Welcome everyone to UMC's 2023 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 instructions given at that time if you would like to ask the question. For your information, this conference call is now being broadcasted 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, Investors, Events section. And now, I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin. Thank you, and welcome to UMC's conference call for the fourth quarter of 2023. I'm joined by Mr. Jason Wang, the President of UMC, and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the fourth quarter financial results, followed by our president's key message to address UMC's focus and the first quarter of 2024 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 Financial 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 risks 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 Authority. During this conference, you may view our financial presentation material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's fourth quarter 2023 financial results. Thank you, Michael. I'd like to go through the Q4 2023 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on page 4, the fourth quarter of 2023, consolidated revenue was NT$ 54.96 billion, with gross margin at 32.4%. Net income attributable to the stockholder of the parent was NT$13.2 billion. Earnings per ordinary shares were NT$1.06 in Q4 2023. On page 5, this is the sequential performance. Revenue declined 3.7% quarter-over-quarter to NT$54.9 billion. Gross margin rate dropped roughly 3.5 percentage points to 32.4% or NT$17.8 billion. With net non-operating income of NT$ 2.22 billion, the net income comes to NT$ 13.19 billion, or EPS of 1.06 This is compared to 1.29 in the previous quarter of 2023. For year-over-year comparison on page six, revenue declined roughly by 20% year-over-year to NT$222 billion. This is largely due to the lower capacity utilization rate, as our wafer shipment declined roughly 27% year-over-year from 2022 to 2023. Gross margin rate, as a result, declined from 45.1% in 2022 to 34.9% in 2023. Overall EPA earnings, net, net earnings, in 2023 was 50.99, or close to NT$51 billion. Net income rate was 27.4%, compared to 31.3% in the year of 2022. EPS, as a result, is 4.93 in 2023, compared to 7.09 in 2022. So on page seven, our cash on hand is still around NT$132 billion, and total equity of the company has come to NT$359.5 billion. Book value per share is close to NT$29, per, per share for... at the end of 2023. On page eight, starting from 2024, we have changed our ASP unit as well as capacity unit to 12-in, and 12-in, equivalent to express the ASP number as well as the capacity number. So for the past five quarters, you can see the trend chart here. The first three quarter was edging up, and the last quarter was relatively firm on the 12-in, wafer equivalent ASP trend. On page nine, for the revenue breakdown by geography, Asia is getting a little bit bigger to 52% of our total revenue, while North America is about 23% of our total revenue. For year-over-year comparison on page 10, Asia actually declined from 51% in 2022 to 57% in 2023. The rest of the three main regions didn't change much. On page 11, IDM continued to increase to 22%, and fabless is around 78% in Q4 of 2023. On our year-over-year comparison on page 12, the increase in IDM is more notable, from 15% in 2022 to 22% in 2023. And in terms of application breakdown on page 13, communication remained the biggest of 47%. And the spread among different applications didn't change much quarter-over-quarter. As for year-over-year change, computer declined from 15% in 2022 to 11% in 2023. And we continue to see bigger exposure to other segments, which is mostly automotive and industrial, around 20% compared to 14% in the previous year. For technology breakdown, we are happy to see that revenue come from 14 nm, and below now represent 50% of our total revenue, and this is compared to about 45% in the previous quarter. And 22- and 28- is our largest share of revenue, around 36% in the Q4 of 2023. For the full year numbers, the trends is also similar. We see the 22- 28 revenue of 31%, compared to 24% in the previous year. On page 17, as I mentioned earlier, the unit of capacity wafer also changed to 12 in equivalent. Right now, our quarterly available capacity is a bit over 1.2 million per quarter in terms of 12in, equivalent capacity. And we will continue to see some minor increase out of our 12A capacity, given our P6 expansion is continuing. On the last page of my presentation, CapEx for 2024 is currently budgeted at $3.3 billion, which majority of that, over 95%, goes to 12 in, capacity expansion in both Tainan and also Singapore. The above is a summary of UMC's results for Q4 2023. 