(PLAB) 2022 Q3 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Photronics' Q3 Fiscal Year '22 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Ms. Richelle Burr, Executive Vice President, Chief Administrative Officer and General Counsel. Ms. Burr, please go ahead.

美好的一天，感謝您的支持。歡迎參加 Photronics 的 22 財年第三季度財報電話會議。 （操作員說明）請注意，今天的會議正在錄製中。我現在想把會議交給你今天的演講者，執行副總裁、首席行政官兼總法律顧問 Richelle Burr 女士。伯爾女士，請繼續。

Thank you, Chris. Good morning, everyone. Welcome to our review of Photronics' Fiscal 2022 Third Quarter Results. Joining me this morning are Frank Lee, our Chief Executive Officer; John Jordan, our Chief Financial Officer; Chris Burr, our Chief Technology Officer; and Eric Rivera, our Corporate Controller and Chief Accounting Officer. The press release we issued earlier this morning, along with the presentation material which accompanies our remarks, are available on the Investor Relations section of our webpage.

謝謝你，克里斯。大家，早安。歡迎來到我們對 Photronics 2022 財年第三季度業績的回顧。今天早上加入我的是我們的首席執行官弗蘭克·李（Frank Lee）；我們的首席財務官約翰·喬丹；我們的首席技術官 Chris Burr；以及我們的公司財務總監兼首席會計官 Eric Rivera。我們今天上午早些時候發布的新聞稿以及我們評論隨附的演示材料可在我們網頁的投資者關係部分獲得。

Comments made by any participant on today's call may include forward-looking statements that include such words as anticipate, believe, estimate, expect, forecast or in our view. These forward-looking statements are based upon a number of risks, uncertainties and other factors that are difficult to predict. Actual results may differ materially from those expressed or implied, and we assume no obligation to update any forward-looking statements.

任何參與者在今天的電話會議上發表的評論可能包括前瞻性陳述，其中包括預期、相信、估計、期望、預測或我們認為的詞語。這些前瞻性陳述基於許多難以預測的風險、不確定性和其他因素。實際結果可能與明示或暗示的結果存在重大差異，我們不承擔更新任何前瞻性陳述的義務。

At this time, I will turn the call over to Frank.

這個時候，我會把電話轉給弗蘭克。

Thank you, Richelle, and good morning, everyone. Q3 was an outstanding quarter. We achieved great new records in both revenue and profit. Demand for photomasks remains strong for IC and FPD, both high-end and mainstream applications. With our global presence, in-store production capacity and deep portfolio of customer partnership, we increased revenue 8% sequentially. Once again, it is our fifth consecutive quarter of record revenue.

謝謝你，Richelle，大家早上好。第三季度是一個出色的季度。我們在收入和利潤方面都取得了新的記錄。高端和主流應用對 IC 和 FPD 的光掩模需求依然強勁。憑藉我們的全球影響力、店內生產能力和深厚的客戶合作夥伴關係，我們的收入環比增長了 8%。再一次，這是我們連續第五個季度創紀錄的收入。

Gross margin and operation margin also reached 25-year record highs of 38% and 29%, respectively, as we benefit from higher price operation at capacity in most locations and superior cost control. The net result was earnings of $0.51 per share. Cash generation was also strong, and we ended the quarter with $324 million in net cash, position us to continue investing in profitable growth opportunities. I'm very proud of the entire Photronics organization and what we had been able to accomplish by working together and serving our customers to deliver great results.

毛利率和運營利潤率也分別達到了 38% 和 29% 的 25 年曆史新高，因為我們受益於大多數地區的產能較高的價格運營和卓越的成本控制。最終結果是每股收益 0.51 美元。現金產生也很強勁，我們在本季度結束時擁有 3.24 億美元的淨現金，使我們能夠繼續投資於有利可圖的增長機會。我為整個 Photronics 組織以及我們通過共同努力和為我們的客戶提供出色的服務所取得的成就感到非常自豪。

There has been pronounced mask capacity shortage since the beginning of second half 2021. Consequently, our customer has been dealing with long masks delivery time. Since Photronics full commitment is to our customers' success and growth, we have evaluated that situation, and we have been making the next wave of capital investment to closely align with our customers for their technology and production capacity road map. This strategy has been extending across geographies for both IC and FPD. These actions will help us continue to be a strong partnership with customers and establish several long-term agreements.

