Welcome, everyone, to UMC's 2024 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow the instructions given at the time if you would like to ask a question. For your information, this conference call is now being broadcast live over the internet. Webcast replay will be available within two hours after the conference is finished. Please visit our website, www.umc.com, under the Investor Relations, Investors, Events section. And now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin.

Thank you and welcome to UMC's conference call for the third quarter of 2024. I'm joined by Mr. Jason Wang, President of UMC, and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the third quarter financial results, followed by our President's key message to address UMC's focus and fourth quarter 2024 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC Security Authority. During this conference, you may view our financial presentation material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's third quarter 2024 financial results. Chi-Tung Liu: Thank you, Michael. I'd like to go through the 3Q '24 Investor Conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page 4. The third quarter of 2024 consolidated revenue was NT$50.5 billion, with gross margins at 33.8%. The net income attributable to the stockholders of the parent was NT$14.5 billion, and earnings per ordinary share were NT$1.16. For the capacity utilization rate in the third quarter was 71%, which is slightly up from 68% in the previous quarter. On Page 5, the sequential comparison, operating revenue grew 6.5% to NT$60.5 billion. Gross margin was 33.8%, compared to 35.2% in the previous quarter. Our net income in the third quarter was NT$14.44 billion. This is compared to the NT$13.77 billion numbers in the previous quarter. And for EPS, it's NT$1.16 per share. On Page 6, for the first three quarters of 2024, cumulative revenue grew 2.6% to NT$171.9 billion. Gross margin rate was 33.3%. The decline of 4.4% or 2.5 percentage point was mainly due to the increased depreciation happened in 2024. For the net income for the first three quarters reached NT$38.64 billion. For the net income attributable to the shareholders of the parent was NT$38.71, which is equivalent to NT$3.12 per share in EPS. On Page 7 is our balance sheet. Our cash dividend payout still remains above NT$100 billion. The number is NT$103.4 billion at the end of the third quarter. The total equity for the company now reached NT$368.5 billion at the end of third quarter 2024. For Q3 2024 on Page 8, the ASP numbers remain resilient, flattish. And this is compared to the previous quarter. We didn't see much change for our blended ASP. On Page 9 for revenue breakdown, Asia now represents 65% of our total revenue and Europe declined by 2 percentage point from 7% to 5%. On Page 10, IDM rebound from 13% in the previous quarter now to 15% in the third quarter of 2024. In terms of segment breakdown, communication also increased to 42% from 39% in the previous quarter. And computer declined by 2% from 15% to 13%. On Page 12, our 22 to 28 nanometer revenue in both absolute dollar amount and also percentage reached a record high of 35% in the third quarter of 2024. And 40 nanometer stayed around 13% in the third quarter. For our capacity table on Page 13, our 12A in Taiwan continued to increase leading edge capacity. And that will bring up the full year capacity increase for UMC to above 7%. And the last page on Page 14, we revised update our annual CapEx budget from previously NT$3.3 billion to now NT$3 billion. Even this is just to reflect the update schedule mainly for our Singapore capacity rent. So the above is a summary of UMC result for 3Q 2024. More details are available in the report which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wang.

Thank you, Chi-Tung. Good evening, everyone. Here I would like to share UMC's third quarter results. In the third quarter, we delivered results that were in line with the guidance. In particular, wafer shipment grew more than expected, increasing 7.8% sequentially due to a strong demand for 22 and 28 nanometer products. Our strategy is to develop specialty technology solutions that deliver best-in-class performance. And I am pleased to report that revenue in absolute dollars derived from our specialty portfolio is the record high in the third quarter. Accounting for 53.1% of total sales. In our industry, technology is fundamental. We continue to invest significantly in technology development every year to ensure we are ready to support customers' next-generation product features with more advanced solutions. For instance, our 22 nanometer display driver solution was the first to be made available to the market and offers unparalleled performance. And we foresee strong table momentum in the upcoming months. With regards to Q4 outlook, we are seeing demand stabilizing across N markets and a clear downward trend in inventory levels. Looking ahead, we have a number of exciting technologies and collaboration projects in the pipeline as we continue to align closely with our customers' product roadmap. In addition, as we hear consistently from customers, UMC's diversified manufacturing footprint is also very important in supporting their long-term strategies. Our new fab expansion in Singapore is nearly in completion, while our collaboration with Intel remains on track. This project will further enhance our value proposition to customers and strengthen our position in the fungi industry. Now, let's move on to fourth quarter 2024 guidance. Our wafer shipments will remain flat. ASP in U.S. dollars will remain flat. NT dollar appreciation may lead to a decline in our reported Q4 NT dollar revenue. Gross margin will be close to 30 percent. Capacity utilization rate will be in the high 60% range. Our 2024 cash-based CapEx will be budgeted at a $3 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions.

