Nanya Technology Corp

TWSE:2408

Earnings Call Transcript 2017-Q4

[Sandra Liu, executive]

[Foreign Language] Good day, everyone. I'm Sandra Liu, Investor Relations [ Officer ] for Nanya Technology. Thank you for joining Nanya Technology conference and conference call today.

Before we begin, we would like to take this opportunity to address that this conference will be hold both on-site at Nanya headquarters and also dial-ins from our conference call. There would be an online emcee to assist our conference.

Our question-and-answer session, we'll first take questions from dial-ins, then we move on to the floor questions. Thank you for your cooperation.

[Operator]

Yes, thank you, Sandra. [Foreign Language] Welcome, everyone. We will now begin -- we are going to begin today's conference call. I'm -- Dr. Lee is not yet in -- at the scene yet, so we'll be waiting for him, and thank you for your patience.

[Foreign Language] Welcome to Nanya Technology's Fourth Quarter 2017 Earnings Conference and Conference Call. [Operator Instructions]

As this conference is being viewed by investors around the world, we will conduct this event in English only.

And today's format will be as follows. First, Nanya Technology's President, Dr. Pei-Ing Lee, will summarize our operations in the fourth quarter of 2017, followed by our guidance for the first quarter of 2018 and key messages. Afterwards, we will both open the floor and line for the question-and-answer session. And Nanya Technology's Vice President, Mr. Joseph Wu; and financial executive, Mr. Philip Jao, will join question-and-answer session.

Today's conference will be approximately 60 minutes in length. For those participants on the call, if you do not yet have a copy of today's earnings conference call presentation slides and press release, you may now download them from Nanya Technology's website at www.nanya.com.

And as usual, we would like to remind everyone that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the safe harbor notice that appears in our presentation slides.

And now I would like to turn the podium over to Nanya Technology's President, Dr. Pei-Ing Lee, for summary of operations and current quarter guidance. Dr. Lee, please begin.

[Pei-Ing Lee, executive]

Thank you. Thank you for coming to Nanya Technology Q4 2017 Investor Conference. I'm Pei-Ing Lee.

This year, we changed our format a little bit to enhance our international communication, the investment from all the country. Okay, I hope that this trial could be successful. Okay. Okay, my agenda start with key takeaway: our Q4 revenue result; also, a summary of the whole year revenue and results; operating guidelines; market outlook; and business outlook. First of all, Q4. Our revenue comes to TWD 16.783 billion, a 26.8 -- 26.3% Q-to-Q increase. ASP increased by 6.9%, and bit shipment increased by 18.7%. And gross margin are 49.8%; operating margins, 38.9%. And we recognized TWD 16.121 billion gain from Micron share disposal. We also recognized TWD 433 million gain due to ECB's option valuation.

So our net income for fourth quarter comes to TWD 21.978 billion; net margin, 131%; EPS for the quarter, 7.2 -- TWD 7.42. A little bit more detail, financial highlights for the quarterly results. Our revenue has a significant increase on Q4 and also net margin increase. For monthly revenue, we've seen that starting July, June time frame, we are starting to monthly increase. This is both due to our ASP increase as well as the shipment increase. Now we'll give more detail later on.

Okay, for Q-to-Q, Q4 versus Q3, our revenue increase, 26.3%; shipment, 18.7%; and ASP, 6.9%; exchange rate are marginally [ negative ]. Okay, more detail of financial summary. We focus more on this 4 number: our net sale already described; our gross margin, TWD 8.3 billion, at 49.8%; and operating income is TWD 6.537 billion, 38.9%; EBITDA, TWD 9.418 billion, 56.1%. All this number representing a very good improvement from Q3, okay.

Nonoperating income-wise, TWD 15.452 billion, okay, versus TWD 4.313 billion. This is mostly due to Micron share disposal as well as ECB valuation change. Income tax is mostly due to the income tax from undistributed income from previous year, okay. So net income comes to TWD 21.978 billion, okay; and earning per share, TWD 7.42; and book value, TWD 44.2, okay, for outstanding share, okay.

A little bit more detail explanation. For the revenue increase, mostly due to ASP as well as bit shipment, okay, increase, okay. And gross income, TWD 8.351 billion versus TWD 5.882 billion, mostly using -- are due to ASP as well as shipment and cost improvement, okay.

