Welcome everyone to UMC's 2022 fourth quarter 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 instruction given at that time if you would like to ask a question. For your information, this conference call is now being broadcast live over the Internet. Webcast replay will be available within an hour after the conference is finished. Please visit our website www.umc.com under the Investor Relations, Investor Event session. I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, you may begin. Thank you. Welcome to UMC conference call for the 4th quarter of 2022. I'm joined by Mr. Jason Wang, the President of UMC, and Mr. Chitung Liu, the CFO of UMC. In a moment, we will hear our CFO present the 4th quarter financial result, followed by our President's key message to address UMC's focus and 1st quarter of 2023 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financials section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risk that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentation materials, which is being broadcast live through the Internet. I would like to introduce UMC's CFO, Mr. Chitung Liu, to discuss UMC's fourth quarter 2022 financial result. Thank you. Happy New Year to everyone. Thank you for joining our call. I would like to go through the 4Q 2022 investor conference presentation material, which can be downloaded or viewed in real-time from our website. Starting on Page 4, the 4th quarter of 2022. Consolidated revenue was TWD 67.84 billion, with gross margin rate at 42.9%. Net income attributable to the stockholder of the parent was TWD 19 billion. Earnings per ordinary shares for NTD 1.54. Utilization rate came down to 90% in 4Q from 100% in the previous quarter. On Page 5, this is the quarterly result. Revenue declined by 10% sequentially to TWD 67.8 billion. Gross margin rate was 42.9% or TWD 29.1 billion. We kept the operating expenses at nearly the same level quarter-over-quarter, which is around TWD 6.79 billion. Total operating income declined by roughly 20% to TWD 23.6 billion. Net income attributable to the shareholder of the parent is TWD 19 billion or TWD 1.54 EPS in the 4Q of 2022. Next page is the full year result of 2022. Total revenue grew up by 31% to TWD 278.7 billion. Operating income is more than doubled to TWD 104 billion. The growth rate was 101% year-over-year. EPS grew to TWD 7.09 in 2022 compared to TWD 4.57 in the previous years. On Page 7, our cash on hand currently stands at TWD 173.8 billion, with our total equity now is over $10 billion mark to TWD 335.4 billion. ASP on Page 8, in Q4, continued to edge up slightly in the fourth quarter of 2022. On Page 9, for revenue breakdown, the change was most significant in the North America market, which represent about 30% of our total revenue compared to 23% in the previous quarter. Asia probably showed the biggest decline from 52% of revenue to 54%. On Page 10, that's the full year breakdown and the changes less significant compared to the quarterly result. Asia represents 61% of the total pie, and U.S represent about 24% in the full year of 2022. On Page 11, the quarterly breakdown of IDM versus fabless, stand at 19% IDM and 81% fabless. For full year on the next page, it remain almost unchanged, with IDM representing about 15% for the full year revenue. For Page 13, communication, computer and consumer didn't change much on a quarterly sequential comparison, with communication still remain the biggest of 45% of the total revenue. The other segment, which include auto, has continued to grow at a faster pace compared to the rest of the segment. It's now 18% of our total revenue. For the full year, communication remained around 45% when consumer is about 26%. On Page 15, the quarterly technologies breakdown. Now we can see 22/28 nanometer represent 28% of the biggest pie of the chart for the Q4 revenue. 14 nm is about 17%. The legacy 8-inch or 0.25 and above declined the most in the full Q 22. For the full year, 22/28 nanometer represent about 24%, also the biggest pie of the chart for the full year of 2022. On page 17, the quarterly capacity breakdown. We have some annual maintenance in Taiwan and also China for Q1 '23. There's some minor decline in available capacity, which we're gradually back to normal in Q2 of 2023. There will be also some new capacity come on stream in the third quarter for our P5 and P6 in Tainan. Next page is our current full year cash-based budget for CapEx. Right now it's about $3 billion, with 90% of the $3 billion contribute to around all the 12-inch related expansion. The above is a summary of UMC's result for Q4 2022. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wang. Thank you, Chi-Tung. Good evening, everyone. Here, I would like to share UMC's fourth quarter and 2022 highlights. In the fourth quarter, due to a significant slowdown across most of our end markets and inventory correction in the semiconductor industry, our wafer shipment fell 14.8% quarter-over-quarter, while overall fab utilization rate dropped to 90%. Average selling price increased slightly during the quarter as a result of our ongoing product mix optimization efforts, moderating the decline in revenue. For the full year 2022, UMC's revenue hit the record high of NT$279 billion, while operating income exceed NT$100 billion. Gross margin reached 45%, driven by a more favorable foreign exchange rate, expanding 22 / 28 nanometer portfolio and newly added capacity. We have taken advantage of the industry upturn over the past two years to enhance our differentiation in specialty technology offering, improve profitability and deepen relationship with our key customers. Revenue from 22/28 nanometer technology increased more than 56% year-over-year, driven by our industry leading 28 nanometer process for OLED display drivers and Image Signal Processors. Our automotive segment also delivered impressive growth in 2022, increasing 82% year-over-year to account for approximately 9% of the total sales now. We expect this segment will continue to be a key growth catalyst in 2023 and beyond. Driven by the long-term trend of vehicle electrification and automation, UMC is well positioned to serve the market with our comprehensive portfolio of auto-grade process technologies and facilities certified according to the rigorous quality standards, while we continue to build strong partnership with the world-class automotive leaders. Given the soft global economic outlooks for 2023, we expect the current challenging environment to persist through the first quarter as customers' days of inventory are still higher than normal, while order visibility remains low. To managing this period of weakness, the company is implementing strict cost control measures and deferring certain capital expenditure where possible. In the longer term, we remain positive that UMC's differentiated specialty technology leadership, geographically diversified capacity offering and operational excellence will enable the company to capture demand fueled by continuous digital transformation across industries. Be the foundry of choice for leading customers. Now let's move on to the first quarter 2023 guidance. Our wafer shipment will decline by high teens% range. ASP in U.S. dollars will remain flat. Please note that we expect a 3%-4% adverse impact on foreign change on revenue. Gross profit margins will be in the mid 30% range. Capacity utilization rate will be approximately 70%. Our 2023 cash-based CapEx will be budgeted at $3 billion. That concludes my comments. Thank you all for your attention. Now we are ready for question. Thank you. Ladies and gentlemen, we will now put for questions. If you'd like to register for a question, please press star one on your telephone. Thank you. Our first question comes from Randy Abrams with Credit Suisse. Please go ahead, Randy. Thank you. Okay. Yes, thank you. Good evening. My first question, if you could just discuss your view on the slope of this business cycle, with the high teen decline in first quarter, do you expect it to mark the low, or do you see or expect, given demand in inventory, further correction, into second quarter? If you could give a view just on the end markets, do you see any areas getting closer to stabilization, or inventory levels already getting down? From the stronger, like auto/other, are you seeing any weakness start to come in? Well, currently, we are still in the midst of the inventory correction, like I mentioned earlier. However, we did see some inventory improvement in some segments, such as a TDDI, for high voltage devices in mobile space. We are working closely with our strategic customer to proactively address those inventory burdens, in addition to the TDDI. We expect those inventory situation will improve gradually and with high visibility second half 2023. We think that the inventory situation is improving, but probably not going to have, not gonna become better until second half 2023. The for the for the 2023 outlook. Well, I mean, given the cyclical nature of the semi industry, you know, we have no one's immune from the end market downturn. While we were able to mitigate our loading in the second half of 2022, amid to a downturn thanks to the growth in our auto business, sustain our business momentum, and which I also touched it, you know, that surge about 82% year-over-year. For the first half of 2023, we do foresee a continuous soften demand in the smartphone PC consumer market that will continue and for the inventory digestion reason. Meanwhile, the inventory digestion will continue to be our first priority. Nevertheless, we expect the first half, if not, the Q1 will be the trough. Okay. Yeah. It sounds like first half it's not Q1, it's still too early to call for sure, but pretty close it sounds like based on what you see, if that's correct. I wanted to ask, your break-even utilization's much lower now. Like at 70%, you have a mid-30s gross margin still. Is that influencing or if you could discuss your feel on pricing, given some cycles you might be close to loss-making. How is your view on your baseline pricing and also just pressure coming from customers needing help out? If you could discuss view how well it could continue to hold and, if you could discuss the latest on how the LTAs on the 28 new capacity are holding up. Okay. First, given the continued end demand weakness in the PC smartphone and consumer segment, we are experiencing this prolonged inventory correction cycle. We believe the pricing