Thank you, President Wang. And ladies and gentlemen, we will now begin our question and answer session. [Operator Instructions] And our first question will be coming from Sunny Lin of UBS. Go ahead, please.

Thank you very much. So my first question is on Q4. So recall back in July, Jason, you mentioned there could be some seasonal slowdown into Q4. But now it seems like you are able to hold out the revenue for Q4. It's a bit better than expected. So what's driving the upside at this point and your view on 2025?

Well, for Q4, we expect -- we foresee the trend in computing segment will be slightly better quarter-over-quarter than we originally expected and, however, will be offset by a mild decline in communication and consumer segment. Net-net, I think that will be more of a flat quarter from a shipment -- ship-out point of view. For 2025 market outlook, although the global economic shows sign of recovery and the inventory level is improving, however, the forecast from our customers at this moment remains conservative. For 2025 early preview, we do expect to see an increase in our wafer shipments as well.

Got it. Thank you, Jason. So a follow-up on pricing. Lately, there is lots of noises and debates. But just wonder, from your perspective, are you seeing stabilization? Or are you seeing another round of competition into year-end or 2025? In Q1 this year, the company did offer a onetime reset for broader ASP that dropped about 4% to provide some customer support. And so any initial expectations based on your current negotiation with the clients? Should we expect some further ASP erosion into early 2025 as well?

Well, on the ASP -- for the Q4 2024 ASP, our pricing will remain flat as we guided. In terms of pricing situation, the -- our UMC's pricing resilience has been well demonstrated during the demand/supply imbalance that reflect our ability to navigate the challenge that arise from the capacity oversupply. So in our view, throughout the 2024, they are capacity over the supply situation in which we are maintaining our pricing resilience. And we do believe our pricing resilience will persist given our efforts on our technology value proposition and including our dominated position in high-end smartphone display leadership, some of the smartphone are front-end modules. And while we continue doing a product mix optimization and with our diversified manufacturing footprint, so we believe our pricing will persist and the resilience will persist. If we go into a 2025 pricing, we do foresee pricing outlook were resembling -- resemble a similar pattern to 2024, where beginning of 2025 pricing adjustment will be again another one-off, which will reflect our alignment with the customer to cope with the market dynamics and gain market shares. The pricing scheme is within our disciplined financial guidance and will not change our overall pricing position very easily [ph].

Thank you, Jason. So for Q1 2025, if there's another reset, would the magnitude be similar with Q1 this year?

I mean, we will provide that guidance in the upcoming call and -- but there will be a one-off. Yes.

Got it. No problem. Another question on gross margin. Q4 revenue is guided to be flat. ASP is also flat. But you anticipate gross margin to fall to 30% from 34% in Q3. What's the reason behind? And looking ahead, if based on 30% or high utilization rate, what will be a reasonable gross margin range that we should expect? Chi-Tung Liu: So for the Q4 margin, lower guidance is largely due to a lower capacity utilization rate, the high 50% versus 71% in Q3. Also, the NT dollar is a headwind because of NT$32.29 was the average ForEx we use in the previous quarter. And this quarter, I think, at least in the beginning, even shoot up to nearly NT$31.5 per $1. And also, the higher depreciation arise from capacity expansion. This factor is going to impact us for relatively few quarters. I mean, we probably won't see the depreciation impact go away until a few quarters later. But most importantly, the gross margin, if we use EBITDA margin, actually, the numbers are very similar quarter-over-quarter.

Got it. Thank you very much. That’s all I had.

Next one, Gokul Hariharan, J.P. Morgan. Go ahead, please.

My first question, Jason, I just wanted to get your view on your customer behavior and inventory levels. I think you mentioned that inventory is kind of coming down across the supply chain. Let's say, next six months, do you feel like there is some prospects from your customers to kind of get into a bit of a restocking cycle? Do we feel like we can get back to like a 75%, 80% kind of utilization in the near to medium term? Or is that still going to be -- going to take some time given the inventory behavior from the customers seems like very, very cautious?