Operating income-wise are TWD 6.537 billion, 38.9%, and mostly due to ASP, shipment increase. And we have a little bit more R&D expense, which I will explain later on. Net income, TWD 21.978 billion versus TWD 8.546 billion.

And the Micron disposal gain is positive. Q4 is TWD 16.12 billion versus Q3, TWD 11.165 billion.

ECB valuation was positive at TWD 7.2 billion. Q4 is positive, and Q1 is negative TWD 6.8 billion.

Exchange rate are negative TWD 505 million, okay, post the very strong yen, okay. And Q4, we recognized ASA impairment of TWD 457 million, okay. For operating expense. R&D expense, we had Q4 a little bit more than Q3, and Q3 more than Q1 and Q2. This is mostly due to the increase in our 20-nanometer new product development as well as from 10-nanometer class technology development, okay. And this number likely would slightly also increase, okay, in 2018 by maybe 10% to 15%; not significant, but that would be increasing, okay. SG&A, whole year-wise, TWD 2.2 billion, and this number is likely to remain pretty constant, pretty stable.

For Micron private placement, Micron project, I would like to say a few words here. At the end of 2015, when I was appointed as President of Nanya Technology and also as a Chairman of Inotera, we immediately recognized that, at that time, Nanya Technology do not have a share of capacity distribution, we no longer had any share of capacity distribution, plus, that the profit sharing to Inotera has been gradually reduced. As a result, we decided to sell Inotera, okay. And in a deal, we also buy Micron share, okay, which means that we have decided to [ spare ] myself as the Chairperson of the Inotera, okay. And the whole project pretty much concluded at the end of last year, okay. And you know well on Inotera transaction, and this is the Micron shares that we purchased, okay. We purchased 57.7 billion shares -- 57.7 million share, I'm sorry, and at price of $17.29. We sell almost, again, $36.57, okay, and we recognized a gain of TWD 32.102 billion (sic) [ TWD 32.105 billion ] as a whole. So this pretty much conclude all our project, including Inotera and sales of Micron, because during selling Inotera shares, we negotiate for the price of Inotera as well as well as we negotiate for 2 more generation of technology license right. Beyond that, we also purchased Micron share, okay. That's the whole project, okay. For ECB conversion, okay, for the purpose of getting cash for 20-nanometer project, we issue USD 500 million, 2016, okay. We issue ECB at that time, okay, and that number, mainly due to NTC share price variation, the company has to recognize accumulated loss of TWD 7.599 billion until the end of 2017, okay. Most of the -- most of ECB has been converted, okay, and the valuation was done quarterly, okay. We only had about 18.87% non-converted ECB. For cash flow point of view, beginning balance for Q4, about TWD 24.5 billion, okay; the end balance is TWD 33.7 billion. Many of you may recognize this number is probably a little bit low. This is because of some of the Micron disposal share actually came in on January instead of December, okay. So by the end of January, we expect this number to increase to about TWD 44 billion of end balance, okay. Now free cash flow, TWD 5.9 billion for the quarter.

So for the cash situation, we were doing quite nicely improved. One point here is that we paid back -- we repay the bank loan for TWD 17.6 billion. By the end of last year, Nanya has repaid all the bank loan as well as the FPG borrowing. Basically, Nanya net debt now is remaining ECB and converted ECB that I just pointed out on the last for you. So basically, currently, the debt ratio has been coming down to very low, okay, at around 12% or so. I'll get into more detail later on.