自 2021 年下半年以來，口罩產能明顯短缺。因此，我們的客戶一直在應對口罩交貨時間過長的問題。由於 Photronics 完全致力於客戶的成功和成長，因此我們已經評估了這種情況，並且我們一直在進行下一波資本投資，以與客戶的技術和生產能力路線圖緊密結合。這種策略已經擴展到 IC 和 FPD 的各個地區。這些行動將幫助我們繼續與客戶建立牢固的合作夥伴關係並建立多項長期協議。

Recently, there have been some slowdown in customer new tape-out activities, more in high-end than mainstream. However, our experience has shown that customers will impress megatrends in the market that drive development of new IC and FPD designs, such as the lower of 5G better communication; the expansion of electronics and automotive application; and of course, the continued expanding need for consumer electronics. As a result, we believe the negative impact of any slowdown on Photronics will be minor as reflect in our Q4 guidance.

最近，客戶的新流片活動有所放緩，更多的是高端而非主流。然而，我們的經驗表明，客戶將在推動新 IC 和 FPD 設計開發的市場大趨勢中留下深刻印象，例如 5G 更好的通信；電子和汽車應用的擴展；當然，還有對消費電子產品不斷擴大的需求。因此，我們認為任何放緩對 Photronics 的負面影響都將是輕微的，這反映在我們的第四季度指導中。

In the U.S., We joined our semiconductor peers in uploading the passage of chips and size act. Photronics, a critical member of the U.S. semiconductor ecosystem for 53 years, is the largest global photomask manufacturer and the only domestic supplier of high-end commercial mask, including U.S. trust products through 14-nanometer.

在美國，我們與半導體同行一起上傳芯片和尺寸法案。 Photronics是美國半導體生態系統53年的重要成員，是全球最大的光掩模製造商，也是國內唯一的高端商用掩模供應商，包括14納米的美國信託產品。

In cooperation with chips, we stand ready to invest and support the expansion of our customers' domestic manufacturing and technology needs. We performed very well in the third quarter, and we believe we are on track to have the best year in the history of the company. I'm proud of our team, and I want to thank all of our employees for their extraordinary work to achieve the quarter's results and look forward to accomplishing even more in the future. Thank you.

在芯片合作方面，我們隨時準備投資和支持客戶擴大國內製造和技術需求。我們在第三季度的表現非常好，我們相信我們有望實現公司歷史上最好的一年。我為我們的團隊感到自豪，我要感謝我們所有的員工為實現本季度的業績所做的非凡工作，並期待在未來取得更多成就。謝謝你。

At this moment, I turn the call to John.

這時，我把電話轉給了約翰。

Thank you, Frank. Good morning, everyone. Design activity remained strong in the third quarter, driving growth across both IC and FPD businesses. Our operations teams did a tremendous job of meeting demand in an environment that remains challenging. As Frank mentioned, we achieved our sixth consecutive quarter of record revenue and grew the top line at $220 million, up 8% sequentially and 29% compared to the prior year quarter.

謝謝你，弗蘭克。大家，早安。第三季度設計活動依然強勁，推動了 IC 和 FPD 業務的增長。在充滿挑戰的環境中，我們的運營團隊在滿足需求方面做了大量工作。正如弗蘭克所說，我們連續第六個季度實現了創紀錄的收入，收入增長 2.2 億美元，環比增長 8%，與去年同期相比增長 29%。

This quarter's performance is another data point that we believe validates our growth strategy. We have strategically invested in capacity and capabilities that are aligned with the high-growth sectors of our markets, such as AMOLED displays for mobile applications in our FPD business as well as both mainstream and high-end IC nodes. We are pleased with the results and believe we are well positioned to continue to outperform the market.

