Nanya Technology Corp

TWSE:2408

Earnings Call Analysis

Increasing Sales and Potential for 2024 Recovery

In Q4 2023, net sales rose to TWD 8.704 billion, a 12.5% improvement from the previous quarter, although the company posted a net loss of TWD 2.488 billion, similar to Q3, with a loss of TWD 0.80 per share. Shipments increased by low-teens percentage, and average selling price (ASP) by low-single digits from Q3, but ASP declined by low-20s percentage compared to the previous year. The company aims for a breakeven by mid-year and hopes to return to profitability in the second half, contingent on market conditions. Global market recovery is uncertain due to geopolitical tensions, but the DRAM market is expected to balance out in 2024. With a focus on launching new DDR5 products and other innovations, the company anticipates a bit shipment increase of about 20% year-to-year.

Financial Performance: Q4 2023

The company saw its quarterly revenue increase by 12.5% quarter-over-quarter (QoQ), reaching TWD 8.704 billion, driven by a combination of higher bit shipments and increased average selling price (ASP). Although the net income for Q4 remained a loss of TWD 2.488 billion, similar to Q3, there was a slight net loss decrease by TWD 17 million. The combined effect of an improving gross profit margin, attributable to both an increase in ASP and lower equipment idle costs, along with higher research and development (R&D) spending, signaled a strategic push towards product enhancement and technological advancements.

Market Outlook and Growth Drivers

The demand for DRAM is anticipated to rise sequentially, with HBM (High Bandwidth Memory) demand increasing due to AI applications and the industry's transition from DDR4 to DDR5 technology. A price rebound that started in Q4 of the previous year is likely to persist, reflecting a favorable market trend. Additionally, the introduction of Nanya's second-generation 10-nanometer class products and designs for high-density low power DDR4 and DDR5 signal opportunities for increasing market share and product diversification. Nanya also achieved inclusion in the Dow Jones Sustainability World Index and Emerging Market Index, showcasing its commitment to sustainable practices.

Strategic Focus on Product Development

The company is actively improving its product portfolio with a stronger emphasis on R&D. With the DDR5 transition, the market share of DDR4 is increasing, signaling a gradual shift away from DDR3. In terms of technology, the company stopped the production of 1A-nanometer wafers due to lack of market demand and shifted focus to enhancing 1B-nanometer technology. Customers are expected to receive samples of new DDR5 products by the end of the second quarter, and the company is aiming for DDR5 to contribute over 10% to the total sales by the year's end.

Improvement in Utilization and Efficiency

Looking to Q1, improvements are expected in utilization which will significantly reduce equipment idle costs, a critical factor given the current underutilization in the previous quarters. As the market recovers from a low baseline, management anticipates a potential rise in market demand. Nanya's approach suggests a strategic alignment of production with market demand to minimize unnecessary expenses and optimize utilization rates.

Financial Prudence and Cash Management

In light of sustained losses, discussions with the Board of Directors will focus on strategic financial management. The company recognizes the need for judicious cash use, balancing the imperative of investing in R&D and new technologies with the need to maintain financial health. The consumer sector, comprising roughly 60% of revenue and predominantly utilizing DDR3 with a shift towards DDR4, remains a significant area for the company. Analysts express interest in the revenue mix between consumer DRAM types and the potential for market recovery, especially in segments that have been particularly weak, such as IP cameras, industrial applications, and the TV sector.

Operational Breakeven and Profitability Goals

With gross margins at negative 14%, the company aims to reach operational breakeven around the middle of the year, as it works on enhancing ASP and utilization recovery. The second half of the year may see the company return to profitability depending on the market dynamics. Positive movements in the DRAM sector would accelerate this timeline, whereas any slowdown would necessitate revising these targets.

Earnings Call Transcript 2023-Q4

[Operator]

[Interpreted]Welcome to Nanya Technology's 2023 Fourth Quarter Earnings Conference Call. [Operator Instructions] The conference will be held only in English for investors around the world.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 2023, followed by our guidance for the next quarter and key messages. And then Nanya Technology's Executive Vice President, Dr. Dr. Lin-Chin Su; Vice President, Mr. Joseph Wu; and Financial Executive, Mr. Philip Jao, will join us as we open our Q&A session.Today's presentation materials are available for download at Nanya Technology's website at www.nanya.com. 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 the 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 materials.And now, I would like to turn the call over to Nanya Technology's President, Dr. Pei-Ing Lee, for the summary of operations and current quarter guidance. Dr. Lee, please proceed.

