. There will be a webcast we play within an hour. Please visit www.chroma.com.tw under the investor relations section. You may now disconnect. Goodbye.