Nanya Technology Corp

TWSE:2408

Earnings Call Transcript 2020-Q4

[Operator]

[Foreign Language]

Welcome to Nanya Technology's Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] As this conference is being viewed by investors around the world, we've conducted this event in English only. Today's conference will be approximately 60 minutes. Nanya Technology's President, Dr. Pei-Ing Lee, will summarize our operations in the fourth quarter of 2020 followed by our guidance for the first quarter of 2021 and key messages. Then Nanya Technology's Executive President, Dr. Lin-Chin Su; Vice President, Mr. Joseph Wu; and Financial Executive, Mr. Philip Jao, will join us as we open up question-and-answer sessions.

Today's presentation materials are available for download at 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 brief presentation materials.

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

[Pei-Ing Lee, executive]

Okay. Ladies and gentlemen, welcome to Nanya Technology Q4 2020 Investor Conference. I'm Pei-Ing Lee.

My report to you is followed by first revenue and result for Q4 and then the whole year 2020 revenue and result and then CapEx and bit shipment, market outlook, business review and outlook.

For the Q4 revenue and results. Q4 2020, our unaudited net sales comes to TWD 14.773 billion, which is slightly lower than TWD 15.324 billion in Q3. And gross profit TWD 3.25 billion, at 22%, comes down slightly from 25.9% versus Q3. And operating income at TWD 1.304 billion at 8.8%, which also lower than Q3 13.5%.

For EBITDA, TWD 4.937 billion at 33.4%. And nonoperating income TWD 184 million mostly due to exchange rate reason and income tax expense, TWD 209 million. Net income comes to TWD 911 million at 6.2% versus Q3, TWD 1.613 billion.

Earnings per share at TWD 0.30 per share versus Q3 TWD 0.53. And I'll explain a little bit detail in the following full year. And book value comes to TWD 50.02 per share.

Compared to quarter-to-quarter, in Q4 versus Q3, our revenue come down by 3.6%, and shipments increased by low single-digit; ASP, the price decreased mid-single-digits and the exchange rate due to strong NT dollars was unfavorable 2.3%. All this in combined, as a result, Q4 performance is lower than Q3.

Year-to-year comparison, revenue up by 12.6%, and shipments increased by high teens and ASP decreased low single-digit Q-to-Q, okay? And exchange rate unfavorable at 6.4%.

If we have a little detailed comparison for the result between Q3 and Q4. Revenue-wise was down by 3.6% and the remark here says that our bit shipment actually increased by low single-digit. However, negative impact by ASP decreased mid-single-digit. And exchange rate also negatively impacted 2.3%. And I will explain a little bit more detail in the next couple of folios on that.

Gross profit, TWD 3.251 billion, 22% and -- versus Q3 is TWD 3.962 billion. And the reason behind it is same as the previous explanation. Basically, gross profit come down TWD 710 million due to ASP decrease and exchange rate negative impact.

Now comes to operating expense, TWD 1.947 billion versus TWD 1.892 billion in Q3 is pretty much similar with the R&D expense slightly increased. Operating income at TWD 1.304 billion versus TWD 2.069 billion in Q3 and the reason behind it is the same as previously explained, is due to operating income decrease as a result from ASP decrease and foreign exchange negative impact, okay. At the end, the net income, TWD 911 million at 6.2% versus TWD 1.613 billion, and reason behind it is also the same, okay? Net income decreased by TWD 703 million. This is mostly result from the gross profit reduction and the op income reduction. And the result is due to ASP and exchange rate, okay?

If we look at the longer trend chart for Nanya quarterly financial highlight, in the last quarter, Q4 last year, our revenue comes to TWD 14.773 billion, gross margin 22%, and op margin, 8.8%. This is almost the lowest point for the last few years, okay?

And for operating expense, our SG&A expense on the left chart here at Q4 last year, TWD 508 million, okay? It's in the normal range, okay? And on the right-hand side is our R&D expense for the quarter, Q4 last year, TWD 1.439 billion. This is also in the normal range and with the expectation that for 2020 our R&D expense will be slightly higher than 2019 as a result from -- we are working on 2 generation of 10-nanometer development, plus we will start the third-generation initial development work in this year 2020.