Okay, so for quarterly financial highlight as a trend. From '14 -- Q1 '14 to Q4 '17, Nanya's gross margin as well as our OP margin, okay, trend, we had come to pretty nicely recover in last quarter. And we're expecting that this likely to be further improve in Q1 and Q2 or even Q3, hopefully, okay. This pretty much conclude the Q4 result, and I'll get into more of the revenue result for the whole year. First of all, net income, TWD 40.29 billion, okay, about TWD 40.3 billion; operating income, TWD 18.8 billion; Micron disposal gain, TWD 32.1 billion; ECB loss, TWD 7.6 billion, that pretty much included in here; earning per share, TWD 14.36, okay; and book value, TWD 44.20. Our debt ratio, as I explained to you, come down to 12.3% versus 37.5% at the end of 2016. And we have repaid all bank loan and FPG borrowing. So this is probably after almost 22 years of [indiscernible] we never -- we always owe money to the bank and FPG always for 22 -- more than 22 years. And this -- hopefully, that with this outcome, that we had also has some cash on hand, that we can prepare for future enhancement for company performance. Annual financial result for 5-year summary, so this pretty much summarize our revenue; net income, in the green; as well as net margin, in the yellow line, okay. This is indicating the -- that the company has been -- performed reasonably okay, okay, reasonably well for the last 5 years. It's a bit of good improvement here. For 2017 versus '16, revenue increased by 31.9%. Shipment is flat. Flat looks like it is easy to say, okay. 2017, we are -- we have execute a major project, that is to convert our fab into 20-nanometer. That project, actually, we invest around 5 point -- about USD 1.8 billion in that project, although it's quite a bit of big project that we have to execute, okay. Due to the technology conversion, all the equipment renovation as well as new equipment introduction, a pretty big project, original expectation is that our output, our sale will be coming down by more than 10%, okay. And with the effort from all our team, which I have to give them very good credit that they did a excellent job, okay, we come to the flat. And I'm very happy to be able to write down flat in here, as a matter of fact, okay. This is pretty much a very good achievement from the team, okay. All right, so overall speaking, ASP is over 35%; the exchange rate, negative 5.8%.

For whole year income statement, okay: revenue, 54.93% -- TWD 54.93 billion; and gross margin, TWD 24.67 billion; and our operating income, TWD 18.8 billion; nonoperating, TWD 23.03 billion; and our income before tax and income tax, at the end, the net income is TWD 40.3 billion, okay; and about TWD 14.36 earning per share for the year. For '17 and '16 result comparison, we had ASP increase 35% and, as I say, even though shipment is flat, but this is a pretty good result from the team, okay; and the exchange rate, negative 5.8%.

Gross margin-wise, TWD 24.67 billion versus TWD 12.85 billion, mainly due to ASP increase because shipment is flat. Our operating income, TWD 18.8 billion versus TWD 8.5 billion, this is due to high sale price and higher margin. And we have increase in R&D expense, 20-nanometer deployment; and SG&A expense also, due to -- is mainly due to employee compensation, information security expense and others. This year, we had to increase quite a bit of expense in information security, okay, due to that we had quite a bit of technical information. And now those technical information is very valuable for the company. And we need to making sure that those information security are maintained within the company. Since the employee is more in and out, we had to make sure that all this information is really secured. Finally, net income is TWD 40.3 billion. Last -- the year before, 2016, we recognized TWD 19.07 billion from Inotera share disposal. And last year, '17, we recognized TWD 32.1 billion gain from Micron share disposal; and also ECB loss, TWD 7.5 billion; income tax, okay, TWD 1.5 billion versus TWD 1.9 billion, that I just described; and negative foreign exchange rate. So this pretty much in comparing pretty good detail, okay, for the year 2017 and the '16. For CapEx and bit shipment. Last year, we spent TWD 29.4 billion, okay. This year, we expect to spend about TWD 11.5 billion; it's about 1/3, okay. Our spending mostly will be on the 20-nanometer equipment payment defer, okay, some of the final payment, okay; and also 10-nanometer class technology development at regular CapEx. Though we don't plan for major capacity expansion this year, we already spent TWD 1.8 billion. And this year, we are expecting our bit shipment will be increasing already by 45%, okay. And bit shipment-wise, Q4 achieved 18.5% (sic) [ 18.7% ]; and yearly-wise, we're expecting 45% increase for '18 -- 2018.

For the market. We expect DRAM supply growth modestly in 2018, particularly towards second half of 2018. DRAM supplier has announced capacity increase in second half '18, okay. For the demand side, we expect server and PC market continue to be strong, particularly server market will be very strong, okay. And this is due to data center, also 5G, artificial intelligence and cloud computing service. This all increases server market demand. We expect this not only going to be '18 significant, it's going to be continue on to be strong for a few years for server market. Potential server replacement from telecom company, this is related to 5G and artificial intelligence. Our PC market sustained by enterprise and gaming PC, okay.