[Pei-Ing Lee, executive]

Ladies and gentlemen, welcome to Nanya Technology Q4 Investor Conference. I'm Pei-Ing Lee.Today, what I would like to report to you -- okay, today's content of my report, I'll first start with Q4 revenue and results and the overall 2023 revenue result and followed by CapEx and bit shipment, market outlook and conclude by business review and outlook.For revenue result of Q4 2023, our net sales comes to TWD 8.704 billion compared to Q3 TWD 7.736 billion, is an improvement of 12.5%. Gross profit loss of minus TWD 1.188 billion versus loss of TWD 1.953 billion, also some improvement of about 10%, okay? For operating income, net loss of minus TWD 4 billion versus Q3 of TWD 4.34 billion. And with EBITDA by TWD 196 million, non-operating income of TWD 521 million and income tax benefit comes to TWD 1.041 billion. For Q4, the net income is a loss of TWD 2.488 billion, which is very similar to Q3. And we will explain in the next few for you about the background behind all these numbers. Earnings per share for Q4 is a loss of TWD 0.80 per share, and the book value per share comes to TWD 53.88 billion -- I'm sorry, TWD 53.88 per share.For quarterly revenue results, Q-to-Q, revenue up by 12.5% and year-to-year compared to Q4 of 2022 also up by around 10%. Shipments increased by low-teens and compared to a year before, it increased by high-30s, okay. ASP increased by low-single digit and compared year-to-year, it decreased by low-20s. Exchange rate increased by low-single digit versus year-to-year increase by low-single digit.For a little bit more detailed results comparison, the net sales is improvement of 12.5%. And this is as a result of the bit shipment, increased by low-teens and ASP increased by low single. Both are improving and exchange rate, low-single digit. And the gross profit loss of TWD 1.188 billion compared to a loss of TWD 1.953 billion is an improvement of TWD 765 million and also percentage-wise, improvement of Q-to-Q about 10% -- 11.6%. And this is mainly due to increase in ASP and also lower equipment idle costs. We still have some equipment idle, but compared to Q3 is relatively lower.Our operating expense, TWD 2.862 billion versus Q3 of TWD 2.387 billion. This increase of TWD 475 million, mainly due to we had spent more money on R&D, try to enhance our new product and new technology implementation. Operating income, a loss of TWD 4.05 billion versus Q3 of loss of TWD 4.34 billion and a decrease. This is basically the last 2 numbers combined. And the net income is loss of TWD 2.488 billion versus a loss of TWD 2.505 billion. And net loss decreased by TWD 17 million. But the reason behind it is exchange rate fluctuated quite a bit on Q4, which is unfavorable for TWD 673 million. This is accountable for a big percentage of net loss at the end come to almost even, plus R&D expense that we're spending more, okay? So income tax favorable by TWD 404 million.For our operating expense on the left-hand side, SG&A expense for Q4, TWD 648 million, which is in the normal range, okay? For R&D expense, as I explained just now, the R&D expense comes to TWD 2.214 billion, which compared to Q3 is a bit of an increase. Our cash flow situation, beginning balance for Q4 of this year -- of last year is TWD 60.474 billion, with the cash from operating activity of plus TWD 733 million and capital expense of TWD 2.189 billion and financial activities, minus TWD 49 million. At the end, the balance comes to TWD 58.969 billion. We are in a cash flow -- outflow situation, but the company still had some net cash.At the bottom of this table here, net cash for Nanya, with the cash above, minus the short-term debt, we still have net cash of about TWD 47.8 billion. For the situation for the cash flow for the whole year, beginning of the 2023 is TWD 73.593 billion, and the cash from operating activities is minus TWD 5.9 billion and capital expense minus TWD 13.245 billion. And with the financial activities and others, this including short-term loan and also the dividend distribution, but net is a positive of TWD 4.55 billion. And at the end of last year, comes to end balance of TWD 58.969 billion.Okay. Now for the whole year revenue and result, the net sales for the whole year 2023, TWD 29.892 billion versus 2022 TWD 56.952 billion, is a year-to-year drop of 47.5%, okay? And mostly, this is coming from ASP decline, okay, with the shipment is only a small percentage variation. Gross profit for the year are TWD 4.483 billion loss versus 2022 of TWD 21.342 billion positive profit, okay? It's a pretty big change, okay? And operating income comes to a loss of TWD 14.46 billion versus