adjustment at this point will still produce very limited effect in demand creation under the circumstance. For the UMC's pricing consideration, is still based on mainly upon the value proposition and supply chain relevance. We expect the ASP outlook to remain firm in 2023. While the ASP is not the only consideration in customer management, the yield improvement technology offering, capacity support, also key factors in strengthening our customers' competitiveness, which will continue supporting that. Meanwhile, we will continue working with our customers to make sure they remain competitive and relevant in their respective markets. For the outlook of ASP today, we still remain firm in 2023. For the 28 nm ASP situation, we continue with our cost reduction and productivity improvement efforts to remain competitive. Even in light of the higher inflationary costs throughout the entire supply chain. We will cooperate with our customers to navigate through those headwinds in conjunction with our internal cost reduction effort. We still feel we have pretty solid position on 28, if there is any cost related, we will closely working with our customer on that. Okay. I think there's also a question about LTA. Yes, that's right. Yeah. How the like if you've had customers need to change negotiation, and how well? Most of them I think are tied to the new capacity, how those are holding in. Well, I mean, the LTA is becoming a more of a common practice in our I mean, for us in the semi industry, because the industry is starting to recognize that semiconductor is essential to plan the future mutual growth. Strategic customer are willing to sign LTA to secure additional capacity. Our strong customer engagement and product pipeline have also demonstrated toward to our, you know, to us and as well as the customer's key objective. Right now we think the ASP situation is less relevant in those LTA situation. Even with some of the loading consideration, maybe some of the penalty occur, but the penalty is not our key objective for those LTA. At this point, it's still insignificant as a percentage of our revenue. Okay. If I just fit one last one on your tax rate, maybe Chi-Tung can address. I think fourth quarter looks like it went up some, if there was a factor, just netting out credits going away but also the new program, if you could give a view on the tax into the coming year. Yeah. Q4 was like this one-off, our overseas subsidiaries, this annual remittance policy about their profit. We took a provision for this potential remittance of the overseas profit. It was mostly on paper. It's not really happening yet, but it just a one-time tax provision at the year-end. Okay. Maybe the forward look. Is 15 still the right number? Yeah. 15% is still the right number. Yes. Okay, good. Okay. No, thanks a lot. Thank you. Our next question comes from Gokul Hariharan with JPMorgan. Please go ahead, Gokul. Thank you. Yeah. Hi, thanks. Could you talk a little bit about what is what you're expecting now for 2023? Any early reads in terms of the outlook? Your bigger competitor talked about foundry industry being down 3% or so this year. Just wanted to hear UMC's view. Secondly, in terms of Q1, could you talk a little bit about 20 nanometer utilizations? I think overall utilizations, you did mention it'll go down to 70%. Could we talk a little bit about how 20 nm is holding up? Is it holding up better than the overall company utilization? Sure. For the 2023 outlooks, the 2023 will be a down year for both semi and the foundry industry, due to the deterioration of the global economics, ongoing inventory correction and weaken the consumer demand. We project the semi industry is gonna forecast to decline by the low single digit, while the foundry industry to shrink by mid-single digit. The question about the loading on the 28-nanometer in Q1. In Q1, in general, the 8-inch loading will be lighter than 12-inch facility. We expect 8-inch will operate below the corporate average, while the 12-inch will be higher than the corporate average. For the 20 nm is- It should be slightly better than the 12-inch. Even slightly better than the 12-inch. Yeah. Okay. Understood. My second question is on the CapEx, the $3 billion number, given that we are running into a downturn. Could you talk a little bit about what is the primaries? I think it's mostly 20 nanometer and some Singapore related expansion, but could you give us a little bit more color on what that $3 billion CapEx comprises of this year? Any qualitative thoughts on, do you think about any adjustment in the CapEx given we are entering the year with utilizations at a lower level in the inventory correction? Sure. The majority of the 2023 CapEx will be budget for new capacity expansion for the Fab 12A P6 and Fab 12i, the P3 facilities, which are endorsed by the customers to well as deposit for that too. A portion of the 28, a portion of the 2023 CapEx budget are also geared toward to a product mix upgrade. The remaining of budget will be reserved for the clean room maintenance and general budget. Basically it's the P6 and the P3 facility as the major portion of that. As far as the CapEx adjustment, we have a plan to dynamically adjust the CapEx plan depends on the macro