For mobile market. AI gradually introduced into high-end smartphone, okay, continue to drive DRAM content growth, okay. But we expect that the growth in server are going to be even higher than mobile market. They even have the opportunity in the future to take over the #1 market sector potentially here. Consumer market. This year, we have a little bit of a sport activity that including, say, the Winter Olympics, including the soccer game, okay. All these may stimulate some consumer consumption, particularly in TVs, set-top box, networking area and also some home use consumer book. Mining machine, game console and smart speakers also increasing some percentage of the DRAM demand, okay. Overall speaking, at this first half, we don't see surprise in demand and supply, so we expect that first half of the market to be stable, okay. Business outlook for Nanya Technology. We expect the Q1 continue to be a little bit tight supply. ASP will continue to grow, okay, not in a big way, okay. We expect to be a modest increase in ASP, okay. First half DRAM demand-supply we expect to be remain stable.

And our operation focus for the year, for 2018. We are shipping more 20-nanometer bit than 30-nano bit in -- for -- already been achieved. And we're expecting 45% bit output and '18. And we also already launched 8 gigabit DDR4 and shipped last year, but this year, we like to launch that product into selective server customer, okay. Nanya is relatively small in size, so we don't expect that we're going to be go all the way out to all the server market. We will be very selectively choosing the server market that we can work with in the data center or in certain kind of Server business, okay. We will expand our 20-nanometer product lineup for diversified application. For 30-nanometer, we did a pretty good diversification. We have more than 15 product in 30-nanometer. We expect that in 20-nanometer, we will do the same thing. We will have more than 15 product all across the board. That's going to be including DDR4, DDR3, okay. We also include low-power DDR4, low-power DDR3, various other product at different density, okay. So that's what we're going to be doing for 20-nanometer. And we pretty much are doing the early few product pretty successfully. As a result, we're already ramping up to our full capacity for the 20-nanometer. Okay, that pretty much conclude my presentation, and I'd like to go into the Q&A section, okay.

[Operator]

Before we begin the Q&A session, I would like to remind everyone to limit your questions to 2 at a time to allow all participants an opportunity to ask questions. We will begin online Q&A session first and then move to Q&A session on floor later. [Operator Instructions] Now we got Mark Newman from Bernstein.

[Mark Newman, analyst]

Dr. Pei-Ing Lee, if you could talk about looking forward to 2018. You said at the bottom there on Page 25, you said overall first half 2018 looks pretty stable, with the capacity ramping up from some of the other players in the second half. Does that imply that you take the second half is more oversupply or too early to say right now?

[Pei-Ing Lee, executive]

Mark's question is if the second half potential supplier capacity ramp-up is not going to change substantially the market situation. Okay, my comment to this is that for the DRAM demand-supply balance, okay, maybe DRAM has a demand increase for about 20% to 25% demand increase, okay. The -- for the past few years, most of the supply increase rely on technology conversion mostly, okay, with some new capacity [ aiming ] mostly to compensate the technology conversion loss in the wafer capacity, okay. This time, it looks like the -- that overall output capacity for the wafer has been planned to be increased, okay. Based on what we understand the announcement, okay, from the supplier, if their planning is as they -- what they described in their -- in the news, okay, they will be increasing the capacity according to market demand, which means the number I just indicate to you, market demand yearly is around 20% to 25%. If that's the case, okay, if all the suppliers have done this -- the capacity increasing according to what they describe, we expect that the market stability may continue beyond first half of this year, second half this year or even, potentially, potentially, 2019, okay. That doesn't mean that DRAM price will not be fluctuating, okay, but means that it is the DRAM market situation will not be substantially going up and down, okay.

[Mark Newman, analyst]

Great. If I can ask one more question on the technology migration. You mentioned 20-nanometer will exceed 30-nanometer in January. Could you tell me what was the mix of bits of 20-nanometer exiting 2017? And when -- what is your plan for 1x nanometer?

[Pei-Ing Lee, executive]

As of January, our bit shipment from 20-nanometer already surpassed 30-nanometer, okay. And that ratio from 20 to 30-nanometer will continue to increase, okay. By the time we complete the whole 20-nanometer ramp-up and the likely to be -- this time frame likely to be around between Q2 and Q3 range, okay, we're expecting that 20-nanometer will be account for nearly, I would say, 70% or more of our total output, okay, more than 70% of our total output, okay.