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 results. In the fourth quarter, challenging macroeconomic conditions continued to prolong the inventory correction in the semiconductor industry, as our wafer shipment decreased at 2.5% quarter-over-quarter. While overall fab utilization rate slightly fell to 66%, as our Tainan 12A P6 facility continues to ramp, our 22- 28 nm, represented 36% of our Q4 wafer revenue, reflecting record high in revenue, as well as percentage of the wafer sales. Overall, 2023 was a year where UMC demonstrated its financial resilience. In face of challenging external environment we were able to achieve yearly 34.9% gross margin, despite the utilization rate significantly declined in 2023. This resilience can be attributed to our relentless pursuit of technology innovation, differentiation, customer synergy and stickiness enhancement, and manufacturing quality, excellence, and cost reductions. As a result, we have improved our product mix and customer portfolio, which lifted ASP by single-digit in 2023. Looking into the first quarter of 2024, we anticipate overall wafer demand will increase mildly. However, customers remain cautious in their inventory management. Moving forward, UMC will continue to navigate headwinds amid an increasing competitive landscape and swirling geopolitical tensions. We'll diversify the manufacturing base and differentiation in 12 in, specialty technologies. Our 12 nm FinFET cooperation is a step forward in advancing our strategy of pursuing cost-efficient capacity expansion and technology node advancement in continuing our commitment to customers. This effort will enable our customer to smoothly migrate to this critical new node, and also benefit from the resiliency of an added Western footprint. We anticipate 12 nm FinFET cooperation will broaden our addressable market and significantly accelerate our development roadmap. Now, let's move on to first quarter 2024 guidance. Our wafer shipments will increase by 2%-3%. ASP in US dollars will decrease by 5%. Gross margins will be approximately 30%. Capacity utilization rate will be in the low 60% range. Our 2024 cash-based CapEx will be budgeted at $3.3 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions. Thank you, President Wang. Ladies and gentlemen, 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 are into the queue. After you are announced, 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. Thank you. Now the first question will be coming from Randy Abrams, UBS. Go ahead, please. Okay. Yes, thank you. I want to ask the first question, probably multipart, because wanted to get a few more details on the Intel partnership, which looks like a big move in a new direction. A few... Maybe I'll run off the questions we had. First, if you could discuss funding of the CapEx, and then if there's any IP or NRE proceeds that UMC would get by supplying the technology. I'll start with those. I have a few follow-ups. Well, I mean, for the 12 nm collaboration with Intel, on the funding side, the development costs for the collaboration will be shared mutually, and the use of existing equipment will significantly reduce the upfront investment for both parties for this collaboration. So, there's not much more to discuss in detail for the funding part. This collaboration will result positive impact to our P&L and once the volume ramps up, and the profit will be recognized at the time. Yeah. Okay. Okay, so it sounds like no, there's no process transfer because it's a co-development, so you'll co-fund it in R&D. And then as it ramps, how's the sales approach? Would it be each, each company respectively sells to their respective customer base, that offering? And would it be the same offering, or you would, you would focus on different parts of the market? Well, I mean, this, the, well, first of all, the 12 nm addresses the gap in the node portfolio for both parties. So this 12 nm is the, you know, the offering that will expanding our product offering and we will be serving our customers. And this will be a vertical cooperation between us and Intel. So if I may head on to that, basically, you can see this is an extension of our technology offering to our existing customer and potential customers. So coming from 28, 22, some 14, and certainly this, technology roadmap, will be perceived as a continuous advancement for a lot of, UMC-based customers and potential customers. Okay. And a question on the timeline. I think previously you were talking about freezing the process in 20, early 2025 and then a year to go into volume from that initial freezing. So the timeline was listed as 2027. I guess two questions: Would you still do a process in your existing Asian fabs, or is this a new focus, and would the timeline push out, or could you try to pull