the 2022 profit TWD 11.002 billion, okay? And non-operating income, income tax, everything all come together, net income is a loss of TWD 7.448 billion versus the profit of TWD 14.619 billion of 2022.Earnings per share is loss of TWD 2.4 per share versus a profit of TWD 4.72 per share. And book value also come down from TWD 58.41 down to TWD 53.88. For a little bit detailed comparison, for net sales, the most reason for net sales dropping is ASP decreased by 40s, okay? Bit shipment decreased only mid-single digit, okay? And exchange rate is favorable by high-single digits, okay? And growth from year-to-year point of view, but the quarter-to-quarter Q3 -- Q4 and Q3 is pretty significant, unfavorable.Gross profit wise, gross margin loss of TWD 4.483 billion versus TWD 21.342 billion of profit, year-to-year is gross profit drop of TWD 25.8 billion, mainly due to ASP and shipment -- slight shipment decrease. Operating expense is about very similar. And operating income, instead of a profit of TWD 11 billion comes to loss of TWD 14.46 billion in 2023. And net income comes to a loss of TWD 7.448 billion. And the change is mostly due to a gross profit decrease and some minor change of exchange rate change and income tax change.For CapEx and bit shipment situation, on the left-hand side of the chart, the CapEx for 2023 comes to TWD 13.2 billion. This is below the Board approval of TWD 18.5 billion. We had about TWD 4.4 billion of expenditure, will be deferred -- has been deferred to 2024. And for CapEx estimate for 2024 will be approximately TWD 20 billion, and this is still subject to Board approval. And we are planning around the TWD 20 billion. The CapEx will be around 50%, is the equipment spending. Bit shipment. 2023 bit shipment decreased by mid-single digit. And we are expecting 2024 bit shipment likely to be increased compared to very low at 2023, comes to about 20% more year-to-year. And production output may gradually resume normal level.For the market outlook, first of all, DRAM demand is expected to improve quarter-by-quarter, with demand growth from HBM, driven by AI and also the transition from DDR4 to DDR5. Price rebound already happened in Q4 last year and is likely to continue in 2024. However, global market recovery are exposed to geopolitical tension, including European war and U.S.-China trade conflict. And this is continuing -- need to be observed. The momentum, we are expecting improvement rebound. However, the momentum of rebound will very much depend on global economic situation.Supply side, suppliers accelerated the production of HBM and high-density DDR5, which will help normalize the inventory of DDR4 and low-power DDR4. And DRAM markets are expected to restore balance in 2024. And inventory continued to destock by quarter as suppliers also suppressed capacity and CapEx. For the server market, AI server is favorable and is a very good trigger point for the demand. And IT spending for U.S. cloud service provider is key to recover. And this is the point that we continue to observe quarter-by-quarter, okay?And mobile market, new smartphone ignite some DRAM content growth. And high-end market will also migrate to AI mobile phones. And Chinese economic recovery also is important to mobile market, and Chinese mobile market recovery remain very crucial to this sector of business. And we're already seeing some improvement, okay, in the Chinese mobile market.For the PC market, inventory gradually normalized. And in the future, AI PC may stimulate high-end PC market. For the consumer market, demand for IP camera, networking, industrial and also automotive application are relatively healthy. And consumer market has a good chance to recover in 2024.With that, let me conclude with the business review and outlook. For Nanya, Q4 last year, net loss of TWD 2.488 billion, EPS of a loss of TWD 0.8 per share. For the whole year last year, net loss of TWD 7.448 billion and EPS is a loss of TWD 2.4 per share. And for the market, DDR5 conversion and destocking of DDR4, low power DDR4 help improve ASP. Overall demand in 2024 may improve gradually and are still subject to geopolitical uncertainty.2024, the production output may gradually resume normal level. And for Nanya, our second-generation 10-nanometer class product in 8 gigabit DDR4 and 16 gigabit DDR5 will be in volume production this year. And we also will be designing high-density, low power DDR4 and low power DDR5. That's upcoming for the future year. And Nanya is selected as Dow Jones Sustainability World Index, as well as Emerging Market Index.With that, thank you for your attention, and let's come to question and answer.