[Mark Newman, analyst]

And do you have any updates on what the plan is for 1x nanometer? I think you mentioned still in development right now. Can you talk about what exactly Nanya is doing in collaboration with Micron and what is the potential schedule for 1x nanometer?

[Pei-Ing Lee, executive]

Okay, if I get your question correctly, your question is our strategy about Micron 1x technology, right? Okay...

[Mark Newman, analyst]

It's like how -- what is the status of Nanya in 1x nanometer and status and schedule?

[Pei-Ing Lee, executive]

Well, 1x technology, we don't have the urgency of implementing this year. As I just described that, we already just barely ramping up 20-nanometer, okay, surpassing 30-nanometer. So this year, we will allow our operation, including the fab marketing, sales, product, everything in 20-nanometer to become more mature, okay. And with that, we're already expecting pretty reasonable good financial result, okay. So this year, we don't have immediate urgency to implement our 1x technology, okay. We will evaluate that pretty soon. Actually, that likely, we will be doing something -- some decision-making at the second quarter this year, okay, about 1x technology. And actual execution likely will not be this year, as I described to you.

[Unknown Executive]

[Operator Instructions] There's no question online right now. We are going to move on to Q&A session on floor. Please go ahead.

[Pei-Ing Lee, executive]

Well, I'd take a few question from floor, if you have any. Please?

[Unknown Analyst]

[indiscernible] that their bit growth beyond 20-nanometer into 1x would -- may not have been as strong as past generations. So I guess, in your mind, are you seeing a slowdown of economical benefits from 20-nanometer to 1x versus what you've seen in prior generations?

[Pei-Ing Lee, executive]

All the new technology generation, now they come with a cost, okay. The -- basically, the technology becoming more complex, okay, to deliver more bits within the wafer, okay. So based on this situation, the cost advantage, although it's improving from generation to generation, okay, for Nanya, it's keeping generation, okay, even if it's -- the generation by generation becoming narrower versus many years ago, okay. So most importantly is what all these company, the supplier, they have in mind in terms of market demand and supply and also in terms of what is their gross margin, operating margin, how much they can skew or set with the market price fluctuation. So they will, in turn, measure what they can do in terms of adding more capacity, converging technology faster versus [ some other ], et cetera, okay. So I would say the market balance or non-balance or all the situation, that very much depend on suppliers' action taken versus the demand increasing. And demand increasing, as I described to you, for the last couple of years and the next year also is pretty stable at 20% to 25% and are likely to maintain the same, okay. So for the -- your question especially, I would say, first half, pretty much stable; second half, that's wait and see if all the supplier really do what they say, they increase the capacity according to demand increasing. And if that's the case, it will be a stable year or more to come, okay?

[Unknown Analyst]

And just a second question, last question, is the bit growth for first quarter. Do you have a bit growth number for first quarter?

[Pei-Ing Lee, executive]

Not yet.

[Unknown Analyst]

Okay. Then I'll say the 45% looks pretty conservative for this year, just we've seen that you ramped up the 68K capacity, if I know you.

[Pei-Ing Lee, executive]

45% is what we -- the minimum we can work on -- or for, okay. We will work for more than 45%, yes, we could, okay. And we'll try to deal with more, and we can, okay. But 45% is actually based on what the experience we had. And while we work with Micron for years, or what we know all about, okay, so yes, there's potential to be more, but we'll not be surprisingly really high percentage more, okay. Yes? Yes, please? Charlie, yes?

[Charlie Chan, analyst]

It's Charlie. So first of all, can you compare your gross margin for Server DRAM, Low Power and also specialty and the wafer base?

[Pei-Ing Lee, executive]