that development timeline in? I mean, from our original milestone, we targeted to have the process ready by 2025, as reported in the past. And now, while we join development with Intel to complete this development, we'll, we'll follow that timeline. But from PDK readiness, from the customer engagement to the production ramp, there's still going to be a year and a half beyond that. So now we put it to, expecting the shipment, I mean, the production will begin in 2027. In the meantime, we will align with our customer and to finalize the, the final, ramp schedule. Okay. And probably just... Sorry, so many on this one. The last one I just have on this topic, the cost of product. I mean, would it be considered it's an Intel fab, so you'd be paying a foundry fee, like they're manufacturing it on their line, or would you have operators, so it's... Yeah, how do you handle the transfer pricing? Like, if the cost structure is not there, or how much control do you have on the process? Well, I mean, there is a comprehensive, cooperation details, that I, I can't, you know, I'm not be able to elaborate it here. As a result, the, I, like I said, the result will be a, will be a positive impact to our P&L, based on the, that cooperation agreement. Okay. Yeah, it is, it looks like an asset-light way to do it versus at least building, I think, the original plan, if you would build a line to do FinFET in one of the other fabs, if this is the approach. Right. Um- So this is truly just a commercial cooperation. The party will be able to share the cost while leveraging the expertise... So we believe this will be a good way to leverage the synergy on both party and to accelerate to this market. Yeah. Okay. And I know it was a multi-part. I'll just ask one other, one other question. If you could talk about, so just on the pricing with the first quarter, it was a 5% ASP decline. Could you talk how much is a, a mix? Like the tech migration is moving very aggressively to 28%. Is there a shift in mix involved, or how much is like, for like, pricing? And just after that, because there are more, more concerns about the mature node, the 8 in, ongoing pressure, should we view it as a one-time reset on pricing, or do you expect we may start getting into, as long as the fabs aren't full and, and there's competition, mild price erosion? Like, how do you see it from— So, I think first, the mix versus pricing, and then from the first quarter level, how you see pricing environment Maybe I'll start off on this. The first of all, there is no change in our pricing strategy, which is with respect to the foundry market. The Q1 ASP guidance included an annual one-off pricing adjustment of 2024, as well as the change in product mix. Nevertheless, I mean, UMC is being fully aware of the market dynamics, so, and the competition situation, and we will support our customer, and we will closely monitor in the market, align with them, and on an appropriate pricing position to safeguard and protect UMC as well as our customers rather than market share. You know, we will only support our customer in order to maintain or increase their market share in selected market segments. We have no intention to fall into a price war, often reflected in a commodity market. From a mix standpoint, although the annual one-off pricing adjustment, this will lead to a slightly lower planned ASP for Q1, and we expect this ASP will remain firm beyond Q1 2024 for the rest of year, 2024, which already factored in, including the product mix LTA terms, for example. Yeah. Okay. And now, just to clarify, in first quarter, is mix—like, how is 28 nm, doing versus the mature node? Are they, are they coming back a little bit with shipment rebound, or is it relatively stable, mix across? Well, I mean, the overall Q1 28 nm, loading is slightly lighter. Okay. - than Q4 2023, mainly due to the seasonality, effect and some urgent order in Q4 2023. Our overall 22 and 28 loading continue to be, resilient amid the market fluctuation. And we will also continue to grow our 22 and 28 business with our customer for the application of OLED driver, ISP, Wi-Fi, SoC processor, while the further expansion of technology offering in the advanced MCU product and automotive industrial segment. Yeah. Okay. Q1, we'll be experiencing a slightly lighter loading for 28. Okay, great. No, thanks a lot, Jason. Thanks for your time. Thank you, Randy. Next one, Nicolas Baratte, Macquarie. Go ahead, please. Yes. Hi, good morning. Do you hear me okay or not? Yes, I think we can. Okay. Thank you. Sorry. Last quarter, I think you mentioned some weaker end demand in automobile and industrial. Is it still the case, and does that contribute to lower loading, lower ASP in 1Q 2024? Yeah, for the Q1, on the segment side, we expect that automotive