Sure, Gokul. Well, first, for the inventory outlook. From the applications perspective, overall inventory level within communication, consumer and computing have returned to a relative normal level after several quarters of digestion now. So we feel the inventory for those applications since get already back to the normal level. For the automotive and industrial segment, they will require more time and probably until end of Q2 '25 and to digest the inventory and return back to norm. After the inventory level return to norm, we do expect the demand pattern will follow the market seasonality. Now for the question, let's say, would there be a restocking and going back to higher utilization, it's our belief that foundry industry is experiencing an oversupply situation due to the supply chain resilience considerations. We can see the current utilization rate probably will be the bottom for the UMC. And hopefully, it will rebound back to the average healthy level and to maybe between 80% plus and giving our continuous effort of technology differentiation. But that will be subject to the market behavior as well as the customer behavior and our technology differentiations. And meanwhile, we'll constantly focus on our technology differentiation and with the hope that market will recover.

Got it. Thank you. And just a question on 8-inch. It feels like a lot of these issues are a lot more in play in 8-inch in terms of pricing as well as lower utilization. Is there anything strategic that UMC is considering? Are we at a point in the cycle of 8-inch that it is probably better to reduce the effective capacity that you have for 8-inch on a medium to long-term basis? Are we kind of at a point where there is enough capacity or enough products shifting from 8 to 12-inch that 8-inch doesn't really make much sense to have this much capacity?

Well, you're absolutely correct. And anything is possible. But at this moment, we do not have any plan to reduce our 8-inch capacity. We do believe the overall market demand for 8-inch will remain steady. And -- but we do see opportunity to gain market share with differentiated technology solutions. So we still have some expectation with our 8-inch recovery. Our current 8-inch loading is under recovery, and we expect the 8-inch loading will gradually improve, driven by the effort in strengthening our solution in BCD and high-voltage platform. And given the -- after these few quarters, given the positive feedback from our customer, we foresee the gradual improvement in 8-inch is very possible.

Okay. And maybe last question is on your partnership with Intel. Given there's a lot of noise about Intel cutting CapEx and having -- considering restructuring, considering spinoff or kind of at least separation of business, et cetera, a lot of noise out there. Anything that you're observing in terms of your partnership on 12-nanometer with them? Any changes in the time lines? Are you still looking at the 2027-time line? Is there a chance for any pull-in of the time line given that we are almost like a year or at least like 6 TO 8 months into that partnership?

Sure. All good questions, let me see. One is on the -- our current partner situation, I can tell you that the current 12-nanometer collaboration is progressing well. Our customers and partners are very positive on the potential of 12-nanometer business opportunity. And the project is on track. Early engagement with the key customers have shown strong interest to pull in our 2027 production schedule. According to the early evaluation feedback from the key customers, our 12-nanometer performance will be very competitive in the industry. And right now, we're working diligently with both our partner and key customers to further accelerate the schedule as requested. And overall, we are cautiously optimistic about that progress, and we'll update you accordingly. The new -- but I can tell you the next milestone right now is -- the key milestone right now we're looking at is the key. The new product tape-out will take place in 2026 from the key customers.

Got it. Thank you very much.

Next one, Laura Chen, Citi. Go ahead, please.

Thank you very much for taking my question. My question is also about the Intel collaboration. Can you give us more details or any color of what kind of the applications that could be? And also how should we like share the profit or the capacity we have reserved for that 2026 or '27 onwards FinFET process?

Well, first of all, for the application, it's mainly focused on communication and consumer products. And beyond that, there could be many other product pipeline from a derivative that we'll continue working closely with our customers. As far as the capacity and the profit sharing, I mean, we are not levered to update you the profit sharing scheme. The -- however, from a capacity standpoint, we believe there is a sufficient capacity to expand, and we'll just have to align with our customer and along with our partner to gradually put that expansion plan together. Once we have a clear picture on the initial number, then we'll share with you accordingly. Chi-Tung Liu: And it's really based upon the customer adoption rate rather than constrained by the capacity.

Yes.

Okay. Thank you. And also, my second question is also about gross margin outlook. As Jason mentioned that industry-wise, we see the oversupply situation. And also, on the other hand, we have some ongoing expansion. So I'm just wondering that do we have any idea about like what kind of structural gross margin we are looking for in the longer term.

Well, I mean, first of all, we are continuing to invest towards the future in developing a new solution in larger but advanced specialty technology. Therefore, we anticipate a rising depreciation burden during the ramp-up phase of the capacity expansion. Chi-Tung actually touched it earlier. Secondly, given the rising cost of goods in utility, renewable energy and carbon tax and -- which our industry is experiencing. And we have to continue to deploy aggressive cost management and to offset those headwinds in costs. And we'll constantly manage the projection of those impacts. The -- so given that, we still project that we feel we are confident that UMC will maintain a solid structure profitability in the long term. And maybe post the 2025, once the depreciation numbers get to the level we expected, we'll get back to the doing low 30 to low 40 range, which we believe that will be a healthy level of long-term gross margin target for us.

