Siltronic AG
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Earnings Call Transcript

Earnings Call Transcript
2019-Q1

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Operator

Good day, everyone, and welcome to Siltronic's conference call on the Q1 2019 results. Please note that this call is being recorded and also streamed on Siltronic's website. The call will be available as an on-demand version later today. Your participation on this call implies your consent with this. At this time, I would like to turn the conference over to Petra Müller, Head of Investor Relations and Communications of Siltronic AG.

P
Petra Müller
Head of Investor Relations & Communications

Thank you, operator. Welcome everybody to Siltronic's Q1 2019 Results Presentation. With me are Chris von Plotho, our CEO; and Rainer Irle, our CFO. Both will comment on market development and our performance in the Q1 and will be available for Q&A afterwards.Please note that our presentation contains the usual safe harbor statement and applies throughout this call and presentation. Today, we have published all documents relating to our Q1 2019 reporting. They are available on our website. And now I turn over the call to Chris for opening remarks.

C
Christoph von Plotho
Chairman of Executive Board & CEO

Good morning, ladies and gentlemen. As expected, 2019 started more muted than 2018 finished. However, on a year-on-year basis, we still saw a positive development in sales and in earnings. Due to the decline in wafer area sold in the first quarter 2019, sales came in at EUR 354 million, 9% down versus the fourth quarter of 2018. Exchange effects -- FX effects on a quarterly basis were negligible as the U.S. dollar against the euro was 1.14 in Q1 2019 as well as in Q4 2018. Our EBITDA reached EUR 127 million and our EBITDA margin was 36%. EBIT came down to EUR 103 million and the EBIT margin was 29%. CapEx was EUR 73 million. Our net cash flow was clearly positive at EUR 81 million. We recorded net financial assets of EUR 762 million at the end of March. Let's have a look at market developments. The market environment in the first quarter showed a high level of uncertainty. The macroeconomic slowdown and geopolitical uncertainties stretched out. Inventory corrections in the supply chain take longer than originally anticipated. While raw wafer inventory at some of our customers only start to get back to normal, finished goods inventories are at high levels throughout the supply chain. This is clearly limiting visibility for us and there are indicators that it could take more time for a clear rebound in wafer demand.In Q1 2019, wafer area was down compared to the fourth quarter of last year. After demand for smaller wafers with a diameter up to 150-millimeter already started to decrease in the fourth quarter last year, 200-millimeter followed in Q1 2019. By now, demand for smaller wafers strongly decreased while 200-millimeter volumes are noticeably down. Loading in 300-millimeter in Q1 has also been coming down. Prices, however, held firm in the first quarter.We still believe that the underlying growth of the market as silicon content continues to grow. However, declining or flattish unit numbers as well as the inventory effects eclipsed the positive long-term trend. Overall, we expect smartphones to be down this year, while PC and servers as well as industry and cars are expected to be more or less stable. The flatter smartphone content is due to softer sales of high-end smartphones. Additionally, we see a negative inventory effect. While PCs are flattish from a volume and content viewpoint, servers are clearly up; however, also impacted by inventory corrections. In general, industrial applications and automotive industry, we see a positive content contribution. However, also, there volumes are down.I think when you look at the silicon area share by end market in 300-millimeter, PC and servers together with solid sales rise account as much as the smartphones. 200-millimeter is clearly dominated by industry and automotive applications. The same applies for smaller diameters. With this first overview, I would like to hand over to Rainer for a detailed presentation of our financials.