and industrial end market will continue to experiencing the inventory correction. Hence, the wafer demand in automotive and industrial segment will remain soft. The communication and computer and consumer segment have stabilized for now, and the contribution will remain flattish quarter-over-quarter. Thank you, very much. So, you mentioned $3.3 billion CapEx in 2024, 95% in 12 in, right? I think that's correct. Does this entirely include, you know, is it 28, 22 nm, capacity increase, or is there something else? Well, for our 2024 cash-based CapEx budgeted at $3.3 billion. Out of that, the 20% of CapEx was budgeted toward 22- and 28- nm, expansion in our, the remaining expansion in P6 and the 12 in, which was pushed out during the 2022 and 2023 time. This reflects our effort to managing our CapEx. Around 60% of the 2024 CapEx will be spent on the 12i P3 infrastructure, as well as a minimum 28- nm, equipment. We'll expect the ramp of the 12i P3 will start at April 2025, so the infrastructure is ongoing. And we project the CapEx will peak out this year and will not impact company's cash dividend policy. As we have stated in the past, our CapEx strategy will continue to remain a disciplined and ROI-driven phase, and our affordability as well, where we invest toward future growth back with the customer commitment. If the market do not rebound as expected in 2025, we will further adjust our CapEx accordingly. Understood. But, is there a change in the, you know, planned capacity of IP3 in Singapore? I mean, the P3, the 12 in, Singapore P3, the infrastructure as a plant, is a pursuit as a plant. For the infrastructure, it means the overall structure of the building and the facilities. But now it's only with a very minimum tool improvements. For 2024. Yes. Okay. Okay. Yeah. Good. Thank you very much. Thank you, Nico. Next one, Gokul Hariharan, JP Morgan. Go ahead, please. Yeah, hi. Thanks for taking my question. My first question, just to follow up on the Intel collaboration. Would you be also using the same node in some of your future fabs, the 12 nm node, or like, let's say, your latter phase of expansion in Singapore? Or is that going to be all the 12 nm capacity will be only in the U.S. fabs of your partner? Well, I mean, not at this point, and we'll focus on to ramp this, you know, the western footprint first. And if it come to the market demands and or the customer commitment, then we will look into the other option as well, but not at this point, though. Okay, understood. And, Jason, maybe a little bit more on the pricing front. Could you talk a little bit about what you're seeing in various parts of your portfolio, 8 in, 20 nm, and mature 12 in? Are you seeing any very different kind of pricing? And, given your firm pricing strategy, how is your market share holding up with your key customers? Are you seeing any market share losses, given all these concerns about capacity expansion in China? Sure. I mean, in the foundry landscape, some markets are more likely to become commoditized. However, our strategy has always focused on technology differentiation that will drive our long-term growth and shift away from commoditized market with a low entry barrier. So right now, there's still a mix of, the kind of a product we, we see in our portfolio, and we are gradually moving away from that. We, you know, we have proactively increased our effort in technology advancement, including 12 nm like, you know, we talked about it, and 22, 28. For example, we expect to see higher revenue contribution from the technology nodes such as 22, 28, EHV, 55 nm, RFSOI in 2024. Beyond 2024, our broader technology offerings, along with the geographically diverse manufacturing location and the customer stickiness, will elevate our overall competitive. So we expect this action will reduce our exposure by half in the next couple of years. In half, you know, for our current commoditized product, by half in the next few years. Yeah. Thank you. So I think, a couple of years back, you had given us some numbers on specialty product mix. I think it was about 30%-35%, if I remember right, two to three years back. Is there any update in terms of how much of your product mix is now specialty and how much of it is single sourced in terms of the total business that you have? Well, there's for the specialty right now is in the Q1, is in a high 50 range, high 50% range. So the single source product is actually quite high, is higher than that. However, is the... We also have to look in the end market competition. So some of those products also consider as a commoditized area, and we're gradually moving out on that space. Yeah. Understood. Thank you. Last question on how do you think about overall order visibility into the next few months? Are you starting to