[Operator]

Yes. Thank you, Dr. Lee. [Operator Instructions] The first one to ask questions, Haas Liu from UBS.

[Angela Dai, analyst]

Dr. Lee, this is Angela on behalf of Haas. So the first question I would like to ask is regarding your expectations on pricing. I know 4Q pricing had a low single-digit uplift, but it seems like you are tracking behind your industry peers. So could you discuss the reason behind this? And separately, do you expect the pricing trend in your DDR3 and DDR4 business to catch up in 1Q?

[Pei-Ing Lee, executive]

Okay. The ASP for Q4 last year, we had a single-digit improvement. We are expecting our improvement will be gradually better quarter-by-quarter. And likely, this will happen in Q1 and Q2 quarter-by-quarter. And Nanya is behind our peers in HBM and DDR5, okay? And however, HBM is still a small percentage of overall demand, and therefore, it's not suitable for Nanya to get in. However, Nanya is preparing a 16 gigabit DDR5 to be in production this year, okay? Hopefully, that will also make improvement in our value-added product portfolio, okay?

[Angela Dai, analyst]

And on your pricing expectations for DDR3 and DDR4?

[Pei-Ing Lee, executive]

At this moment, all sectors seems to be improving in ASP, that's including DDR5, DDR4 and DDR3. And as you can probably already know that DDR5 and DDR4, the improvement is better than DDR3 for now, okay? But this is actually going to be pretty dynamic. Depends on the each products' demand and supply. DDR3 also have different density, okay, and also application of industrial, automotive is also different, okay. So, we are expecting that all these sectors will have gradually ASP improvement.

[Angela Dai, analyst]

Got it. That's very helpful. My next question is on your expectations on when you would expect the business to reach operational breakeven. So, your 4Q gross margin was negative 14%, factoring your expectations on gradual pricing and utilization recovery. When do you think gross margins and operating margins will be back to profit?

[Pei-Ing Lee, executive]

Of course, we would like to have breakeven situation happened earlier, the better, okay? And we are working on middle of year. Potentially by month, we can come to breakeven point, okay? And hopefully, in the second half of the year, we will be profitable, resume profitability. And that's not -- again, that's the target, okay? And that may change if the market momentum becomes better and hopefully, that will be sooner. And if the market momentum is slowing down for any reason, then there will be a change from that dynamic only, okay?

[Operator]

Next one to ask question is Anthony Lau from Yuanta.

[Anthony Lau, analyst]

Dr. Lee, I have 3 questions about. And the first one is we have about like 20% growth of the bit shipment in this year. And is it mainly contributed from new products or new clients or just because we saw some recovery from the current clients is my first question?

[Pei-Ing Lee, executive]

The bit shipment improvement, we're expecting 20% or more this year. That's for several reasons, okay. The very first reason is that at the end of 2023, the market demand is actually pretty poor. So the baseline is at very low, okay? So that's a low baseline. Likely we will have some improvement, okay? And that market downtrend is actually started in already 2 years, okay? So the baseline to start with for this year is at a pretty low stage, okay? That's one reason. And second reason is we're going to have new product introduction that's including DDR5, low power DDR5 and new technology introduction, our second-generation process technology as well, okay? And also, we are expecting the market has a potential of improvement from its very low baseline situation.

[Anthony Lau, analyst]

I see. It's really helpful. So when we talk to -- when we talk about the DDR5, will it contribute to our sales or top line in the second half of this year? And is it mainly targeted to PC or like server application?

[Pei-Ing Lee, executive]

We like to -- we target to have some contribution in second half this year. And we will, of course, started with PC and then also server market, okay? And this DDR5 application is mainly in this area. However, as time goes on, the consumer market will shift from DDR3 to DDR4 as well as DDR5, and we will have a complete product portfolio to cover consumer market as well.

[Anthony Lau, analyst]

So do we have any like target or about the DDR5 shares in our top line in this year next year?