Okay. Well, Server business, first of all, is very important business, but Nanya is still working on it, okay. We still don't have a major shipment in the Server business. Basically, 5 years ago, Nanya Technology has stopped Server business, okay. During the Inotera changes in time frame, we completely stopped. We used to have pretty good Server business, then we stopped, okay. Now is we try to get back to Server business because you know that Server business is very important sector, growing sector for our business. It's something we can do, but we will not be going all the way out, okay. We'll be selective between our customer. Your question about margin-wise, okay, margin for Server business as well as even the PC business is now pretty good because they use mostly DDR4, okay. And you can ask my DDR4 margin will be higher. Even though cost is marginally higher, but the pricing is substantially higher, okay. So I will expect that the margin-wise will be good 15% to 25%, depends on the supplier [ 1:1 ], okay, for the Server business, okay, DDR4, okay. Low Power-wise, recently starting to gaining momentum of increasing, okay. Low Power, it actually was pretty much depressed for a long time, server going way up, low power stay very low. So this is becoming a little bit of pressure to major supplier, yes, particularly the biggest supplier, they have almost 50% of low power, and the margin actually was appraised heavily for many, many quarters, okay. So the last quarter was -- and the quarter before, Low Power is starting to catch up in terms of the margin-wise, okay. So if I look at comparing today, maybe Server is still higher. Low Power is catching up, gaining the gap between Server and Low Power, gaining the gap but still not anywhere compared to Server business yet, okay. Consumer-wise, it's been stable. Right now, it's probably -- after the -- used to be better than Low Power. But now with Low Power gaining the gap, it's probably very much close to consumer, and Low Power are pretty much even, yes, very close.

[Charlie Chan, analyst]

Yes, so with that, Server margins are now better than corporate average, are you going to increase the mix or even convert more capacity to Server DRAM you can have?

[Pei-Ing Lee, executive]

Can you repeat your question again?

[Charlie Chan, analyst]

Yes. So now Server DRAM margin seems to be better than corporate average or than your consumer DRAM business, right? So are you going to increase the shipment mix to Server, which is considered to be a commodity DRAM?

[Pei-Ing Lee, executive]

Potentially, there are going to be some adjustments, okay, particularly shifting from Low Power to -- Low Power business to the Server and the commodity business. That's already happening as we speak, okay. So the market actually would adjust by itself as well, and that adjustment will be happening over time, yes.

[Charlie Chan, analyst]

Okay. And my second question is regarding your potential cash return because, last year, you cashed out on all those investments, right? So can you give some guidance about your potential dividend payout, capital reduction or a more concrete plan for 2019 fab or new capacity expansion?

[Pei-Ing Lee, executive]

I would say you have already seen my number to you on my estimation for 2018 bit growth, okay, 45% bit growth, okay. And so assuming the ASP pricing remains stable at least for the first half, okay, Nanya is likely to have a pretty good year this year, okay. And maybe Macquarie can tell me more about the forecast of number. But for me, to -- it's not prepared to give you a prediction of our financial result for the whole year because there it is ASP fluctuation as well as the regulation issue, okay. But I always expect that with the bit shipment increasing, with our cost continue to improve, okay, with the -- over the quarter, Nanya's competitiveness for 2018 would remain pretty strong, okay. Particularly, you see that the gross margin and the OP margin continue to climb up for the next few quarters. Even the market becoming a little bit fluctuating, not in [ as big ] way, Nanya will still have a pretty good year, 2018, yes.

[Charlie Chan, analyst]

How about cash dividend per share?

[Pei-Ing Lee, executive]

Huh?

[Charlie Chan, analyst]

Cash dividend.

[Pei-Ing Lee, executive]

For this year?

[Charlie Chan, analyst]

Yes.

[Pei-Ing Lee, executive]

On the cash dividends, we still need to have the board approval, okay. We -- the board hasn't yet made a decision for distribution yet. But I can share with you that because of the better operational income that you see compared to the year before, we expect that distribution will be better than last year and, hopefully, even better than the year before last year, okay, hopefully, okay. And you'll go back and check that -- those number, you'll know that it will be a pretty reasonable good distribution for this year, okay. And our policy is based on our operational income, not including the nonoperating income, okay. The nonoperating income, basically, we plan for future growth, future improvement, okay.

You don't have ask question -- have to ask question in English. Taiwan [ language ] will be okay. [Foreign Language]. Please, yes?

[Unknown Analyst]

[indiscernible]

[Pei-Ing Lee, executive]

Tax rate. Currently, Nanya still had accumulated loss. So for our net income, essentially, we still don't have to pay income tax. Unfortunately, I have to say that, okay. But that number likely to be compensated as we speak, okay. Hopefully, in a year or 2, Nanya will be able to pay income tax. It is my achievement, okay. Hopefully, maybe for another 2 years also, okay, okay. So you some income tax that we pay, that was due to undistributed income for the previous year, we are asked to pay for that tax without [Foreign Language]. That's the TWD 1.5 billion or TWD 1.9 billion for -- is for that reason, yes. So next year will be that also, undistributed income, okay. How about we do some celebration when we pay tax? You will see it, we'll bring you some good coffee, okay. Yes, please?