So can you kind of assume that given our current utilization rate is only at about 60%, 70% range and with the inventory digestion almost done, and structurally we will see that 30% kind of at the relatively trough level in the longer term? Chi-Tung Liu: I think there are many factors. So it's very difficult for us to commit the absolute numbers. So what Jason just mentioned is there are several headwinds coming. And we also work diligently to offset the impact. So overall, we do believe our structure profitability should be intact. And especially for year 2025 and '26, we will focus more on our EBITDA margin, which really has no major reason will be different materially compared to the previous down cycle.

Okay, very clear. Thank you.

Next one, Charlie Chan, Morgan Stanley. Go ahead please.

Hello, Jason, Chi-Tung, good afternoon. So yes, my first question is also regarding the pricing. But I wanted to have a step back, right, to compare your current status versus maybe two years ago. Two years ago, I remember, would you comment about your product mix, right? You said 70% is not commodity and some of those are kind of a single source, right? So customers wouldn't care about your pricing. But I remember a couple of quarters ago, that may come down a little bit to like 50%, maybe half of your business. Yes. But now, I'm confused, right? Because supposedly those commodity business should already go away given the competition. So your exposure to those single source or differentiated products should be even higher than before. In that case, why you still need to do like a onetime pricing adjustment at the beginning of next year? That's my first question.

Sure, sure. I mean, the -- what -- you're right from a product mix standpoint. Given there is oversupply situation in the industry, so we also have to closely working our customer to compete in their marketplace? So the pricing discussion is more associated with closely working our customer to gain market shares, not only associated with our stickiness with our customer. Based on the current utilization rate, it represents a very limited exposure to the product price sensitive from our perspective to our customer. So from a stickiness point of view, the comment remains intact. However, to continue to support our customers to be competitive in their marketplace we do need to consider that.

Okay, I see. It's very helpful. And then do you observe that major foundry adjacencies also be more flexible on a mature note pricing? Is that one of the reasons that you also want to adjust your price early next year?

Well, I mean, we don't comment on specific company for all our peers. I mean, the -- but in general, we need to get closer with the market price. If that representing the narrowing the margin -- I mean, the range of the market price, then we have to respond. So in a way, we are working with our customers. We are actually working closely with our customers together to cope with those market dynamics. And we -- the bottom line is we both need to be competitive. And from our side, we need to provide a competitive and differentiated technology solutions and, at the same time, be commercially competitive as well to gain our market share, yes, and with our customers together.

I see. Thank you. And regarding the differentiated products. I'm wondering, can you comment a bit about your smartphone differentiated IC market share? I remember the third quarter revenue or utilization was pretty good. It's probably one of the reason. So when I look at your fourth quarter UTRs decline, is that also because your kind of market share is giving back to your competitor for this specific product line?

Well, a few things, right? I mean, one is our utilization guidance actually reduced mainly because our capacity increased. And we have guided the wafer out will be similar, right? So it will be flat. So we don't think there is a market share loss situation. Now, getting back to the specific 22 and 28, the display driver or linked market, I mean, we remain as the market leader in this display driver IC space. And we are the first to roll out the 22 HEIDI as well given the early remand pipeline. And we foresee and our position will not change.

Got you. So maybe last one to two small questions we're having you. So that interposer business, right, I mean, over the past 12 months, there's definitely a need for non-TSMC supply chain. But into next year, it seems like TSMC is even more dominant in this core capacity supply. And this is some migration to newer technology like silicon bridge. So I know this was discussed like a few months ago. But now do you think that your interposer capacity can be reutilized next year?

Well, certainly. I think there's -- I mean, right now, the capacity like we reported in the past is about 6,000. And currently, we support the current version of the interposer and that then will actually continue into the 2025, at least early 2025. And following that, we have a pipeline of engagement beyond with the multiple customers with a different product line as well. So we do have an expectation that this will continue. And there may be a gap in between in terms of the migration path and the schedule. But however, we do have confidence that those capacity will be used. And even now, we also -- and in addition to that, we actually think about -- we're actually in discussion with the customer if that requires additional capacity for us.