R
Rainer Irle

Thank you, Chris, and welcome, everybody. Due to less wafer area sold, sales in Q1 '19 was down by about 9% compared to Q4 '18 and reached EUR 354 million. Exchange rate effects had basically no influence as the U.S. dollar against the euro was stable at 1.14. In Q1 2018, we generated sales of EUR 327 million. The increase of 8% in Q1 2019 is due to the higher euro ASP as well as stronger U.S. dollar. However, the volume is down year-on-year. Cost of sales increased slightly quarter-on-quarter from EUR 208 million to EUR 210 million. Costs per wafer are up. This is due to higher energy cost and the lower dilution of fixed costs given the lower capacity utilization. As a result, our gross profit in Q1 2019 declined to EUR 145 million from EUR 180 million in Q4. The gross margin came down from 46% to now 41%. In Q1 '18, cost of sales were EUR 202 million. The respective gross profit and gross margin came in at EUR 125 million and 38%.Lower volumes and high electricity costs also weighed on the profits. EBITDA came in at EUR 127 million after EUR 161 million in Q4 '18. The EBITDA margin went down quarter-on-quarter from 41% to 36%. Last year Q1 reached EUR 122 million and EBITDA margin was then at 37%. The EBIT was also burdened by slightly higher depreciation. EBIT came in at EUR 103 million compared to EUR 138 million in Q4. EBIT margin went down from 36% to 29%. Last year, in Q1, EBIT was EUR 97 million with a margin of 29%. Net profit reached EUR 80 million. Earnings per share came in at EUR 2.68 per share. Our general dividend policy provides for a payout ratio of approximately 40%. Therefore, we will propose, at the upcoming AGM next week, an increased dividend for the year 2018 of EUR 5 per share, equaling a dividend yield of 6.9%. This represents a doubling compared to the prior year.Looking at our balance sheet. Our equity increased further to EUR 968 million, which is primarily due to our net profit for the period. Our equity ratio though came down slightly to 48% because of higher pension and leasing liabilities. Pension provision was burdened by higher interest rates in Germany, which led to an increase in our pension provisions from EUR 362 million to EUR 422 million. Interest rates came down further just after the ECB announced their intent to maintain relaxed monetary policy in the near future. Our net financial assets reached a new all-time high of EUR 762 million.In Q1 '19, we generated an operating cash flow of EUR 131 million. We have not received any additional customer prepayments in Q1, but returned around EUR 17 million as planned. Net cash flow, therefore, came in at EUR 81 million, up significantly quarter-on-quarter. However, the negative cash flow in Q4 was a result of significantly higher CapEx last year. In Q1 '18, net cash flow came in at EUR 112 million. Cash flow from CapEx totaled EUR 67 million and included our well-known investments in capacity, automation and capabilities.With that, I would like to hand over to Chris again.

C
Christoph von Plotho
Chairman of Executive Board & CEO

Thank you, Rainer. As you already know, our view on 2019 is more muted than we expected at the beginning of this year. Therefore, we adapted our forecast in April. We expect Q2 to be significantly weaker than Q1. For the full year, we expect sales to be around 5% to 10% below the previous year. Looking at our profitability, we expect the EBITDA margin to be between 33% and 37%. EBIT is forecasted to be significantly lower compared to 2018. Net cash flow is expected to remain clearly positive, but, nevertheless, declined by around EUR 150 million. However, it will be up again in 2020. Earnings per share will be substantially below previous year. Our CapEx will be around EUR 350 million. In 2020, CapEx will be significantly lower. Altogether, this forecast continues to hinge on the recovery of the market. Irrespective of the currently challenging market environment, we are convinced that the fundamental growth trend in the wafer industry remains intact. However, it is difficult to predict when exactly this will happen.With this, we close our presentation and are now available for your questions. Operator, please open the Q&A session.

Operator

[Operator Instructions] And first question is from the line of Francois Bouvignies with UBS.

F
Francois-Xavier Bouvignies

I have a couple. The first one I have is, if we look at your 200-millimeter volume that is going down for this year, if we assume that the long-term contract is much less important for 300-millimeter than 200-millimeter, can you explain how you managed to get the same pricing for 200-millimeter specifically? Or how it doesn't impact your ASP for the full year? Put it this other way. And I have a couple of others, if I may, after?

C
Christoph von Plotho
Chairman of Executive Board & CEO

So you refer to the pricing of 200-millimeter?

F
Francois-Xavier Bouvignies

Yes, exactly. So if we assume that you have ...