For cash flow. In Q4 2020, our beginning balance is TWD 47.126 billion, and end balance is at TWD 51.619 billion, with cash from operating income of TWD 7.88 billion and capital expense, TWD 3.543 billion and dividends and others. Compared to Q3 last year, we had distributed dividend, which is at TWD 6.6 billion is dividend plus the others, okay? That's the change between these 2 quarters. So our cash flow continued to positively flow in, okay?

And if we look at the cash flow situation for summary on the right-hand side, right-hand chart, beginning of last year, we had TWD 44.149 billion and with cash from operating activity, TWD 22.506 billion up and capital expenditure around TWD 8.47 billion with the dividend and others at TWD 6.56 billion. And the end balance for the cash at the end of last year is TWD 51.619 billion.

Now it comes to the whole year summary for revenue and results. Our 2020, the whole year unaudited net sales revenue comes to TWD 61.006 billion, which is higher than 2019, TWD 51.727 billion, okay, by 17.9%. Cost of goods sold, because of shipment, increased TWD 45.3147 billion (sic) [ TWD 45.314 billion ] is increasing from 2019 and gross margin at TWD 15.692 billion come down from TWD 16.494 billion in 2019. This is mostly due to the reason of ASP increase (sic) [ decrease ]. And SG&A expense, TWD 2.119 billion, which is very similar to 2019. R&D expense TWD 5.138 billion, which is also very similar to 2019. Most of the R&D expense is spent for the 10-nanometer process generation development as well as the all the new product development. And operating income, TWD 8.435 billion for 2020 versus TWD 9.517 billion 2019, decreased by 11.4%, mostly due to ASP decrease as well as foreign exchange unfavorable.

Non-operating income, TWD 539 million, okay, and down from TWD 1.708 billion in 2019, mostly due to interest rate decrease, okay? Income tax -- income before tax, TWD 8.9 billion versus TWD 11.2 billion in 2019 and decreased by 20.1%. And the reason in this explained just now. So net income, TWD 7.672 billion versus TWD 9.825 billion of 2019, okay? And EPS TWD 2.5 versus TWD 3.23 in 2019. And book value TWD 50.02, which is normal.

I'll give you more detailed comparison. And reason behind the net sales and the -- for the 2020 and 2019, bit shipment increased by mid-30s, ASP decreased by high single-digit, and exchange rate negative impact, 4.4%, okay? So we have some upside due to shipments. We have downside due to ASP and foreign exchange reason.

Gross income of TWD 15.692 billion versus 16.497 -- TWD 16.494 billion due to the same reason [ dropped ] because of the ASP and foreign exchange rate impact. Again, the net income at the end, TWD 7.67 billion versus TWD 9.825 billion on 2019, a decrease of TWD 2.152 billion mainly due to operating income as a result from lower ASP and unfavorable foreign exchange, okay?

If I may do a little analysis on the earning impact by ASP and exchange rate by taking the Q3 2020 versus Q4 2020, basically, I just reported to you that Q3 is higher than Q4, okay, and only 57% in Q4. But if we may normalize the exchange reason using the same exchange rate, this number will be gaining back about 25%. And normalized to the same ASP, this number will be increasing by another 36%. This indicated that this is 2 major reasons for our earnings decrease, okay, and also indicating that our operation efficiency is normal from Q-to-Q.

For yearly point of view, 2019, taking 2019 as 100%, at the end 2020, only 77%, basically, 3.25 -- TWD 3.23 EPS versus TWD 2.5 EPS. We do the same analysis, normalize the same exchange rate on 2019, even this will increase by 34% of our earnings, which means that just simply by exchange rate reason, we could have done better than 2019, excluding the ASP price reason. And if we then take into account using the same ASP to do the analysis, we will find that we would gain even more earning only on 2020. This is just to give you an understanding and on our operation situation, okay? The foreign exchange rate reason is not something that we can control, okay? And ASP is more market-driven. But from operation efficiency point of view, Nanya stay normal.

Let me come to CapEx and bit shipment. CapEx wise, on the left-hand side of the chart, 2020, we spent TWD 8.5 billion for CapEx, okay? And for 2021, we are expected to spend a little bit more, TWD 15 billion, but this is subject to BoD approval. And this spending is mostly for our 10-nanometer piloting as well as some infrastructure building, okay? We have -- we are building new office, new parking space, et cetera, okay? On top of, we are buying some equipment for 10-nanometer piloting and early test production, okay? The big growth, however, will not be contributing in 2020 -- 2021. We will be contributing to mostly to 2022. Bit shipment wise, 2020, we have missed early our bit shipment increase, okay, mostly selling our inventory as well as some efficiency improvement from factory, okay, more output slightly. And for 2021, however, we are expecting relatively flat, very little bit shipment increase for 2021.