[Pei-Ing Lee, executive]

At the end of this year -- the end of this year, hopefully, our target is for more than 10%. We're looking half of that monthly.

[Anthony Lau, analyst]

I see. Okay. So, my last question is talking about the inventory trends. Will our inventory -- I mean, Nanya Tech inventory will go down until end of this year? Or maybe it will still increase maybe second half of this year because of the seasonality?

[Pei-Ing Lee, executive]

The inventory, if it is measured by the number of days of shipment, likely that will have some improvement for this year.

[Operator]

[Operator Instructions] Next one, we have Simon Woo from Bank of America.

[Simon Woo, analyst]

Yes. Dr. Lee, Happy New Year. Yes, very quickly, could you update your fab utilization ratio? And then when you're going to start the -- maybe increasing the utilization ratio and when it will reach 100%?

[Pei-Ing Lee, executive]

Our utilization ratio in Q3 and Q4 are still underutilized. And Q1, we are expecting that to continue to improve. And this very much depends on our product portfolio and market sector. And seeing the improvement, we will have an opportunity to reduce the production cut. And our inventory situation and production cut situation is a little bit different from the big supplier. They had mostly -- the market sector is in high-density DDR4, high-density low power DDR4. For us, we are much more distributed in a different product sector and different product situation. So, we are expecting our utilization to improve in Q1. And hopefully, our equipment idle costs will be reduced very significantly in Q1.

[Simon Woo, analyst]

You mean the cost reduction?

[Pei-Ing Lee, executive]

No, no, I mean the equipment idle. When your equipment is underutilized, those equipment that is idle, you still need to take charge, take the cost, okay? Take charge for their, say, their depreciation. Also, you have to maintain the operation, everything. Those has to be -- continue to be charged. So, that's what we call idle costs.

[Simon Woo, analyst]

Yes. Okay. So roughly, Q3, Q4 last year, your UTR was around 80% because previously, you mentioned that you're about 20% roughly?

[Pei-Ing Lee, executive]

Yes. It was dynamically, but yes, it was running 20% and coming lower and lower by now.

[Simon Woo, analyst]

And then when you input the new wafer and how long it's going to take to get the wafer output these days for DDR4 and then DDR5 roughly? 3 months is enough or no?

[Pei-Ing Lee, executive]

Front-end and back-end combined, probably 3 months or so. Probably every company is very similar.

[Simon Woo, analyst]

Three months is from wafer input to get the -- package the product.

[Pei-Ing Lee, executive]

Get to the market, yes. Every company is slightly different, maybe between 2.5 months to 3 months, depends on how you prioritize your plan?

[Simon Woo, analyst]

Yes. And one quick thing. Some people say Chinese companies, CXMT, really ramping up their 17-nano load, which can be considered maybe 19-nano load for maybe ex-China memory makers. Do you feel the China domestic guys DRAM production, capacity expansion, growing a lot and also their actual production volume is growing a lot?

[Pei-Ing Lee, executive]

I'm not supposed to comment on other companies' operations. But the Street talk I heard is that, yes, they are very aggressive, okay? And also on the market, analysts did reported that as well, okay? So, I think the important point to make is that, first of all, they are very concentrated on domestic market. And second, so far they are still not a sufficient product portfolio. And third, also they may also be experiencing some quality or yielding situation, the growing pain that is quite normal for all the industry, okay?And so, overall speaking, from Nanya business concern, I don't see that Nanya is singly solely impacted by the Chinese producer, okay? The impact is actually global to all suppliers, okay. Particularly, they are so interested in big market, mobile market -- mobile phone market in China. China has quite a bit of mobile phone company suppliers. Their demand in the mobile memory is quite high. And Nanya is not in that business, okay? That's the business Nanya would have not been putting much of focus. We are putting in more of the application-specific -- the application specific mobile usage. Even though if it's in mobile phone, it will not be the main memory they are using.

[Simon Woo, analyst]

Yes. Very clear. Yes. Okay. By the way, one investor is asking whether you're going to pay the dividend? Sorry, if I missed your comment on dividend. But you can pay dividend based on the 2023 results?