Okay. That to me is not easy to reconcile, right? Because I think currently, your major customer obviously is the biggest AI semi company. So it makes sense for them to have a dual source, right, meaning buying a version from TSMC and maybe second source from your foundry. But when you talk about other customers may use your interposer, would there also be like your source? Or they kind of use a single source from your interposer?

Well, that's various, right? I mean, there's a multiple customers, multiple types of programs with a different solution as well. So they are multiple sourcing, they are single source. So there are numbers engagement projects that we are in discussion with right now.

Okay, okay. So you're confident that, that can be fully utilized or even considering to add some capacity?

Yes, right. Yes.

Yes. And last one maybe to Chi-Tung. Electricity cost impacts, does that already show in your first quarter margin impact? Or how do you think about the margin sensitivity to Taiwan's electricity cost hike? Chi-Tung Liu: Q4 guidance already embedded the electricity utility price hike. So we foresee headwinds such as utility rate hike and other inflationary pressures. So we will continue to deploy aggressive cost management efforts such as focusing on multi-sourcing strategy and streaming process for supply chain, pricing management and power reduction measures on facility and tools. Also, we will continue to drive automation transformation and leverage our flexible work hours doing tool maintenance which will align with our holiday season. So this is the measure we will implement, especially when our capacity utilization rate is not up to the level we hoped. So we certainly believe this will help UMC, at least to largely offset some cost headwinds to ensure our long-term financial resilience.

Okay. That’s very, very clear. Thanks Jason and Chi-Tung. Thanks for your answers. Thank you.

Next one, Brad Lin, Bank of America Merrill Lynch.

Thank you for taking my questions. I have a question on the, well, RF SOI. We have earned a strong potential of RF SOI, especially in smartphone. Can the management elaborate expected growth trajectory over the maybe next two years? How is the customer demand shaping up so far for this technology? If I may, I would also like to ask about a similar question but about another technology, which is the OLED driver IC especially for the FinFET stage?

Sure. Well, I mean, on the RF SOI space, we -- for the past few years, and we're definitely gaining our market position in the RF SOI in the antenna and switch space. And we continue expanding our solution from this antenna switch to the LNA [ph]and while expanding the broadband coverage in 5G, which we developed a derivative of the 40-nanometer RF SOI to address the emerging full range 3, the 7 to 24 megahertz band with the most optimized and competitive performance solution. And additionally, we have the wafer-to-wafer hybrid bonding solution for the RF front end and module for all the advanced 5G applications from the space considerations. So I think we're starting to have a whole spectrum of the RF SOI solution from our successes in the radio and in the antenna and the switch space. So that's for the RF SOI. On the OLED and our industry-leading HEIDI solution have consistently been the top choice for the display driver IC for the high-end smartphone. In addition, we have also expanded our driver IC to serve growing needs of notebook and tablet OLED panels. So it's already beyond smartphones. And beyond the 28 and 22 nanometers, we also have the 40-nanometer FinFET DDI solution in our product pipeline. So I think we're prepared for the consideration of FinFET. But meanwhile, for the 22 and the FinFET is still under the exploratory stage. In our view, the 22 nanometers will be the mainstream OLED driver for at least the next two to three years. And the technology migration beyond 22 is on the road map, but we are evaluating the trade-off between the 22 and FinFET to align the schedule.

Thank you very much. So another question would be on the geopolitical things. So basically, we are -- U.S. is having a very important election soon. So as most of the market are increasing tensions, so what strategies are in place for UMC to manage the risk? And also, do you expect more upside or downside for UMC if the tension increases?

Okay. It's such a big question. Let me see. The geopolitical outlook taking place in the semiconductor industry, we have to say, is unprecedented and inevitable. And such initiatives have led to a supply chain resilience, at the same time, it has created a capacity oversupply in the industry. So the industry is experiencing oversupply situation due to the supply chain resilience considerations. So obviously, that is the downside risk. And however, UMC is one of the few foundry suppliers who can support the global fab operations. We have envisioned a need for diversified manufacturing strategy for many years ago. And while, at the same time, we believe the fundamental competitiveness is a strength of our technology differentiation. So we have deployed our technology in all our diversified manufacturing footprint to support our customer best we can. With the diversified manufacturing footprint and competitive technology offering, I think that will set us apart from our peer to mitigate that oversupply risk. Now the opportunities, our diversified manufacturing site provides supply chain resilience to our customers. That does become a one of the possibilities for the upside. We work on any opportunity from our customers and our many ongoing porting project already which will materialize after 2025. So there are some downside as well upside.