C
Christoph von Plotho
Chairman of Executive Board & CEO

We do not -- when we talk about ASP and ASP development, we always talk for the total company and not by diameter. We never disclose details about ISP by diameter and we'll continue to do so.

F
Francois-Xavier Bouvignies

But what I'm trying to understand is, I understand your comments when you say that LTA is helping your pricing. But the LTA is mainly on 200-millimeter if we assume, I mean if we look at your competitors and comments. We're looking at 200-millimeter mainly for LTA and not really 200-millimeter. So I'm just wondering how can you manage the same price if 200-millimeter is going down.

C
Christoph von Plotho
Chairman of Executive Board & CEO

As you know it's simply a question of discipline. In the periods where everybody was fighting for market share, prices went down significantly. I'm referring to the period between 2010 and 2015, but nobody earned any volume. And I do believe that with the action initiated by Siltronic to increase prices, to announce price increases in late 2016 for 2017, we also sent, somehow, a signal to the market. And since then, everybody enjoys a stable pricing level. And I think human beings can still learn from the past, and the experience from the past showed that although the one or the other was very aggressive from pricing, at the end of the day, nobody gained market share. So why should we try again to gain market share when the volume is not there in the market?

F
Francois-Xavier Bouvignies

Okay. No, I understand. And the second question I have is, most of your customers reported Q1 numbers. If I look at TSMC I mean Infineon preannounced and the Samsung, Micron, et cetera. If we look at their inventories, it looks like it's almost all-time high since 2009. So I'm just wondering, how do you factor this kind of high inventory that your customers, especially when we go in the second half of the year when you look at the comments on the conference call that most of them said that they will try to decrease their inventory in the second half of the year. So I was just wondering, how do you factor this in your assumptions for the second half?

C
Christoph von Plotho
Chairman of Executive Board & CEO

It's a very good question and it's a very complex question. We see -- at a few of our customers, we see the inventory level of raw wafers, but only the raw wafers which were sold through Siltronic. And I made my comments in my speech regarding that, but that's not the problem area. The problem area is the finished goods at customers. And that we tend to believe that most of, let's say, the memory players started to react to this high inventory level only early in the year 2019. And as the production chain takes 3 months, so for the month of January, February and March, there is still -- the outcome out of production was higher than demand. So inventory levels at the end product of our customers, we believe they still continue to go up in the first quarter. And therefore, we say it takes longer than anticipated. But unfortunately, we don't have a clear picture on that. We got some figures from some customers, but we don't have a very detailed view on that. On top of this, it's not only the inventory of the finished goods of our customers, it's the inventory level throughout the whole supply chain. I do believe that there was also some higher inventory buildup in smartphones and in the car industry for sure because in the car industry, 40% of the -- no, 50% of total volumes sold is either in the U.S. or in China. And these 2 markets typically are not like markets like in Germany where people order a car and the car is specially built for them. They go through the dealer and they buy out of inventory. And the inventories went up in these 2 countries, and therefore, we also see inventory effect on the end product.

F
Francois-Xavier Bouvignies

That's very clear. And 2 financial questions quickly. On the prepayment for this year, how much do we expect for this year in prepayments? Can you disclose that? Or?

R
Rainer Irle

Yes. You can see in there, in the balance sheet. I mean, the short-term portion of the prepayments is the amount that we will pay back. But then please be aware that there might be additional prepayments that we will receive during the year.

F
Francois-Xavier Bouvignies

Okay. And with regard to the underutilization impact on your gross margin, can you quantify as well the impact in Q1? Just to make sure we are understanding the moving parts.

R
Rainer Irle

I didn't get the question. Which effect?

F
Francois-Xavier Bouvignies

The underutilization impact on the gross margin. What is it maybe on absolute or in percentage points in Q1?

R
Rainer Irle

We didn't disclose exactly how much volume is down, so I can't give you that number. But overall, I think it's a good assumption to assume that half of our costs are fixed and half are variable.