[Pei-Ing Lee, executive]

We are losing money. So, we have to still come to discuss with our Board, okay? And Nanya also -- even though we have some cash on hand, but also we need to be putting a lot of focus on R&D, putting a lot of focus on future new generation of technology and product introduction. So, we have to be careful on using our cash as well, okay? But anyhow, we will discuss this more with our Board Members.

[Simon Woo, analyst]

Yes. But some investors are asking questions through me, not mine, but roughly 60% of your revenue is still consumer DRAM still?

[Pei-Ing Lee, executive]

Yes. Roughly. Yes.

[Simon Woo, analyst]

Not much changing?

[Pei-Ing Lee, executive]

Yes. And the consumer sector now is mostly DDR3 and gradually shipping to DDR4.

[Simon Woo, analyst]

So any rough idea of mix, DDR3 versus DDR4?

[Pei-Ing Lee, executive]

Right now, probably 60-40 in a trend of going down more. Yes.

[Simon Woo, analyst]

You mean the 60% DDR3?

[Pei-Ing Lee, executive]

Yes.

[Simon Woo, analyst]

Versus the 40% DDR4.

[Pei-Ing Lee, executive]

Yes, yes, roughly speaking. And it's different from, say, different density. For example, 8 gigabit, there's no DDR3 8 gigabit, very little supply. Yes, there are some but little supply, mostly DDR4.

[Simon Woo, analyst]

Yes. Okay. Then the -- your DDR5 will start from second quarter then, this year?

[Pei-Ing Lee, executive]

We hope to have some customer sample towards the end of second quarter.

[Simon Woo, analyst]

The end of second quarter?

[Pei-Ing Lee, executive]

Yes.

[Simon Woo, analyst]

Meanwhile, still DDR3 portion is bigger than DDR4.

[Pei-Ing Lee, executive]

Yes. Slightly bigger than DDR1. DDR4's percentage is improving.

[Operator]

Next one to ask questions, we have Jay Kwon from J.P. Morgan.

[H. Kwon, analyst]

Dr. Lee, Happy New Year. I have a couple of them. Actually, my first one is about your 1A-nanometer and 1B-nanometer wafer input. How much is it in terms of a mix as of Q4? And also, do you have any target by end of the first half and the second half? And I do have more follow-up.

[Pei-Ing Lee, executive]

Okay. We already ramped down 1A technology. We no longer -- the production for 1A has been stopped because the market do not need additional capacity. So, we are putting focus on move to 1B technology. And we are expecting for the second quarter, we will have some more input on 1B technology.

[H. Kwon, analyst]

My second question is you talked about the wafer equipment CapEx to be up in '24. May I ask what was the mix in '23? You did mention about deferred CapEx. I just want to check about that first.

[Pei-Ing Lee, executive]

We also spent some cash in terms of construction, okay, and facility, and also some CapEx for the new technology conversion, okay? So, our equipment is roughly -- in 2024, we are expecting its equipment cost will be around 50% of our plan. And say, suppose we plan for TWD 20 billion, TWD 10 billion will be equipment spending.

[H. Kwon, analyst]

Understood. And my next one is within your major, the consumer market focus, are you specifically more optimistic in terms of the demand between the multiple and industries? Like the networking, industrial and automotive, you laid out multiple ones and those are recovering. But are there any specific industries that you are more optimistic about? And if so, any reasons why?

[Pei-Ing Lee, executive]

I think, in generally speaking, the consumer markets, such as the IP camera, such as industrial, also the TV sector, we are seeing it coming from very low baseline as well, okay. We've seen some improvement in those areas. So, we're expecting consumer market to be better because it has been very bad, okay? And that's a situation that we are expecting that to be improving. Sector wise, this is, I say, okay. It's been relatively -- getting relatively healthy now.

[Operator]

[Operator Instructions] Ladies and gentlemen, we thank you for your questions.Now, we will move on to webcast Q&A session. Dr. Lee, please begin.