conditions and market demand. We do have a flexibility to adjust our CapEx expansion and the general maintenance budget if it comes to a need. Got it. Just wanted to follow up on the first half bottoming. As things stand right now, do you feel the inventory in the supply chain will reach normal or a low enough level by end of Q1? Or you think that there are several areas where it still needs another quarter of inventory clearance to kind of get over that? I think, like I said earlier, the some area are improved and some are still high. I think by the end of the Q1, I think we'll be better than the Q4. I think by Q2, I think the we expect inventory will improve significantly to more the normal level. We expecting the inventory will gradually improve. The second half of 2023, we have a much, we have certain confidence that will come back. Yes. Is that confidence driven by any specific projects that you have or you are basically thinking about, overall inventory restocking in the industry happening in second half? actually, multiples. One is the DOI check with the customer. Mm. The other is the engaged projects and also the end market outlooks, the alignment that we have with customers. There are multiple factors. However, we are cautiously optimistic about second half, and we just have to continue monitoring the progress of the DOI situation. Yeah. Understood. Yeah. Thank you very much. I'll go back to the queue. Thank you. Thank you. Thank you. As our next question comes from Charlie Chan with Morgan Stanley. Please go ahead, Charlie. Thank you. Hey, Jason, Chi-Tung, and Michael, first of all, congratulations for a very strong first quarter result and happy Chinese New Year ahead. Jason, my first question is really about your industry assumption. I think you shared with us and also investors about your methodology, right, to forecast the industry revenue. When I think about the foundry industry, I feel like the revenue should be much lower than semi customers because there is at least one month or even more than one month's chip inventory at the customer side. That means the foundry, revenue should be at least at 5% or even 10%, lower, than your customers into the industry because the customers need to, deplete all those inventory before they reorder. Can you explain why your industry assumption is that, semi down high single digit, but the foundry will be down only mid-single digit? Can you, start with that, question? Thank you. Well, I mean, it is, like you said, we do have a methodology that calculating that. It is a, maybe a very complicated answer. Yeah. The semi does have better business. Yeah. The semi is better right now, is low single digit. The foundry is about mid-single digits. Oh, okay. Even within the foundry, there are different technology nodes, and some node are better than the others. And then, for instance, even we report that the foundry industry was shrink by mid-single digits, but UMC addressable may be a little bit different. And then if you look at the end market exposure and every foundry will probably be different. Mm-hmm. We do look at the multilayers of data. At this point, we think the foundry will be about mid-single digit decline. Yeah. Okay. Same with the low single digit decline. Yeah. Oh, I'm sorry about that. Yeah. Just a quick follow-up, right? First of all, would the UMC's address both market does better or worse than the industry average? Second question is that, do you consider some major foundries that wafer price hike in your foundry industry assumption? Thank you. I mean, there are some, but not to the full extent. Going back to the UMC addressable node, currently we anticipate the decline will be in the low teens% range. Oh, low teens? Yes. Okay. Got it. Okay. May I clarify, you just said that, 1Q could be bottom of cycle. Do you mean that, your second quarter foundry utilization will flat to up? Is that a right interpretation? Well, I mean, we'll give you the guidance. Yeah. Jason was saying first half- Yeah. Mm-hmm. will be the top, if not Q1. Sometime in first quarter we hope to be the top. Hopefully, there's a chance to be Q1. Oh, I see. I see. Now, now I get it. Thanks, Quidong. Let me switch gear to the pricing, right? I appreciate company's strategy that, you know, price cut doesn't translate into better demand, et cetera, right? Some of your competitors are cutting price. Would you know, foresee some market share loss in some mature nodes if you want to be firm on your pricing? Thank you. I mean, our objective is clear. We will support our customer and to make sure they remain competitive and also with their respective market shares. For UMC's consider the AC versus the loading trade-off, the way we see it is there is a considerable progress was made in pricing reposition for UMC. The cost reduction productivity improvement in the past two years actually help us with that. We in turn to preserve the win-win structural profitability between the foundry and customers. Under the recent market condition and our product portfolio, we believe the trade-off between the loading and the price will end up with limited benefit in demand creation, because the weakness of the PC and the smartphone and consumer sales growth. However, we will