Operator

And our next question is from the line of Amit Harchandani with Citigroup.

A
Amit B. Harchandani
Vice President and Analyst

Amit Harchandani from Citi. Three questions from my side, if I may. The first question is with regards to your outlook. You've quantified your outlook for the full year. You've given us a range. At the same time, for Q2, however, you talk about it being down significantly without necessarily quantifying it. Significant can mean different things to different people. Just trying to get a better gauge for what has stopped you from giving a quantitative guidance? Obviously, you talked about uncertainty, inventory. To what degree of confidence do you have then in the full year outlook? Any thoughts around what's the difference between the 2 set of outlooks, please?

C
Christoph von Plotho
Chairman of Executive Board & CEO

I fully agree with you that when you use the word significantly, it means different things to different people. But this is not our problem. We will not be more precise than significantly. And for the full year, we are still confident that the range we gave between minus 5% and minus 10% is good from today's perspective.

A
Amit B. Harchandani
Vice President and Analyst

Okay. Secondly, if I may? With respect to pricing, you talked about a year-on-year pricing in Q1 being up 8.7% in euro ASP terms. Factoring in for FX, that would probably imply USD ASP being up potentially around 2 percentage points, if I may. And then if I look at the potential tailwind from the contracts you've signed over the past 3 quarters getting blended into this ASP, would it be fair to say that the quarterly pricing was down quarter-on-quarter in Q1 versus Q4?

R
Rainer Irle

No.

A
Amit B. Harchandani
Vice President and Analyst

Okay. And you still believe -- if I remember, you've said the pricing overall would be up year-on-year this year, right? That still remains the case?

R
Rainer Irle

ASP, yes. You don't see that the volume is still down year-on-year. ASP is -- yes, ASP is up significantly year-on-year.

A
Amit B. Harchandani
Vice President and Analyst

But yes, but that was largely because of FX, right?

R
Rainer Irle

No, no, no. FX is one effect, but also the ASP is up significantly year-on-year, but volumes are down year-on-year. So it's basically 3 effects, and volume and ASP, I mean, the real price is a wash and then we see the benefit from FX.

A
Amit B. Harchandani
Vice President and Analyst

Okay, okay. And finally, if I may, with respect to the cost reduction. I think in the April announcement, you talked about the continuous cost reduction programs will be pursued with full force. Is there a way we should think about the potential benefit from cost reduction coming through in the OpEx? Anything you could help us with respect to our modeling for this year?

C
Christoph von Plotho
Chairman of Executive Board & CEO

Between the announcement of April and today, there were no significant changes. Our cost reduction or cost position did also -- did always contribute in the past to a positive development of the Siltronic financial figures. And we always said this year, it will be different because we have a strong headwind from electricity coming. And we hope that we can compensate part of it, but what we see said only part of it can be compensated.

Operator

And the next question is from the line of Florian Treisch with Commerzbank.

F
Florian Treisch
Former Analyst

Two questions from my side. So the first one is, I believe, last time, it took around 6 weeks to come up with a second warning. Now we are 4 weeks later into the year and you confirm the guidance. Can we read this as a positive that April basically delivered the performance as expected and that the world is not really getting worse than what we have seen in March? The second question is on LTA. Have you signed any additional LTAs in the recent weeks or months or are clients simply reluctant to talk about that as of now?

C
Christoph von Plotho
Chairman of Executive Board & CEO

Well, I think regarding your first question, how you judge our statement today, which is completely comparable to what we said 4 weeks ago, that's up to you. Basically, it means that the view that Siltronic has on the total year did not change in the last 4 weeks. If you take that positive or not, it's up to you. And your second question was regarding what again, customers?

F
Florian Treisch
Former Analyst

LTA.

C
Christoph von Plotho
Chairman of Executive Board & CEO

LTA. LTAs, it's still true, holds true what we said before. We have customers coming to see us, and we continue to be willing to think about the quantity and the time frame, so -- which basically means that the total volume of the contract needs to be -- to remain the same, but we are willing to accept -- to ship quantities later than thought before in the contract. Up till now, we never had any discussion regarding pricing in LTAs with customers.