[Pei-Ing Lee, executive]

Okay. Our first question coming from SinoPac Securities, Stanley. Any plans for HBM-like memory?The HBM-like memory is a second step for Nanya Technology. We started with 3D integration of, basically, TSC integration for high-density RDL first, okay? And HBM-like, why Nanya is not putting a priority focus is that not because Naya do not have capability of doing HBM. Nanya did have experience of designing and also cooperating with international company to build HBM-like memory before. So, we do have experience on designing HPM. We have experience in high I/O.We have experience on large density of TSV, okay? And however, HBM, the overall market size now is still less than 2% of market size. And with the all 3 big suppliers, which is the leading company, they are all taking a full speed to go into HBM market. And likely, that's not the market that Nanya should put in too much priority and resource to work on that market yet. However, we will prepare our 3D integration, the TSV DDR5, okay? And the product is currently under our design and will be the case. The product will be piloting middle of this year, okay? That is DDR5 with TSV capability. And the goal is not for HBM. The goal is for high-density RDL. And revenue contribution percentage of DDR3, DDR4, I just -- here we are saying that we have some low power -- low power DDR3, low power DDR4 or even low power DDR2 business, that is accountable for around, say, 15% of our sales. And then minus 15%, 85% is probably 6:4 ratio right now. But the ratio is changing, as I just explained just now.And the second question is anywhere -- and are there any consumer product already migrating from DDR3 to DDR4?Yes, yes. We just discussed a lot, okay? And it's migrating from [ 8:2 to 7:3 to 6:4 ] and could be more, okay? As a matter of fact, there are certain areas that require higher density memory for consumer, mostly those using DDR4. For instance, 8-gigabit requirement mostly using DDR4.The next question from [ Fuba Richard ]. The question is, has NTC started developing DRAM stacking technology?Yes, I just commented on that. And we did have some experience before. We have some product testing way back. So, we do have some experience and we have some equipment also. However, we will not be focusing on HBM, but instead focusing on high-density RDL first.Any fundraising plan for 2024?At this moment, we don't have immediate plan yet, but we will see the future requirement for fundraising, okay? And that's yet to be discussed. And as I reported just now, Nanya still have net cash of over TWD 47.8 billion, okay? We still have net cash. So, not in hurry to do fundraising for now. However, if any other requirement that demand us to do fund raising, we would gradually consider further the need for that.The next question from Shin Kong Life by Mandy.And the question is, previously, you mentioned the Q-on-Q growth of Q1 2024 bit shipment, any changing of the direction?The bit shipment for 2024, we are expecting to gradually improve quarter-by-quarter, okay? And that's, as I explained in very beginning, many sectors, the demand is actually at a very low stage, and we're coming from a very low stage. So, there's some expectation of mobile shipment, plus new product introduction. Likely, we will see that to happen, okay? And so we are expecting Q-to-Q growth in 2024.The next question from Pro Capital. Q1 2024 bit growth, we're expecting bit growth, but the exact number, I don't have the number. We work hard to get some bit growth. And 2024 depreciation and R&D expenditure, okay?Our depreciation typically comes to around TWD 1.3 billion -- TWD 1.3 billion per month, depreciation in 2024. And that depreciation number will gradually begin to decline, okay, will be declining down to around TWD 10 billion -- TWD 1 billion and then TWD 800 million over the next 2 years to 3 years, okay? And R&D expenditure, our R&D expenditure will likely to be increased from 2024 compared to 2023, will be increased by 5 to 10 percentage. That's our expectation.The next question from [ San Si ] from J.P. Morgan. As the ASP is expected to move up Q-to-Q in the first half of 2024, do we expect inventory revaluation gain?Because we hadn't taken any inventory valuation loss, our inventories still are all about our cost structure. So, we will not be -- we didn't take loss. So, there's no revaluation gain either, right? Okay.Okay. And please share about NTC's inventory and customer inventory? When do you think they will be normalized?It's going to be normalized as we speak quarter-by-quarter right now. And right now, the inventory situation is already improved quite a bit from, say, Q2, Q3 last year. However, from a bit supplier point of view and us as well, the inventory is still high, and we will see that continue to improve. And we expect that situation will help quarter-by-quarter. There's a good chance that the situation could become -- if you say, normalized, likely in the second half this year will be very normal.And then the next question also from San Si. Could you share Nanya revenue mix by end market exposure, for instance, mobile, PC and consumer?And the mobile is around, say, 15 percentage or so. PC and server is around 20 percentage and rest are consumer.Okay. That's the end of questions.

[Operator]

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 disconnect now. Thank you, and goodbye.

[Pei-Ing Lee, executive]

Thank you. Goodbye.