continue work with our customer to make sure they secure their market share in their respective market. Okay. Could you be, you know, nimble on pricing if, you know, customers come back to say, "Hey, is, you know, demand if you cut price..." Yeah, I'm just wondering how firm are you on the pricing? I mean, we firm in terms of our guidance right now for 2023. Mm. we also, you know, I mean, It's our intent to preserve. Mm. that structural profitability and, you know, protecting the pricing position. Mm-hmm. in terms of AC management, we will continue manage that with our customer closely. Okay. Thanks. My last question is probably for Chitung Liu, right? Based on above discussion, assumptions, et cetera, can you give us a kind of, you know, like full year gross margin guidance and do you have a, like a minimal gross margin target based on your depreciation assumption, pricing assumption, et cetera? Thank you. Yeah. We don't give out the full year, gross margin outlook. We do have the depreciation, assumption for 2023. Mm-hmm. Which right now after the cut in CapEx will be a low single digit decline compared to our year 2022. Does that mean Okay. Does that mean the first half is also the bottom of the gross margin? Overall, as Jason just mentioned, from business standpoint of view, we hope the trough will be first half, sometime first half of this year. It's now the first quarter. Mm. Mm-hmm. Margin should reflect. Mm-hmm. to the business momentum, but maybe one or two quarter differences. There could be some time lag. Mm. on how you reflect the cost versus the revenue improvement. Mm. Overall, we certainly hope the trough will be sometime in first half. I see. I see. Jason, I come up with one question. I think there are some investors are concerned about one of your IDM customers because they also have some challenge about their own fab utilization, right? They may receive back some 40 nm or 17 nm or 22 nm project back to their own fab in 2024. How do you address that concern? I think that the end product should be like a smartphone ISP or AMOLED driver IC. Thank you. Well, I mean, there's always a cyclical nature of this industry, right? Mm. We're no stranger to that. We have to just deal with all business circumstance. The way we see it is we believe the product mix optimization is a continued pursuit for UMC to enhance the long-term fundamentals. Mm-hmm. You know, we'll continue our business development, follow the mega trend, not just limited at one customer, but very diversified-. Mm. Diversified market focus as well as the customer base. Mm. And- Mm. Continuous strengthen our specialty technology offering, quality operations, we can continue be the best foundry and for those products to be produced in UMC. Now. Mm-hmm. We do believe, and we have a strong engagement product pipeline to support that long-term fundamentals. Mm-hmm. Mm-hmm. You know, any short-term volatility, we will continue to work with the customer to make sure that, you know. Mm-hmm. We both remain very competitive and relevant to this market. Yeah. Mm-hmm. You should have to make a decision about your 17 nm capacity, right? Do you have any visibility right now for 17 nanometer capacity expansion? Yeah. I mean, that's more of a question about the technology migration, right? In our view. Mm-hmm. The technology migration will continue. Mm-hmm. once we have aligned with our customer, then we will also will put, you know, adequate capacity to support that migration. Mm-hmm. At this point, you know, we I mean, I'm not commenting about the customer specific or product detail. Mm-hmm. if the question is about the 17 nm for the, Right. Right. For the driver and the ISP, we expect the next mainstream node for that is after 28 nm will be 22 nm. Mm-hmm. The 22 nm is a mature technology, and with the manufacturing capabilities already proven. Mm-hmm. We believe the 22 and 28 is a long-lasting node. The 17 nanometer solution could be a subsegment of the total OLED driver and ISP solution. Mm-hmm. Before 2024, you know, the volume production for 17 nanometer will be very minimal. Mm-hmm. And the, uh, you know- Mm-hmm. Right now we're seeing the 28 nm is still the most competitive offering in the marketplace. When considering the overall factors, you know, performance, cost, capacity availability, and the system acceptance. Mm-hmm. Our upcoming 22 nm solution have already been adopted, okay, by the leading partners with their- Mm-hmm. with their design. Therefore, with our confidence with the 22 nm will continue to have a business sustainability well into the next wave. From a technology migration point of view, we are also working with our customer and partners to define the future roadmap. We will not be absent from that market anyway. Yeah. I see. Okay. Thanks for your patience and all the answers, gentlemen. Thank you. Happy New Year to you, too. Thank you. Thanks, Jason. See you soon. Thank you. Our next question comes from Szeho with China Renaissance. Please go ahead, Szeho. Thank you. Hi, gentlemen, I have two questions on 28 nm. Given the fact that we are still building up 28 nm capacity in multiple locations in Taiwan, China, and maybe later on in Singapore, right? Will we be offering a comprehensive