For the market outlook, we have seen that DRAM demand is stabilizing in first half 2021. And the DRAM industry is entering a new upcycle, okay? And on the last quarter, we are observing that Q4 the quarterly contract price, because it was negotiated at Q3, so Q4 quarter price is actually lower than Q3. However, we are observing monthly price are already starting to gradually increase even in Q4 last year. And market-wise, first half 2021 stay-at-home economic is to be remain. And this will be favoring notebook, networking and digital TV application. In second half 2021, we are expecting COVID-19 vaccine will be gradually increase its coverage level, okay? This may enabling global economy to grow and various applications of 5G, AI, smartphone, data center, automotive and consumer electronics have to be stimulated in DRAM demand. On the supplier side, DRAM supplier inventory level has continued to decrease, and we're now seeing first half of 2021, the bit supply growth will be increased, in a [ bit ] way. It will be very limited. Bit supply growth will be limited. Demand wise, on the mobile market, smartphone shipment to recover, and we see in 5G handset, shipment percentage is increasing, which is encouraging for DRAM content.

Server market. The server market inventory level is normalized. And new server CPU platform is to drive more DRAM content as well. And for the PC market, we are seeing visibility on notebook, Chromebook demand throughout first half of 2021 and it could be even beyond due to remote work and e-learning demand from ongoing pandemic. For the consumer market, we've seen promising demand growth in 4K/8K TV, set-top box and new generation game console, 5G, networking, wearable device and automotive electronics, et cetera. So in general speaking, we've seen demand momentum is better -- much better than Q4 last year.

When it comes to business review and outlook, for Q4, DRAM contract price is bottom out and DRAM demand has been improved. Demand is stabilizing in first half 2021, and DRAM industry is entering a new upcycle. And our Nanya 10-nanometer class first-generation piloting is on schedule, and second-generation development is accelerated, how likely we will be able to do some piloting before the end of this year. And we have received 2020 National Sustainable Development Award from government. We also received A List rating from CDP highest honor in response to climate change.

That conclude my report to you. Now please open to questions.

[Operator]

[Operator Instructions] The first one to ask questions is Randy Abrams from Crédit Suisse.

[Randy Abrams, analyst]

Okay. Yes. I want to ask the first question on the 2021 shipments, roughly stable for bit shipments. I want to understand, you still are carrying at least exiting third quarter, about TWD 8 billion of finished goods inventory, which is still a good bit above where it was back in 2018. So I'm curious if you could get some shipment growth out of inventory depletion? Or you think you're already back in your normal inventory levels?

[Pei-Ing Lee, executive]

The inventory level has actually come down quite to healthy range. So we are not expecting a significant increase in the bit shipment in 2021. But we'll continue to work on our operational efficiency improving our operation to see is there any opportunity. But likely, 2021 will not be increasing in bit shipment.

[Randy Abrams, analyst]

Okay. On the operating efficiency, do you have a target if there's much cost reduction like-for-like just ahead of getting to the 1x or 10-nanometer class?

[Pei-Ing Lee, executive]

Very similar to industrial average, the new-generation technology now is only marginally improved cost structure, and as we expect that this year will not have a large quantity from 10-nanometer. And so we are not expecting major cost reduction for 2021.

[Randy Abrams, analyst]

Okay. And if I could ask on the pricing, I think originally, into fourth quarter, you're expecting pricing may be flat, but it looks like it came down mid single. So I wanted to see if it was maybe a mix impact were a little bit softer. And if you could give an initial view of how pricing is looking into first quarter?

[Pei-Ing Lee, executive]

Okay. That's actually a very good question. Actually, the pricing point of view, from a country point of view, you have the quarterly pricing as well as the monthly pricing, 2 different mechanisms. And last quarter, actually I reported that the quarter price for Q4 was negotiated on Q3. As a result, it was unfavorable for quarterly price on Q3. The extent of the quarterly price is a little bit higher than my expectation, okay? However, we could see monthly price increase from October, November and December, month-by-month, okay? And also because of the downtrend, we've seen the percentage of quarter price increased significantly in Q4. Basically means that customers tried to secure more shipment under low price situation in Q4 and that already happened in Q4. For Q1, though, we've seen both quarterly price -- quarterly country price and monthly price are likely to increase in both uptrend.