本季度的表現是我們認為驗證我們增長戰略的另一個數據點。我們戰略性地投資於與我們市場的高增長領域相匹配的產能和能力，例如我們的 FPD 業務中用於移動應用的 AMOLED 顯示器以及主流和高端 IC 節點。我們對結果感到滿意，並相信我們有能力繼續跑贏市場。

IC revenue of $161 million was 11% higher sequentially and up 37% year-over-year on strong demand growth and improved pricing across both high-end and mainstream. For high end, U.S. and Asia demand increased, particularly for 22-nanometer and smaller nodes, as demand remained strong, and we saw a pickup for EUV applications.

IC 收入為 1.61 億美元，環比增長 11%，同比增長 37%，這得益於強勁的需求增長以及高端和主流的定價改善。對於高端，美國和亞洲的需求增加，特別是 22 納米和更小的節點，因為需求依然強勁，我們看到 EUV 應用的回升。

Mainstream demand also continued strong, driven by applications across the industry. The ubiquitousness and continued proliferation of the use of semiconductors in everything we use is widely discussed in the industry, and our customers continue to innovate and bring new products to market, resulting in new design starts in driving the increase in mask demand. Our investments in capacity across the organization expand our operations to supply more masks that enable product development initiatives.

在整個行業的應用程序的推動下，主流需求也持續強勁。半導體在我們使用的所有事物中無處不在且持續擴散在業界得到廣泛討論，我們的客戶不斷創新並將新產品推向市場，從而導致新設計開始推動掩模需求的增長。我們對整個組織的產能投資擴大了我們的運營，以提供更多的口罩，從而實現產品開發計劃。

There are also selective opportunities for pricing action across our IC business to help capture the value that we deliver to our customers.

我們的 IC 業務也有選擇性定價行動的機會，以幫助獲取我們為客戶提供的價值。

FPD Revenue of $59 million increased 11% year-over-year, driven by strong high-end demand during the quarter, as both AMOLED for mobile displays and G10.5+ for ultra-large screen TV were up strong double-digit percentages compared with both last quarter and last year. Although demand was robust in both high-end and mainstream FPD, the dedication of production capacity to the higher-margin products resulted in decreased mainstream FPD revenue.

FPD 收入為 5900 萬美元，同比增長 11%，受本季度高端需求強勁的推動，用於移動顯示器的 AMOLED 和用於超大屏幕電視的 G10.5+ 均實現了兩位數的強勁增長上一季度和去年。儘管高端和主流 FPD 的需求強勁，但將產能用於利潤率較高的產品導致主流 FPD 收入下降。

Revenue from products shipped to China continued its strong growth trend. Our investments and work to build our business there have paid off, and we expect to remain the market leader.

運往中國的產品收入繼續保持強勁增長趨勢。我們在那裡建立業務的投資和努力已經得到回報，我們希望繼續保持市場領先地位。

Gross and operating margins continued to improve during the third quarter and benefited from improved pricing, operating leverage from higher volumes and continued cost discipline. Gross margin of 38.1% and operating margin of 29%, both 25-year records, improved sequentially 380 basis points and 480 basis points, respectively, and are both entering into the bottom end of the ranges in our long-term target model. Based on our outlook and the continued focus on cost reductions, we expect to continue to deliver sequential margin improvements as our revenue moves into the targeted ranges.

第三季度毛利率和營業利潤率繼續提高，並受益於定價改善、銷量增加帶來的經營槓桿和持續的成本紀律。毛利率為 38.1% 和營業利潤率為 29%，均為 25 年的記錄，環比分別提高了 380 個基點和 480 個基點，並且都進入了我們長期目標模型的範圍的底部。根據我們的展望和對降低成本的持續關注，隨著我們的收入進入目標範圍，我們預計將繼續實現利潤率的連續提高。

Operating expenses were well controlled during the quarter, and we were below -- were well below the implied target in our long-term model of 10% of revenue. We expect this metric to trend toward our long-term target model as we invest in resources to support growth and continue to qualify more products.

本季度的運營費用得到了很好的控制，我們低於 - 遠低於我們長期模型中的隱含目標，即收入的 10%。隨著我們投資資源以支持增長並繼續使更多產品合格，我們預計該指標將趨向於我們的長期目標模型。

Income tax provision increased on increased earnings, and net income to noncontrolling interest increased with the strong performance of our Taiwan and China JVs. The totality of the operating results, together with an unrealized gain on foreign exchange, resulted in diluted earnings per share of $0.51.