portfolio of technologies in each of the fab locations or we'll be more selective in offering the technology platforms? Well, I mean, the product mix on different sites, is, you know, is very dynamic. Mm-hmm. We are aligning to the outlooks. The idea is we want to creating as much as the flexibility, but without sacrifice the scale. You know, many of that is ongoing discussion. I don't have a specific or fixed mix for you as a reference. Mm-hmm. The messages, I mean, the update is that, you know, we have an option to dynamically adjust that, subject to the outlook with and alignment with the customer. Yeah. More importantly, if I may, we are actually offer more choices for customers in terms of the production sites. If customer place 22, 28 nm orders to UMC, they have a option to be produced either in Taiwan, China, Singapore. We are one of the very few founders that can offer multiple site choices. Mm-hmm. amidst of the, current geopolitical tension. Yes. Sounds great. The second one, on the 28 nm, how easy are we upgrading the capacity to the next generation, like the 14 nm FinFET? I mean, there is option to do so. Mm-hmm. Nothing's easy. The, the, and, you know, the next major way, it will probably be upgrading from migrating the 28 nm to a 22 nanometers. Mm-hmm. After that, there will be a 14. There will probably be a couple layers before we another step before we get into the FinFET. They are good percentage of the two that actually can convert between those nodes. I think we are in a good position to cover all the way to 14 given the tool mix. Yeah. I see. All right. Okay. Thank you very much, and Happy New Year. Happy New Year to you, too. Yeah. Thank you. Our next question comes from Sunny Lin with UBS. Please go ahead, Sunny. Thank you. Sure. Thank you for taking my questions. My first question is on geopolitical evolvement. I wonder if in recent quarters, have you started to see older opportunities from clients re-evaluating the supply chain diversification? If yes, what kind of products are you seeing more eminent upside? That's my first question. Thank you. Well, I mean, we do see trends like that. We believe we are in position to be benefited from that trend. However, given the current inventory correction, we expect the progress in engagement and the payback will be more obvious perhaps beyond 2023. You know, we will whether or not comment on specific product or customer on this. We are aware of this geopolitical supply chain concern for many of the customer and, you know, it's the potential implication from, you know, on our global customers. Some is already in discussion with us to fulfill their sourcing plan. Probably not a good idea at this point to giving anything specific, yeah. No problem. Just to quickly follow up, I understand some of the engagement are still in early stage, but any way, we could try to quantify the upside for coming years? Quantify that, it's still too early right now, because the given the current inventory correction, I think many of these is under the discussion in terms of volume and the product and also the process. I think it's still kind of early again. I think many of these will probably take a year to see them realize it. I think we can probably, once we have a clear visibility, we'll be able to update you on that. Yeah. Got it. Thank you. My second question is real quick on capacity increase. Based on your current CapEx target, what kind of capacity increase you target to increase for this year, and specifically on P6, for 20 nanometer? For your Singapore expansion for 28 are still targeting for late 2024? Thank you. For 2023, capacity will increase by 4.9% year-over-year, mainly for the Fab 12A P6 profile. The Fab 12A P6 ramp will start on by mid-2023, and it will reach about 12K a month by Q4 2023. The P3, the Singapore P3 ramp, is targeted to the first half of 2025. Got it. Thank you so much. Thank you. Thank you. Our next question comes from Laura Chen with Citigroup. Please go ahead, Laura. Thank you. Hello. Hi. Thank you. Good afternoon, and happy New Year. Thank you for taking my question. My question is also on the 20 nm. While we see the demand is still quite resilient, even we see a lot of inventory correction, we know that many of them still are PC or smartphone related. Just wondering, do you think that the resilience will continue even during the first half inventory correction at the client side? If that's the case, how would that impact the overall growth margin, as we know that 20 nanometer probably also one of the key catalysts to drive a better pricing and also better product mix? That's my first question. Thank you. Sure. First, happy new year to you, too. For the 28 nm loading, I mean, we remain confident with our 28 and 22 nm business, given that it's a long-lasting node, driven by many applications, such like ISP, Wi-Fi 6, OLED driver. We expect this 28, 22 nm will be partially impacted by the inventory correction in communication segment during the first half 2023. We do anticipate a good rebound in our 28 and 22 nm business starting from second half 2023. We, given the current visibility, we have some confidence that it will come back on the second half of 2023. For the ASP and the, you know, we're gonna