[Randy Abrams, analyst]

Okay. And maybe roughly on magnitude, is it -- we should think single-digit? Or do you have kind of a rough magnitude of how it looks at this stage?

[Pei-Ing Lee, executive]

I don't have the precise number because it will be different from different sectors, okay? We're doing the consumer, PC, mobile as well as server market. Each sector will be different. I would say probably in the consumer, market is probably going to be more favorable in a slightly higher percentage versus PC and the server, okay? And then PC and server will be catching up in Q2 more.

[Operator]

Next the line is open to J.J. Park, JPMorgan.

[J.J. Park, analyst]

It started a little bit early, but if you assume that the flattish bit shipment growth this year and then you've 1x nano fully impact the 2020 bit shipment growth, how much bit shipment growth do you expect in the 2022? And then we have the final question.

[Pei-Ing Lee, executive]

I'd say -- Mr. Park, as I reported that we don't expect bit shipment increase in 2021. And what we are doing on 10-nanometer class, contribution likely happen in 2022. And we are piloting first generation now. And we are hoping that we can start piloting second generation before the end of this year. And each generation, we are expecting 30% increasing in die output per wafer. We are expecting that, roughly.

[J.J. Park, analyst]

Okay. Look at the 2020 market outlook. You have the high visibility for the first half this year, the price and the demand. Do you think the, like, uptrend in price will continue into the second half of the year?

[Pei-Ing Lee, executive]

There's a very good opportunity of that, okay? However, it would depend on other suppliers -- the action taken by supplier, okay? Demand side, I think there will be no problem seeing the continued uptrend, okay? And so the market, how much is the market balanced is very much depends on supply situation also and because of the CapEx spending for last year is quite conservative. So it's pretty confident that first half this year, the bit shipment supply side will be also conservative as well, okay? And that's quite confident. And second half is still yet to be determined later on, okay? And there are good opportunities that trend may continue.

[Operator]

[Operator Instructions] Next, we're having Charlie Chan from Morgan Stanley for questions.

[Charlie Chan, analyst]

So first of all, may I ask about your CapEx TWD 15 billion this year is much higher than previous year, whereas your bit shipment doesn't seem to be able to grow. May I know the breakdown of that TWD 15 billion you said for the 10-nanometer class capacity expansion or some of that can use to expand out [ 10-nanometer ] current capacity?

[Pei-Ing Lee, executive]

Last year, we spent TWD 8.5 billion, okay, which is quite low. And this year, we spent -- we will be planning to spend around TWD 15 billion. Of course, the number is still subject to BoD approval. And TWD 15 billion, around 60%, 70% will be for equipment purpose. The other is -- will be used for our infrastructure spending on some office building, some water treatment, et cetera, or all kind of infrastructure spending, okay? And for the equipment side, it's mostly used for 10-nanometer piloting and small volume, okay? And this mostly will be to second half of this year. So the contribution will likely not in 2021, likely to be in 2022, okay?

[Charlie Chan, analyst]

Okay. So if we have kind of a little bit longer-term perspective, does the company need to find a new location to build a new site? And for that 10-nanometer class, what would be the key factor for you decide to go for a much bigger production?

[Pei-Ing Lee, executive]

We still have some space, okay, in our current facility, as I reported several time before, I think probably most of people have heard that, okay? And those space will be used for those spending I just reported, okay? And beyond that, yes, we have to think about long-term growth and long-term -- or not maintaining our current status instead of growth, at least we need to think about our future. And we don't have a firm report to you yet, okay? But we will come back to report as soon as we have a firm plan.

[Charlie Chan, analyst]

Okay. And then again, I keep coming back to this topic, right, China DRAM competition. So it has been another year, right? So what do you see those China DRAM companies, especially CSMT's progress, no matter at the OEM or the channel markets in China?

[Pei-Ing Lee, executive]

Yes. In general, I shouldn't be comment on one specific company. Overall speaking, this has already happened 5 years ago. I had making comments that the DRAM industry in China is going to be taking some time to make an impact to the industry. And it's already 5 years. And originally, there were 3 company interested in doing. Now it is only probably 1 company, it's capable of doing small volume, okay? And they are -- they have to face, say, quality issue, [indiscernible] issue. And they also may have to face trade secret issue, IP issue in the future. So I still think that they may not be making a significant impact to the industry in the near term. I would say, at least a couple of years, they're not going to be making any impact, if any.