Operator

And our next question is from the line of Martin Jungfleisch with Kepler Cheuvreux.

M
Martin Jungfleisch
Junior Equity Research Analyst

I have 3, if I may? The first one is on pricing. I know you're not disclosing too much, but given that we are seeing a strong decline in demand for 150 and smaller-diameter products, how sustainable do you rate the price levels there? And how do you rate the risks of price declines in that area? And second question is on your capacity additions. There was nothing ramped up in the first quarter, right? And then can you comment if you are on track with the ramp-up? And the third question is -- and more or less an accounting question, what was your EBITDA benefit from the IFRS 16 accounting standard in Q1? That's it.

C
Christoph von Plotho
Chairman of Executive Board & CEO

Okay. Let me start with the second question, the ramp. Nothing changed about ramp. We said that we would add capacity to reaching plus 70,000 in 300-millimeter. The ramp started late last year and we always it will be completed by mid this year, and this still holds true. We are in line with our schedule timing-wise and also with our spending budget. Your first question was regarding pricing. We do believe by experience that the risk for price pressure is bigger on smaller diameters than on the other diameters also due to the fact that in smaller diameters we have much more players in the market and we also have the Chinese players. We always said that the Chinese players are not really state-of-the-art in the most demanding specifications. And as long as our customers are fully loaded, they, of course, buy the wafer with the highest output, not to say yield. And in the actual environment, as our customers in smaller diameters are not fully loaded, they can accept also wafer with a little bit lower performance if the target is to reduce spending in purchasing.

R
Rainer Irle

IFRS 16 impact is very low. You can see that it expanded the balance sheet, but impact -- the shift between EBITDA and depreciation is less than EUR 1 million per year.

Operator

And the next question is from the line of Jürgen Wagner of MainFirst Bank.

J
Jürgen Wagner
Director

I have only one question. Now with the downturn in full swing, you keep saying -- to indicate lower CapEx for 2020, what would be needed to change that to avoid the next shortage or wafer shortage similar to like what we saw in 2017?

C
Christoph von Plotho
Chairman of Executive Board & CEO

Well, that's really a question I appreciate. Yes, we are -- actually, we're in a weak phase, but we are telling our customers already that the next shortage is somewhere ahead of us all. And we are pretty convinced that the next shortage will be more intense than the one in '17 and '18 was. We still have, somewhere in our head, the possibility of greenfield investments. It does not -- actuality of that, of course, decreased with the recent development. But at the end of the day, it's still true that the industry and also Siltronic one day will need greenfield investments. And it's still true that we always said we need to see somehow support from customers, which basically means additional commitments to take the quantities out of that huge investment. But in the actual environment, let's take a customer like Samsung or like Hynix or like Micron. It's very difficult in this phase where they've slowed down wafer fabs to talk to them about the next shortage and the need to sign an LTA which might kick in '23 and last till '28, they don't have the vision for the timeframe in the actual environment, and that's okay.

J
Jürgen Wagner
Director

Now a scenario could be then that the shortage comes then also again overnight driven from memory, right?

C
Christoph von Plotho
Chairman of Executive Board & CEO

Yes. I'm pretty sure that the first signs of slowdown were probably visible end of Q3, beginning of Q4 last year, not for us but for our customers somehow. And they started to slow down wafer fabs maybe early this year, some even a little bit later. And I'm pretty sure it's like always in that industry, they slowed down too late and they slowed down too much, which basically then leads to a pickup, like you mentioned it, overnight. This is what will happen. And therefore, we are already thinking about that phase, how we can -- what can Siltronic contribute to bring up production as fast as possible to 100% loading again.

Operator

And the next question comes from the line of Gustav Froberg with Berenberg.

G
Gustav Froberg
Analyst

I just have 2. First question, your sales quarter-on-quarter declined a little bit faster than what the reported market volumes from SEMI did. Would you mind just helping us understand the reason for this?