do our part. I mean, we will continue to do our cost reduction, productivity improvement effort to make sure that our customer can remain competitive. We will cooperate with our customers in the case of the headwind, the market headwind, the cost headwind, and in conjunction with our cost efforts. We want to make sure that they will stay competitive and with respective to their market share position as well. Yeah. Okay. Thank you. That's very clear. Also on the IDM business, we know that in the through the last year, the growth are quite solid and quite substantial. I'm just wondering that what nodes we see the most growth and also what kind of the application. Given again, the cyclical downturn across the board, do you think that the IDM outsourcing will continue, particularly in some like MCU or automotive related? Well, I mean, yes, I mean, particular for the 12-inch and the, you know, there is across all different technology node from 28, 22, to extend the 55 nm and the 40 on automotive space. We do see there is a continuous opportunity for us to engage. That's also aligned to our mega trend and that we have been talking about it. We believe our addressable market will continue to grow, okay? Giving our upcoming capacity planning, the 28 and 22 will actually continue enhancing our position in that context. We are excited to many of the new opportunity that brings to us to increase our relevance to on those application. You know, the, you know, we touched that already, the ISP, the Wi-Fi, OLED, as well as the automotive. We, you know, because, you know, not just the IDM that, you know, which is what we focus to align with the industry mega trend. Okay, great. Because for one of the IDM customers, probably also see some weakness on the automotive for the industrial. I'm just wondering, since some of the IDM also ramping up their own 12-inch capacity, for that will be slightly impact our short-term business. We know like the mega trend in the longer term is still quite solid, so just wondering will you also see that kind of, NCE or automotive business to come down after maybe later in second half or into later in first half into second half? I mean, not really. I mean, it's not. Well, I mean, given the alignment that we have with our customer and with closely working with them, the capacity growth, even within the IDM, is actually incorporated to our sourcing, you know, strategy with us. We are part of their sourcing strategy. I do not, we do not expect, you know, the IDMs, you know, the in-house capacity expansion will become a threat to us. I think given our long-term, you know, given our long-term alignment with the customer, and while the customer also recognize the semiconductor supply chain is essential now, I think they've been sharing the data with us in a much better way, and it's more transparent, you know, high visibility. No, I mean, at this point, we don't anticipate any impact on that. Okay, great. Really appreciate. Thank you. Yeah, and have a nice Chinese New Year ahead. Thank you. You too. Thank you. Thank you. Have a nice Chinese New Year ahead. Thank you. You too. Thank you. Thank you. Our next question comes from Bruce Lu with Goldman Sachs. Please go ahead. Thank you. Have a nice Chinese New Year ahead. Thank you. You too. Thank you. too. Thank you. Hello. Hello, Bruce. Hello, this is Bruce. Can you hear me? Yes. Hi, Bruce. Okay. Happy New Year. Happy New Year to you. I think I still need to go back to the pricing. I mean, I'm surprised that you talk about a full year pricing will be firm. I want to know the, you know, basic assumption for this pricing. This is assuming like healthy recovery in the second half. Does that take into consideration that your new fab will be LTA protected, will be like, you know, price premium versus market price? Or you're talking about like, you know, like-to-like basis, the pricing remain firm for the full year. Well, I mean, the pricing has a mix, right? I mean, the way I have to look at it is there's a mix of a pricing. Our ASP basically reflects the product mix as well as the pricing adjustment. Okay? Mm. For the blended ASP guidance that we're taking into account, there's a short-term variation of a 12-inch product mix and also the adjustment and also the new P6 RAM. They are multiple factors that we have blended together. What we provided to you is more of a blended ASP guidance. You're right. It's not like to, like to like. Yes. Okay. What about the like-to-like base pricing, well, let's say for the second half of this year? If you take all those figures. Yeah. We won't be able to comment on that. This kind of information, first of all, it's very difficult to predict. Secondly, we can only give you a blended ASP guidance as we always have. The like to like, overall conceptually, we can talk about it on a quarterly basis. I see. Understand that. Understand that. The second thing, I have a quick question for the R&D expenses for the whole year. You know, your competitor was talking about like a big jump in terms of R&D for 2023. What about the operating expenses for UMC for the whole year? Yeah, we intend to somehow keep the absolute numbers in terms of operating expenses. Of course, the employee related compensation