[Charlie Chan, analyst]

Okay. So lastly, maybe just a follow-up on this, right? So I'm not sure if you also see this, right, but their capacity, I mean, is around the 40,000 exceeding last year. And this year, it seems to be grow to 60,000, 70,000, 80,000, whatever. So it is almost a similar capacity size as yours, right? So even there you said some [indiscernible] issue, but shouldn't we think about you 3 on the radar screen? And yes, I know not much we can do, right? I just want to be realistic on that potential competition.

[Pei-Ing Lee, executive]

Charlie, they are always in our radar scan, always, okay, since day 1, since 5 years, 7 years ago, they always, okay? So we have to be aware of what's happening. So our responsibility to our shareholders, we have to be careful about that, okay? So that's no doubt, okay? And our judgment to that is make -- basically have to make based on, first of all, the overall capability, okay, as well as the overall market situation, including the political situation, trade conflict issue, trade secret issue as well. And that's why, as a result, we are making such a comment. We're not ignoring them at all since day 1.

[Charlie Chan, analyst]

Okay. Yes. Congratulations for the very strong quarter guidance, and hope you have a great year.

[Operator]

Next one in line, Simon Woo, Bank of America.

[Simon Woo, analyst]

Okay. Just very quickly regarding your ASP trend. Yes, I hear that you are expecting flat ASP growth for 2021. However, your view for the demand quite positive, but that really means you can easily raise your contract price going forward even immediately for the Q1 versus Q4 mid-single-digit price cut for branded ASP?

[Pei-Ing Lee, executive]

Pricing-wise, it's very much market-driven, okay? The market-driven is demand and supply, okay? It's not 1 individual supplier or -- and overall speaking, the DRAM market is a big market as well as individual sector, is by self is a demand and supply, okay? Even individual product, so let's say, for instance, like DDR3, say, 4-gigabit or 8-gigabit, it by itself, is a demand and supply. So this is -- overall speaking, this is very much market-driven, okay? And based on current status, looks like there's a good opportunity that the price will be uptrend, as I reported to you, okay? And the -- even price has been actually not so favorable to the supplier for a long time now, okay, or even more than 2 years, okay? And with the inventory level been pretty low for all suppliers, okay? And also, the COVID situation is not making so much negative impact by now, okay, ASP started to gradually recover, okay? All these factors come together, the -- gradually demand is picking up, okay? Supply side is getting tight. There's a good opportunity that likely the market will drive the price higher.

[Simon Woo, analyst]

Okay. Sure, sir. Maybe very quickly. You mentioned that you have 100 different clients. And then your DRAM sales is mostly based on the contract price base. So very quickly, overall, your ASP, could it be updating change every month or more quarterly basis these days?

[Pei-Ing Lee, executive]

That's a very good question. I mean, last quarter, I reported that likely maybe the price is not going down the path very badly, okay, because we've seen monthly prices picking up, okay? However, quarterly price continued to come down in Q4 last year because quarterly price was negotiated in Q3. In Q3, it's mostly buyers market, okay? And therefore, Q4 contract price continued to come down. And because of the market situation like that, quite a few customers want to have the quarterly deal instead of monthly deal to their advantage. So that happened on Q4. And -- but the situation in Q1 is favoring in the seller market likely, okay? We've seen that quarterly price could be going up and also seeing monthly price continue to go up. So with the Q4, you had 1 sector of business quarterly going down, but monthly going up. But quarterly still has bigger volume, as a result, Q4 going down, okay? And for Q1, both quarterly and monthly are going up as we expect to happen. So likely, Q1 this year will be more favorable. And I hope that I can deliver a result. Sorry that my Q4 result is not as good. It's my own expectation.

[Simon Woo, analyst]

Yes. That is okay. It can be easily reversed with a higher price. So maybe, lastly, I think that these days our PC commodity price getting better. People talking about supply shortage of the most tech components. Maybe we can discuss this thing later. But for now, could you recap your current product mix for PC versus mobile, server quickly? The consumer continues to be 60%, but could you recheck PC versus the server and the mobile quickly?