C
Christoph von Plotho
Chairman of Executive Board & CEO

There are no basic reasons. We never commented on that. Maybe we dropped a little bit more, but this is difficult to say where it comes from. It's only a quarterly figure. We take the figure as reported by SEMI. The area development and our revenue development. We see it -- we see there is no -- it's not a perfect match, but that's it. And please keep in mind, in the first quarter, we had this negative effect where -- we had the positive one in August last year where a customer went from sea freight to airfreight, which basically boosted the revenue. And now this customer went for most of the quantities back to sea freight, which did cost us in the first quarter a significant amount of revenue.

G
Gustav Froberg
Analyst

All right. Super. And then just a final question. Because you're talking a little bit about being flexible with your customers on the LTAs in terms of the timing, I am just wondering then if there will be a catch up then in volumes in, say, 2020, perhaps. Is that the way to think about it?

C
Christoph von Plotho
Chairman of Executive Board & CEO

I can only disclose little bit details on one contract where we renegotiated. We basically slowed down the quantities of this year, and we said it will last one year longer. That's it -- that's what we did. So there is no effect on 2020.

G
Gustav Froberg
Analyst

All right. So it's not so that you will sort of take all the wafers till this year and next year.

C
Christoph von Plotho
Chairman of Executive Board & CEO

No, and I will take -- in general, if we take our quantities in 2019, I think, in most cases, the customer wouldn't like to see these additional quantities in 2020, but more at the end of the contract phase.

Operator

Next question is from the line of Bob Sanders with Deutsche Bank.

R
Robert Duncan Cobban Sanders
Director

My first question is just on the CapEx number for 2019. I appreciate that you may have fixed plans, but I kind of thought you might consider elongating that CapEx into next year, maybe slow deliveries of pullers that kind of thing. I'm just wondering if you -- what you're thinking is there. And I have a couple of follow-ups.

C
Christoph von Plotho
Chairman of Executive Board & CEO

Well, I think -- well, first of all, of course, we thought about it. The effect would have been really minor. And on the other hand, like I said in previous calls also, in general, when you talk -- when you mention the possibility to invest against the cycle, everybody likes the idea. And soon as you do it, everybody doesn't like it. So -- and this is what we are doing. We are convinced that the future will bring additional demand and additional quantities specifically on 300-millimeter and we want to be prepared for that.

R
Robert Duncan Cobban Sanders
Director

Got it. And can you just remind us -- once you complete that buildout, will you -- is there still more brownfield capacity in Singapore? Does it make more sense to do brownfield in Germany or U.S.? Or is it -- would it be -- make more cost-effective sense to do a greenfield in Singapore?

C
Christoph von Plotho
Chairman of Executive Board & CEO

Well, first of all, I will refer to the U.S. In the U.S., we have 200-millimeter activities in Siltronic. In general, we're not at capacity in 200-millimeter. We will maybe do a little investment here -- a little investment there for specific product categories, but the total wafering output will not be increased. And we are a strong player in the float zone area. We will add next year 2 float zone pullers because the demand in float zone is very strong, and we want to maintain our strong position. If you look at -- yes, there is still some possibility for brownfield in Singapore. I do believe that there would be also some brownfield capacities in Germany. But in Germany, what we do -- we did it in Burghausen and we continued to do so in Freiburg. We will add EPI reactors to change the product mix from a little bit less polished in Germany and more epitaxial wafers over there. But at the end of the day, one day, Siltronic will need greenfield and greenfield will, for sure, not be in Germany.

R
Robert Duncan Cobban Sanders
Director

Got it. And last question will just be -- still on -- SEMI just announced they're going into 300-millimeter power devices after Infineon did whatever 4, 5 years ago. I mean I seem to remember you guys having a quite differentiated technology. Do you think that you can serve a much larger customer base in 300-millimeter thin wafers per pound?