So would you be considered more upside and downside?

It's probably hard to gauge right now. I do think we have the right position to do so, to engage and capture those opportunities. Hopefully, that can offset the downside. But it's kind of hard to gauge at this point because there is also other market landscape changes, for instance, end markets market share changes. So there will be changes in terms of customer mix as well. So we have to step by step continue monitoring the progress.

Right. So the strong interest for the customers for power, the fab in the collaboration with Intel, about that project, would that be also attributed to some of the geopolitical tension?

We think so. Because, I mean, there is one additional the footprint for us. And it's the first one in the Western for us as well. And however, the fundamentals is still going back to technology competitiveness as well. Given the 12 impact [ph] collaboration project, we have confidence that we have a good solution and we have a competitive solution. And along with the Western footprint, we do think that's a value proposition for our customers.

Got it. Thank you very much, Jason.

Next one, Bruce Lu, Goldman Sachs. Go ahead please.

Hi. Thank you for taking my question. Jason, you just mentioned that 28-nanometer, you do see the oversupply situation. Can you share with us what kind of oversupply magnitude for 28 for next year, maybe the year after? And the second level is that within 28, you have certain derivative process like high voltage or any specialty. Can you also share what kind of like supply-demand situation for the specialty process within 28?

Sure. Focus on 28. So Bruce, one is the -- giving you a perspective, in Q3, our 22 and 28 wafer shipments reached a record high. And our loading utilization in 22 and 28 is above our corporate average. So the 22 and 28 currently loading still demonstrate some resilience here despite there is additional capacity opened up. Whether those are effective capacity or not will remain to be seen. And for Q3, the 28 and 22 is still resilient. Now going to Q4 as well the 2025, the 22 and 28 will be our growth driver business and in different applications, from communications, computing and consumer segments. And I think our 22 and 28 business will continue to grow. So we have a good confidence with our 22 and 28 loading situation despite there's capacity oversupply. And the competition will probably be more intense, but we have to continue tracking that progress on the market landscape. Now from our plan ourselves, is we continue migrating our product into 22 nanometers. Currently, the 22-nanometer larger product has already entered production, which that can help us be top on our peers and set apart from our peers. And we also see the DDI and ISP migration to '22 is happening. We foresee a strong stable of momentum on 22-nanometer for communication and consumer segments. And so I think there's another data for you, that it's not just the 28 capacity. Also we have to continue to roll out our 22-nanometer solutions. And from a derivative and the DDI high voltage, we'll not stop there and there will be a derivative beyond that from the [indiscernible] memory and as well as the RF SOI. And those are also in the pipeline on our road map. So we will continue pushing that. Hopefully, we can create a technology differentiation for our customer as well as maintaining our -- or even increase our market position in the 28 and 22 space.

Just a quick follow-up. Are we talking about -- like oversupply, are we talking about like 5 percentage oversupply or 10% or like just like 1, 2 percentage oversupply situation as the overall 28?

Well, I mean, I don't have a specific data to share with you. I can look into it and give you an update. Meanwhile, we continue tracking the overall capacity buildup on all different nodes. But at the same time, we are measuring in terms of the effectiveness and the addressable market in what kind of solution they address, not just the 28 logic. So I -- the data may be a bit fragmented, but let me just gather that, maybe get you update later. Yes.

Okay. Thank you. So the second question is more for Chi-Tung. I mean, what kind of depreciation growth we're going to see for next year. I'm assuming that you're cutting your CapEx for this year. You will be mostly for maintenance CapEx and some of the infrastructure CapEx for next year. So the depreciation growth is somehow more predictable for next year because you are mentioning that you're going to maintain the EBITDA margin, which is around 45%, I believe, at the current level. So I want to know what the depreciation growth for next year. Chi-Tung Liu: The EBITDA margin is close to low 40s. And for the depreciation increase in 2024, it's a little bit over 20%. And next year, the number will be similar or probably slightly higher.

You mean that the growth will be slightly higher than this year in terms of like 20%? Chi-Tung Liu: Yes.

[Operator Instructions] There are no further questions at this point. We thank you for all your questions. That concludes today's Q&A session. And I'll turn it over to UMC Head of IR for closing remarks.

Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact UMC at ir@umc.com. Have a good day. Thank you.

Thank you. Ladies and gentlemen, that concludes our conference for third quarter 2024. Thank you for your participation in UMC's conference. There will be a webcast replay within two hours. Please visit www.umc.com under the Investors Events section. You may now disconnect. Thank you, and goodbye.