所得稅撥備因收益增加而增加，非控股權益的淨收入隨著我們台灣和中國合資企業的強勁表現而增加。全部經營業績，加上未實現的外匯收益，攤薄後每股收益為 0.51 美元。

We generated $93 million in cash flow from operations during the quarter due to strong earnings, good management of working capital and VAT refunds we received in China, which we used to further reduce long-term debt. Since the beginning of the fiscal year, we have reduced long-term debt by $54 million. We ended the quarter with $324 million in net cash, maintaining our ability to invest in growth opportunities and providing the wherewithal to weather potential economic troughs.

由於強勁的收益、良好的營運資金管理和我們在中國收到的增值稅退稅，我們在本季度從運營中產生了 9300 萬美元的現金流，我們用這些資金進一步減少了長期債務。自本財年開始以來，我們已將長期債務減少了 5400 萬美元。我們以 3.24 億美元的淨現金結束本季度，保持了我們投資增長機會的能力，並提供了應對潛在經濟低谷的資金。

CapEx for the quarter was $12 million, bringing year-to-date CapEx to $45 million, net of government subsidies. We still project a spend of $100 million this fiscal year, although some of the remaining spend could lapse into next fiscal year. While it is too early to provide precise CapEx guidance for fiscal 2023, early indicators point to continued expansion of demand and an abundance of investment opportunities, especially in IC, that will likely cause CapEx next year to increase.

本季度的資本支出為 1200 萬美元，扣除政府補貼後，年初至今的資本支出為 4500 萬美元。我們仍然預計本財年的支出為 1 億美元，儘管剩餘的部分支出可能會延續到下一個財年。雖然現在為 2023 財年提供準確的資本支出指導還為時過早，但早期指標表明需求持續擴大和大量投資機會，尤其是在 IC 領域，這可能會導致明年資本支出增加。

Before I provide guidance, I'll remind you that our visibility is always limited, as our backlog is typically 1 to 3 weeks and demand for some of our products is inherently uneven and difficult to predict. Additionally, the ASPs for high-end mask sets are high. And as this segment of the business grows, a relatively low number of high-end orders can have a significant impact on our quarterly revenue and earnings. Given those caveats, we expect fourth quarter revenue to be in the range of $205 million to $215 million, driven by a continuation of favorable end-market demand trends across both IC and FPD.

在我提供指導之前，我會提醒您，我們的知名度總是有限的，因為我們的積壓訂單通常為 1 到 3 週，而且對我們某些產品的需求本質上是不平衡的，並且難以預測。此外，高端掩模組的 ASP 也很高。隨著這部分業務的增長，相對較少的高端訂單可能會對我們的季度收入和收益產生重大影響。鑑於這些警告，我們預計第四季度的收入將在 2.05 億美元至 2.15 億美元之間，這得益於 IC 和 FPD 的終端市場需求趨勢持續良好。

At the midpoint, this represents an increase of 16% over last year's Q4 revenue and for the full fiscal year 2022, an increase of 24% over full year fiscal 2021 revenue, in line with our expectations, somewhat tempered by economic uncertainty, the effects of foreign currency and typical Q4 seasonality.

在中點，這比去年第四季度的收入增長了 16%，在 2022 財年全年，比 2021 財年的收入增長了 24%，符合我們的預期，在一定程度上受到經濟不確定性的影響，影響外幣和典型的第四季度季節性。

Based on those revenue expectations and our current operating model, we estimate adjusted earnings per share for the fourth quarter to be in the range of $0.44 to $0.52 per diluted share, at the midpoint, a 45% increase over last year's Q4 EPS and for the full year, more than double the full year fiscal '21 earnings per share of $0.89.

基於這些收入預期和我們目前的運營模式，我們估計第四季度調整後每股收益在每股攤薄收益 0.44 美元至 0.52 美元之間，中點比去年第四季度每股收益增長 45%，全年，是 21 財年全年每股收益 0.89 美元的兩倍多。

Our outstanding performance through the first 9 months of fiscal 2022 is on pace to deliver another record year in revenue with expanding margins, strong cash flow and a solid balance sheet to support our growth strategy. We are making palpable, steady progress toward achieving our long-term target model that we believe will ultimately lead to greater value creation for our shareholders.