see customers come back, or you think the customer stance is still a little bit more cautious, given some of your other competitors have been starting to talk about utilization bottoming out and growth kind of resuming? Any thoughts about how you expect growth to look like for the foundry industry this year and also for UMC? Sure. I mean, we start off on the maybe industry. We do expect the 2024, the semi industry will grow, probably to a mid-single digit year-over-year. But for foundry, we project that it will grow in a high single digit range. And for the UMC, we will strive to grow in line with the foundry industry, despite that our addressable market will probably remain flattish. As far as the demand outlook, of course, we start out with the inventory situation, and although we have observed healthier inventory level in PC and smartphone market segment in Q4 2023, the customer remained cautious after the Q1 2024 restocking of the mobile applications. For the auto and industrial segment, they will likely require more time to digest the inventory and return back to normal in the second half of 2023. So overall, the visibility of 2024 is relatively limited due to macro uncertainties. And while there is a lingering inventory issue in auto and industrial segment, we are cautiously optimistic about the market demand, given the PC and mobile inventory have returned to a bit healthier levels in Q4 2023 already. So, I think customer is behaving little bit cautious after the Q1 restocking, and then we'll continue monitoring the market dynamics. Got it. Thank you very much. Thanks. Sure. Thank you. Next one, Bruce Lu of Goldman Sachs. Go ahead, please. Hello, can you hear me? Yes. Okay. So, first of all, I want to double check about the foundry growth. You just mentioned that you talk about, like, the foundry is going to grow about like 10% and your addressable market is going to be flattish. I think this is such, you know, meaningfully lower than what your peers were talking about, like, you know, 20%. Can you tell us where is the discrepancy, you know, why you are so much more conservative than your peers? Well, I mean, I can't really comment on our peer, because I don't know what data they're using, but I'm sure, you know, we, we, you know, all of us are collecting the data from both the market and our customer and different market segments. Our data shows that the 2024 on the foundry side, I mean, foundry market will probably grow to a high single digits and close to 10%. And while the foundries, as it is, within our addressable will probably stay flattish. That's what our data shows. Since I don't have our peers information, so I can't really comment about the discrepancy. Yeah. I see. Understand. Okay. The second thing is that, you know, regarding to the, again, for the Intel collaborations, I think, can you provide us couple milestone that we can check or follow up? Because I think the key for this strategy is all about the executions, right? I mean, how can we track the execution from both parties? I mean, for example, like, you know, what time or timeframe you can complete your process development? What kind of timeframe you can available for tape out? What kind of timeframe, you know, customer can get by, you know, we can recognize some revenue or profit. Can we have some timeline for that? And also, is the collaboration only limited to 12 nanometers? You know, what about like 10 nm or 7 nm you know,, or any other advance our process development? Well, first of all, this cooperation is focused on the 12 nm process. And, you know, we look at this 12 nm it represents a long-term commitment and the opportunity for both parties. And as far as the future opportunity, we hope there will be, but it probably going to be in the future. And once there is anything, we'll glad to report that. For the milestone, there's, you're right, there's a very comprehensive project milestones, you know, under this joint development program. The major milestone is we like to freeze our process in 2025 and get everything ready for customer engagement after that, and hopefully the pilot at 2026 and the production in 2027. So which is aligned to what we have reported, is production in 2027. And we hope we see a meaningful revenue contribution started from the year of 2027. And that's probably in a very high level of a milestone. There are many, many details that, you know, we understand that we're fully aware of it, so we just have to executing it, and, you know, we putting a great attention to it. We believe this cooperation actually already been mitigated by leveraging the existing manufacturing footprint without going through. You know, the complicated setup of a greenfield facility. So we have mitigated some of the risk in terms of