[Pei-Ing Lee, executive]

Okay. So product mix, Nanya continued to operate consumer side as our major, 60% to 65%. And by consumer, we remained a lot of device sector, I'll describe to you later. And then our mobile is now between 10% to 15%. Mobile is low power, okay? And server, we were expecting to come up to 10%. But because server market was not too promising in Q3 and Q4 and we only come up to around 6% to 7%, not 10%, okay, and the rest are balanced by commodity, mostly notebook and PC.

[Simon Woo, analyst]

How much PC? Sorry, high 10%?

[Pei-Ing Lee, executive]

It's on 10% to 15% in the log of PC.

[Simon Woo, analyst]

I see. For PC 10% to 15%, same ratio for the mobile also, 10% to 15% also?

[Pei-Ing Lee, executive]

Right. Right.

[Operator]

[Operator Instructions] Next on line is open to Jeff Ohlweiler, Macquarie.

[Jeffrey Ohlweiler, analyst]

First question. You're foreseeing a DRAM upcycle this year, especially starting in the first half. But you told about inventory last year into downtrending prices. I guess my question is why didn't you save a little of inventory into higher prices into the first half of this year?

[Pei-Ing Lee, executive]

Jeff, you have a very good question about the inventory. Inventory, in general, speaking is coming down, okay? And we have a customer demand for the operation, okay? In general speaking, we like to meet our customer operation demand also. And of course, you have a very good point about inventory adjustment level. And we are -- this is our day-to-day routine operation. And we are -- we will be working on diligently trying to maintain our inventory level healthy.

[Jeffrey Ohlweiler, analyst]

Okay. And the next question, when do you foresee actually shipping to customers 10-nanometer products?

[Pei-Ing Lee, executive]

Shipping-wise, probably -- we hope to have some sampling before the end of this year. We are targeting to have some sampling before the end of this year. Hopefully, we can have small volume shipment first half next year.

[Jeffrey Ohlweiler, analyst]

Okay. And then last question, somewhat related for maybe mid-late-2022. Do you see any kind of meaningful product mix shift because of your 10-nanometer shipments?

[Pei-Ing Lee, executive]

The percentage-wise will be a small contribution of 10-nanometer shipment, okay? And the key -- probably most of the focus is 10-nanometer going to be substantially cost reduction. Based on our analysis on our own number as well as all the other suppliers' number, the generation -- technology node generation in advancement only provides small number of cost reduction. This is across the board, okay, for all companies, not just not just one company, okay? And what's the most biggest impact to us, as I presented just now is that we have a very unfavorable exchange rate, okay? And I just reported that if the exchange rate will be staying the same between 2019 and 2020, our performance already better in 2020 compared to 2019, okay? And the price also ASP also come down a bit. So suppose the price becomes stable, and we're also doing much better, much, much better in 2020 compared to 2019, okay? And this indicated that, overall speaking, Nanya's operation efficiency, but that's including cost, of course, okay, it is in a reasonable situation, okay? We are not in major cost disadvantage.

[Operator]

[Operator Instructions] There seems to be no further questions from dial-in at this point. So we're going to move on to webcast Q&A session. Dr. Lee, please begin.

[Pei-Ing Lee, executive]

Okay. We have 2 questions from webcast. Our first question is from KGI, Aaron. The price trend from spot or contract in the first half -- price trends, okay? Likely, the price trend for the first half, as I described, contract price in the quarterly review and month review likely to be uptrend, okay? Spot is a small market. It's an indicator, but we are not the major spot player.

And the second question is from K&C Capital, okay? Will the growth of 5G-based station, small cell, a major -- main driver for DRAM demand? The question is about 5G base station. 5G base station will make some contribution, okay, in overall demand growth, but it will not be the major driver, okay? In general speaking, network can -- we put it into, say, consumer bucket. Consumer bucket consists of networking, TV, set-top box, automotive, IP camera, the PlayStation, et cetera, all the non-PC, nonserver, nonmobile, we put it all into consumer, this contributed around consumer around 20% to 25% of the demand. 5G's base station is part of this. And we will make some good improvement. The impact will not be the major driver. It will help, of course, particularly small cell.

Okay. Looks like no more questions from webcast.

[Operator]

And thank you, Dr. Lee. That concludes our conference call 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. We hope you will join us again next quarter. We thank you for your participation and have a wonderful day. You may now disconnect. Thank you, and goodbye.

[Pei-Ing Lee, executive]

Happy New Year.