[Unknown Analyst]

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[Pei-Ing Lee, executive]

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[Unknown Analyst]

[Foreign Language] DRAM segment, such as in kind of server, PC, mobile [Foreign Language]

[Pei-Ing Lee, executive]

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[Pei-Ing Lee, executive]

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[Pei-Ing Lee, executive]

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[Pei-Ing Lee, executive]

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[Pei-Ing Lee, executive]

[Foreign Language] One more, okay?

[Operator]

Ladies and gentlemen, we are now running out of time, but we still got some minute for last question from online participant. Mark Newman from Bernstein, please go ahead.

[Mark Newman, analyst]

Follow-up question from me on your mix. Normally, you report product mix. I didn't see it in the presentation. Last quarter, you mentioned consumer, 65%; mobile, 20%. Could you talk about how much that is changing, where that is changing, where that might be this year?

[Pei-Ing Lee, executive]

Mark, the question is about our product mix, am I correct, Mark?

[Mark Newman, analyst]

Yes.

[Pei-Ing Lee, executive]

Okay, our product mix for 2017, we had around 60% or so is in consumers, okay; around 20% -- 20 percentage in Low Power, okay; and we had some Automotive & Industrial [indiscernible] as well, that comes to around 80% -- 7% to 8% also; and the remaining is our commodity, okay. For '18, likely, in the beginning of the year, at least for the first half, likely, our commodity ratio will be increasing due to that we are shifting 8 gigabit DDR4 into commodity market a little bit more, okay. That percentage increasing is not necessarily our ultimate goal to increase our commodity ratio, okay. Today, the commodity sector is actually very good, and the pricing margin is very good, and we're pretty lucky that we are gaining that margin, okay. But commodity market will continue to be our buffering zone, okay. Our ultimate goal is geared in consumer, in Server, in Low Power, okay. And we will not be out of commodity market, okay. We selectively are supplying to limited commodity customer. As we did -- we already did that for many years, and we'll continue to do that, okay. So as I say, the commodity ratio are likely to be increasing slightly this year, but we will make adjustment as we need to, okay? Mark, do I answer your question?

[Mark Newman, analyst]

Yes, that's good. If I can have one more follow-up, do you have a number on the China mix? I'm just concerned looking at consumer being quite a large portion, and a lot of that being TVs, set-top boxes. China might be a large portion of that? And I'm just wondering if you have a -- an idea for how much of 9 years' revenue may come from China and if you see any impact from potential ramp of Chinese participants in 2018, '19.

[Pei-Ing Lee, executive]

Likely, this will not be happening for short term, okay. The Chinese supplier, we don't expect them to be ready to ship yet. And on top of that, if a Chinese TV maker, they are shipping their product worldwide, likely that will not happen either, okay. They have to be facing intellectual property law issue, trade secret law -- trade secret issue -- not trade secret, I mean, the information secret issue, okay. All this issue will come around. So we don't expect that we will be impacted in a big way in terms of the China market, okay. The situation may change even in the future that -- in China, that they probably have to also recognize the value of the legalization of the IP property as well as the trade secret, okay. So I'm not too pessimistic on this point. Even though they may be trying, but eventually, I think that the market will also come back to internationalized trading, and everything has to be following international behavior, okay.

[Mark Newman, analyst]

And do you have any ideas for what percentage of -- time's up or...

[Operator]

Excuse me, this is the operator speaking. Mark, we are really running right now, so we really appreciate it. I'm going to put you back in conference call.

[Pei-Ing Lee, executive]

Sorry, Mark. Okay, so last question for the audience.

[Unknown Analyst]

[Foreign Language]

[Pei-Ing Lee, executive]

Okay [Foreign Language] Okay. So that concludes our question section, okay. Thank you.

[Operator]

Thank you, again, Dr. Lee. And that concludes our conference and conference call for today. Please be advised that the replay of the conference will be accessible within 3 hours from now, which will be available through Nanya Technology's website at www.nanya.com. So thank you for joining us today. We hope you would join us again next quarter. You may now disconnect for online participants. Goodbye.