execution, and we've seen the rest of it. We just have to execute and report it accordingly. Yeah, and also for both Intel and UMC are publicly listed companies. Of course, this collaboration is more material given our size relative to Intel. So certainly we will report the progress on a quarterly basis to our stakeholder. And as Jason mentioned, once we freeze the PDK and with customer engagement, hopefully we have some kind of customer announcement in between. Okay. Thank you. Thank you. Next one, Charlie Chan from Morgan Stanley. Go ahead, please. Thank you. Hi, Jason, and Chi-Tung. First of all, happy New Year and also truly congratulations for your partnership with Intel. I think this should be a win-win situation. But maybe we kind of come back with some details. First of all, is the long-term profitability with this Intel partnership. So maybe Chi-Tung or Jason, so what was the kind of estimated kind of gross margin or IRR, ROE, you know, compared to your own investments, right? Or it to be your fully owned investment. What would be the difference in terms of gross margin and ROE? Yeah, we agreed, I mean, both sides, not to touch upon these numbers because- Okay. Probably is three years away. And, again, the material impact for both companies are relatively different. But, what we can say is all the questions you ask, we have internal pro forma or simulate numbers, support- Mm. our decision to go into this collaboration. Mm. We do believe 12 nm, is a multi-billion-dollar market, and currently is dominant by a few players, a few players. Mm. With the collaboration and the setup of the contribution from both sides, we think we can offer a very competitive technology, 12 nm, solutions at the Western footprint to our existing customers, as well as our potential customers. So we, we- Mm ... do have high hope for this collaboration, including the P&L impact to UMC. Mm. Yeah, Charlie, first of all, thank you for Happy New Year to you, too. I also like to add the background of this 12 nm cooperation is, it very much aligned to our growth strategy that we have set up to do, you know, 5 years or 5 or 6 years ago. Our growth strategy has always been to pursue a cost-effective capacity expansion and technology node advancement to continue our commitment to our customers while enlarging our addressable market and increase our market relevance. So as such, we have always been exploring potential cooperation that align with our strategic objectives. So this actually fits that very well. Mm. You know, like Chi-Tung say, there's many benefits about this 12 nm cooperation. And, you know, so we set up our goal, and we will execute this. And, we're seeing at the end of the day, this will be a win-win-win scenario for our customer, Intel- Mm ... as well as ourselves. Yeah. Thanks, thanks, Jason and Chi-Tung. So, a follow-up to that question. So, I think you seems to imply the business is not just like exceeding customers migration, right? It should be also some share, again, in this 12 nm foundry business. So since you mentioned about a win, win, win for the customers use your industry peer, right? Would you be able to provide some key-like process? The reason I'm asking you is that if you add a second source foundry you probably need to spend some upfront cost for the mask et cetera. How do you justify that customers to use your 12 nm as a second source? Well, I mean, first of all, in our view, this 12 nm, it is a competitive solution. Mm-hmm. And not only that, from a market standpoint, it's a long-life node that address many high-growth market, as more such as mobile communication, infrastructure, and networking. Now, many of product actually just come to the 12, so they're not necessary to be a second source product. Mm. So, many of the product pipeline actually arrive at this time. So we are aligning our milestone with the end market demand, demands. Now, from a competitive standpoint, this 12 nm products will be a comparable industry standard node. And it utilize our back-end process experience and, you know, and foundry know-how, and as well as Intel's FinFET transistor foundation. So I think there's, we will provide a very compelling and competitive solution to the customer. I see. Thank you. And then, also another question on this one. Yeah, I'm wondering if before 2027, there is some causes demand, would you use your current 14 nm, capacity in Taiwan or convert some of 20 nm, to fulfill the demand before 2027? No. I mean, right now we have evaluate all options. We believe this is the best option for us. Mm. Yep. In our primary reuse existing equipment for the 12 nm production, and we, you know, we expect it will have required some conversion kits and limited new tools, which is going to be more efficient than we producing in