C
Christoph von Plotho
Chairman of Executive Board & CEO

Well, first of all. Power is not -- at the beginning, it was only one customer looking into 300-millimeter for power applications. In the meantime, basically, everybody does. I do believe that Siltronic has a very good position in 300-millimeter for power applications. I do believe that our share in that market is higher than our overall share for the company or for 300-millimeter. And we will continue to support that market. I do believe that for the players in that market, the quantity development is very positive and very important. On the other hand, I would guess that in the actual environment, less than 100,000 wafer starts per month for 300-millimeter power. And when we look at the total quantity sold, this is still relatively small. But of course, it needs special pullers because we have special [ to open, highly authentic door, highly retroscope ], so it's not something that you can do overnight.

Operator

And we have a follow-up question from Amit Harchandani from Citigroup.

A
Amit B. Harchandani
Vice President and Analyst

The first follow-up I have is again going back to inventory. Certainly it's true that the inventory of finished products is up, but my understanding was the inventory of raw wafers is still quite low at customers. And if that is the case, when you have discussions with those customers, why are they not replenishing the raw inventory -- raw wafer inventories up to reasonable levels? What gives them the confidence that later on, if they would need the raw wafers from you in case of an upswing in demand, they would get access to that easily? So I'm just trying to get a gauge on the bigger picture trends.

C
Christoph von Plotho
Chairman of Executive Board & CEO

Amit, that's a very good question, but you should ask this question our customers and not so much us. We saw at customers -- there are few ones where we see the inventory. The inventory went up. But if you say the range of the inventory that they are targeting is somewhere between 30 and 60 days, they are more at the lower end.

A
Amit B. Harchandani
Vice President and Analyst

Certainly, I would ask this to your customers because just wondering what explanation do they give you, if you can share even broadly with us what gives them confidence they are okay with 30 days or being closer to the lower end?

C
Christoph von Plotho
Chairman of Executive Board & CEO

Typically, when we have demand discussions with customers, we talk about the demand, they talk about wafer starts, they talk about weakened markets, they talk about inventory in the value chain. We basically have never discussion with a customer, which is based on the inventory level. And in the meantime, everybody knows that the periods where 300-millimeter was fully loaded to 100-plus percent is not real world anymore. So when it kicks up, they know that they can get more. So therefore, it's the target range for 30 to 60 days. If they are happy today at 30, I can understand that. I would do the same.

A
Amit B. Harchandani
Vice President and Analyst

Okay. That's very helpful. And secondly, with respect to competitive dynamics across the industry, I mean, obviously, different players are positioning differently. When I say players, I'm referring to wafer manufacturers are approaching this slowdown or temporary pause differently. Do you have any sense for any change in competitive dynamic? Do you see one player being more aggressive or trying to add capacity to exit the downturn with a greater share? Any thoughts on the evolving competitive dynamics from your perspective would be helpful.

C
Christoph von Plotho
Chairman of Executive Board & CEO

Well, Amit, I think in a situation where nobody is fully loaded, it's very difficult to see whether somebody adds capacity because you wouldn't see the quantity on the market because the demand is not there. I do not believe that anybody changed his attitude towards contribution to stability in the market.

Operator

And our next question is from the line of John Page (sic) [ John McPate ] with BTIG.

J
John McPate
MD & Global Technology Sales Specialist

Just one on your dividend policy. So you stated that you got a strict 40% payout. However, with a cyclical industry there, that implies your variable dividend over the years. Would you, given your strong cash generation and cash positions now, view maybe a change in that to smooth it, say perhaps, to keep it at EUR 5, or are you going to stick strictly to that payout policy?

R
Rainer Irle

We have no intent to change our dividend policy.

Operator

And at this time we have no further questions. [Operator Instructions] Since we have no further questions, I hand back to our speakers for closing comments.

P
Petra Müller
Head of Investor Relations & Communications

Well, thank you, everybody, for joining today's call. We wish you all a pleasant day. And our next publication will be the half-yearly report on 25th of July. Have a good day. Goodbye.

Operator

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.