will be affected by the four years profit sharing program. Other than that, such as R&D and some other project, the expenses will be somewhat flattish. On top of, on top of that, because of the short-term volatility, we are implementing a pretty stringent cost control for other areas, but not on the R&D program. Okay. Well, lastly is that, you know, you have a lot of fab in different regions. Do you consider to like price in the different, you know, with a different pricing, with different geographical location? You know, TSMC was talking about like, you know, flexibility in terms of different multiple location has a value, which means they wanna sell those kind of that. Do you consider to do that kind of pricing strategy as well? Well, I mean, like you say, earlier, the P6 and P3, the 12A and the 12i, you know, definitely have a different pricing scheme. Because the production ramp for the P6 and P3 will indeed incur some of the higher depreciation costs for us. For us, the new build capacity is under the LTA base and with the build-in wafer price. Given that our customers do recognize the our value as well as the belief our total solution is competitive for both of us to capture the market growth, and they agree to that. Those fab investments are also based on such alignment and so to drive our CapEx and ROI decision. Yes, from those new build capacity, there are different pricing scheme. But not for the rest of them. Only for the newly added capacity in other than Taiwan. That's right. with a different pricing strategy. Okay. Yeah. Understand. Even within Taiwan because the P6 is in Tainan. Yeah, yeah. -P7. Okay. That's all I have. That's all for me. Thank you. Thank you, Bruce. Tainan and... Thank you. Our last question today comes from Gokul Hariharan of JPMorgan. Please go ahead, Gokul. Thank you. Thanks for taking my follow-up question. First of all, could you talk a little bit about timeline for your 14 nanometer FinFET and what kind of demand you're getting from customers? Is this happening in the next couple of years itself, or is it something that will happen beyond the next couple of years, you focus on 22 nm migration? Lastly, also wanted to check whether the 14 nanometer is something that you have committed to customers as part of some of your LTA arrangements, whether it is for Fab 12A P6 or for the Singapore new fab that is coming up. I mean, first of all, it's our understanding that before 2024, the volume production for 14 nanometer will be very minimum, if any, because the 14 nm production is still under the exploratory stage. The current discussion that we have is, main issue is the trade-off between the power consumption, transistor performance, cost, and the capacity plan. It's still in a very early stage even to predict, you know, when it will start production. Yeah. Okay. Is it covered in any of your LTAs or that will be separate agreements that you sign if and when you decide to go ahead with it? No, it's not covered under the current NDA, the LTA, no. Okay, understood. Just one quick question, Jason, on your overall view on 28 nm industry demand. We are now hearing TSMC also building a lot of 28 nm capacity in Japan, Nanjing, as well as potentially considering Europe. You guys are considering Taiwan as well as Singapore. There's a lot of announcements from some of your competitors as well. When we look at all this together, it looks like 28 nm capacity will be 50%-60% higher than any of the prior nodes in terms of installed capacity. Do you agree with that? Do you think that the demand is that big that we could kind of fulfill all this capacity, especially as we are also heading into a bit of a downturn? Yeah. Well, I mean, the. We definitely don't look at this from the physicality point of view. We look at it from a long-term standpoint. We remain very confident in the 28 and 22. You know, I can't really comment. I won't be able to comment on our competitor's situation, but we are confident with our own business, mainly by our highly differentiated and customized technology solution. Together with what Chitung Liu mentioned earlier, we have a geographical diversified capacity offering. You know, and we is with the current customer alignment and mutually committed to the some of the new capacity build, and we've seen the 28 and 22 is a sweet spot for many of our customer and their application. Which we believe those demand is continue to grow. With the strong product pipeline in 28, the short-term market turbulence will not change our long-term view and the relevance on the 28 and 22 nm, based on the alignment we have with our customer. Okay. That's very clear. Thank you and happy Chinese New Year as well. Yeah. To you. Thank you. Thank you. That concludes today's Q&A session. I will turn things over to UMC Head of Relations for closing remarks. Thank you everyone for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact UMC at ir@umc.com. Have a good day. Thank you. Thank you. Ladies and gentlemen, that concludes our conference for fourth quarter 2022. Thank you for your participation in UMC's conference. There will be a webcast replay within two hours. Please visit www.umc.com under the Investors Events session. You may now disconnect. Goodbye.