our facility. Mm. So overall, leveraging the equipment, existing equipment will tremendously reduce the upfront investment, for this 12, for this project. Okay. Thank you. And lastly, just on this, Intel partnership, right? Just, two kind of logistic question. So first of all, who will be in charge of the fab operation? I saw the news today, you suggest you will run a fab, but I feel like it could be pretty challenging, right? I'm not sure how you're, who's going to be in charge of the operation. Can you answer this one? ... No, I mean, we have people that assist for the joint development on the engine, the process development side. So- Mm-hmm. From the operation, Intel will operate that facility. Yeah. Okay. And would that require additional government approval for this collaboration? If you know, we'll follow all the filing for any regulatory requirements, and we'll comply to that. Yeah. Okay. Okay. Okay, thank you. Yeah, and switch gear to, to near term, right? I mean, the, the long-term dream is, is great, but, but back to, to near term. Sure. So, so Jason, do you think the fab utilization will have a second leg down this year? I, I saw... I noticed some of your customers' inventory days is running pretty, pretty low, right? So can you give us some kind of observation about the cycle recovery for, for this year? Just a, like, query, query pattern. Yeah, like I kind of stated earlier, we're cautiously optimistic about it, the 2024. Mm-hmm. However, the visibility of 2024 is still relatively limited due to the- Mm. Macro uncertainties. The consumer spending, higher interest rate and inflationary pressure. So, our customers, you know, they remain very cautious, even after the Q1 restocking that we have observed. So, we will go hand in hand with our customer, going through this turbulence. And meanwhile, our primary focus on 2024 is we will continue to enhance the company's resilience and to weather through this market turbulence, and then embrace the market upturn. So, I am cautiously optimistic about the upturn, but meanwhile, we will continue to focus on the company's resilience. I see. So last question is a financial question to Chi-Tung. So now you have the 2024 CapEx guidance, you have the full year revenue forecast. Can you give us some update about your full year depreciation growth, and also your full year gross margin guidance? Well, the depreciation estimate for 2024 is about 20% higher than that of 2023. As I mentioned, 2023 was really a trough for a recent depreciation curve. So the 2024, with 20% increase, is probably back to the 2021 level. Mm-hmm. And for margins- Well, I mean, for the margin, you know, we understand there's a softer market demand. So our, like I said, our focus is, you know, with a relentless effort, and in the past year, as well as in 2024, we'll continue to improve our structural profitability. Mm-hmm. Our margins highly depends on the capacity utilization, like you know. Mm. We expect we'll get market share in second half, which will lift our utilization rate as some of the new product will start ramping in the second half. Mm. However, we expect the depreciation expense, like Chi-Tung said, will increase 20% year-over-year in 2024. Yeah. So- We don't really give the full year guidance- Right. In terms of margins. Of course, we have a goal for a very longer term structure trend for our gross margin, but not the 24, 2024 margin guide, gross margin guidance. Hmm. Okay. Use the first quarter 30% as a benchmark. Do you think full year can keep at a similar level? Again, we don't comment on the full year margins. I think, Okay. We have a long-term goal, right? Maybe I can share this with you then, we hope to stay around the midpoint of 2022 and 2023 gross margin number, while continuing to add resilience to our top profit margin, I guess. As a structure- Yeah. -gross margin target, not for 2024. Yeah. Okay. Okay. I will need to go back to check my model. But anyway, thanks for the tips. Okay. Good luck, gentlemen. Thanks for your answers. Thank you. Thank you. Thank you. Next one, Szeho Ng, China Renaissance Go ahead please. Hi, gentlemen. I have a question on R&D. In Q4, the number edged up quite a bit. Is it due to the fact that we are starting to do the 12 nano R&D activities? Yes, of course, the 12 nm is one of the key focus for our R&D activities, but there's also some year-end adjustments for R&D efforts. So, I would say the overall R&D budget will continue to increase, but we will try to manage- Mm. as a fixed number in terms of% of revenue. I see. But can you share with us, what would be the R&D run rate going into, let's say, 2024 and 2025? Sorry, say that again, please. The R&D run rate into 2024 and 2025. Can you share with us, let's say, as a percentage run? I think the run rate will be similar to 2023. ... 23. Okay. All right, I see. And second question regarding the cash dividend policy. Will that still be based on the payout? So, as I just mentioned, even though we may see a peak CapEx in 2024- Mm-hmm. That will not affect our dividend policy. So we still intend to balance the payout ratio as well as the absolute dollar terms. Mm-hmm. -in terms of, cash dividends. I see. I see. I see. Fair, fair enough. And then, and last question regarding the partnership with Intel. Would the fab be targeting those customers or the serving the European and also the U.S. markets primarily? Well, I mean, the solution will be serving the customer globe, globally. Mm-hmm. So, it's not limited to any market segment, no. Right. I- It is western footprint for the first time for UMC's perspective. But would that be biased or, or focused more on the overseas market than the Asia side of the market? No, it will serving the customer worldwide. Okay. Okay. All right. Okay, thank you very much. Thank you. The next question, Brett Simpson from Arete. Go ahead, please. Yeah, thanks very much. Most of my questions have been answered, but I had a follow-up on the FinFET partnership with Intel. I mean, I guess the three Intel fabs in question equates to about 60,000 wafers a month capacity. Is that the rough plan we're talking about, as part of this partnership? And can you just help us with the math around the CapEx assumption to convert these fabs to your process? Thank you. Well, first of all, the capacity planning is subject to the customer engagement. So, you know, while we reframe where the project, the 12 nm will be developed in that location, but that doesn't mean that the capacity numbers. We will align with the customer and finalize the capacity size, but the size is actually available for us to plan that accordingly. For the CapEx, like I also mentioned earlier, primarily we will reuse the existing equipment; that will be very limited. The new tools and also some of the conversion kits are required for the CapEx, but the CapEx number is relatively small. Yeah. Is Intel taking any of the capacity for internal means as part of this agreement? And then, does this qualify for any CHIPS Act funding going forward? Thank you. We cannot speak for Intel. I think they will make their own decisions. As for us, we won't, we won't do that. Okay. Thanks very much. Thank you. Thank you. Next question is from Gokul Hariharan, JP Morgan. Go ahead, please. Yeah, hi, I just had one question. So, given, Chi-Tung, you mentioned, the CapEx will probably peak out this year. How should we think about depreciation going forward? I think you have this 20% bump, in depreciation this year. Should we expect depreciation to continue to keep growing at this kind of pace into the next couple of years as well? Or is it kind of largely, kind of this is like the big, jump in depreciation that we're going to see in 2024? Yeah, we see a little bit delay impact from the peak of CapEx to depreciation. So we will probably see a peak of depreciation in year 2026, two years after that. Two years after 2024. Okay, understood. Yeah. Thank you very much. Thanks. Thank you. Ladies and gentlemen, we are running out of time, so we're taking the last one. The last question, Laura Chen from Citi. Go ahead, please. Hi, thank you for taking my question. Just a follow-up on the Intel's cooperation as well. Just wondering that based on your agreement with Intel, is there any like a license fee or IP transaction of the cooperation? No, there's not. Okay. And also, I know there's a lot of different kind of type and demands of could adapt the 12 nanometers. But just wondering, do you have any priorities or like your first generation of the inside ramp you are scheduling it will put into your first consideration right now? Well, I mean, they are listed the customer that we're engaging with. So, we'll first finalize our discussion with the customer and then try to align with our development milestone, and then hopefully we can confirm the engagement. So, we are at very early stage of this joint development. And while we just announced it, we're already having a customer discussion, but we have not finalized it yet. Okay, thank you very much. Happy New Year. Thank you. Happy New Year to you, too. Thank you. Thank you. Ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. And now turn things over to UMC Head of IR for closing remarks. Thank you 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. Ladies and gentlemen, that concludes our conference for Q4 2023. Thank you for your participation in UMC's conference. There will be a webcast replay within 2 hours. Please visit www.umc.com under the Investors, Events section. You may now disconnect. Thank you and goodbye.