我們在 2022 財年前 9 個月的出色表現有望再創歷史新高，利潤率不斷擴大，現金流強勁，資產負債表穩健，以支持我們的增長戰略。我們在實現我們的長期目標模型方面取得了明顯而穩定的進展，我們相信這最終將為我們的股東帶來更大的價值創造。

I will now turn the call over to the operator for your questions.

我現在將把電話轉給接線員詢問您的問題。

(Operator Instructions) Our first question will come from Hans Chung of D.A. Davidson.

（操作員說明）我們的第一個問題將來自 D.A. 的 Hans Chung。戴維森。

This is Linda on behalf of Hans Chung. First of all, congratulations on a great quarter. So I guess my first question, in terms of the moving pieces in the demand environment as well as supply constraints, I was wondering, from your perspective, if you saw any supply chain issues in the quarter? And how much the constraints are limiting you in terms of potential revenue or output? And if any of the constraints are embedded in your outlook? And then I have a follow-up.

我是代表 Hans Chung 的 Linda。首先，祝賀一個偉大的季度。所以我想我的第一個問題，就需求環境中的變化以及供應限製而言，我想知道，從您的角度來看，您是否在本季度看到了任何供應鏈問題？以及在潛在收入或產出方面限制了你多少？如果您的前景中有任何限制因素？然後我有一個跟進。

The supply chain impact on our output actually is very minimal. We do see some small shortage in FPD brand supply, but we are able to deliver, develop second and third source. So to answer your question, this is not a factor on our Q4 output.

供應鏈對我們產出的影響實際上非常小。我們確實看到 FPD 品牌供應存在少量短缺，但我們能夠交付、開發第二和第三來源。因此，要回答您的問題，這不是我們第四季度產出的一個因素。

That's helpful. And I guess as my follow-up, in terms of the demand side of things, you noted strong demand in the quarter. But with concerns of potential slowdown in the coming year in different end markets, are you seeing any order pushouts or any actual cancellations? And then as you think about 2023, obviously, a lot of changes in the end markets, I'm curious how you're thinking about net effect into 2023? And whether we could see any growth or declines? And here, I'm wondering what you think.

這很有幫助。我想作為我的後續行動，就需求方面而言，您注意到本季度的強勁需求。但由於擔心不同終端市場來年可能放緩，您是否看到任何訂單推出或任何實際取消？然後，當您考慮 2023 年時，顯然終端市場發生了很多變化，我很好奇您如何看待 2023 年的淨效應？我們是否可以看到任何增長或下降？在這裡，我想知道你的想法。

At this moment, the mainstream product, we don't see any slowdown in customer type activities. However, we do see a little bit push out in the high-end mask tape-out and not necessarily in all customers, but we do see some slowdown in the customer tape-out.

目前，作為主流產品，我們沒有看到客戶類型活動的任何放緩。然而，我們確實看到高端掩膜流片有一點點推出，不一定是所有客戶，但我們確實看到客戶流片有所放緩。

For 2023, actually, as John mentioned, our business model, our backlog normally is 3 to 4 weeks. So at this moment, we...

實際上，正如約翰所說，對於 2023 年，我們的商業模式，我們的積壓工作通常是 3 到 4 週。所以此時此刻，我們...

So Linda, we had -- at the beginning of the fourth quarter, we saw a little bit of push out from some of our major customers. But from our discussions with them, that demand is going to be coming back. When we put our long-term model together, the 2024 model, as we've discussed, we anticipate that there's going to be a pullback sometime during the cycle. We're 3 years into a pretty good cycle now. And we all know that -- and notwithstanding some people's contention that it's different now, it never has been different. So we expect a pullback sometime during our forecast period. And our growth anticipation through 2024 has been muted to factor a slowdown in the industry. Whether that slowdown is occurring now or not, we don't know. We expect our demand to pick back up during the quarter. And we haven't put our budget for 2023 together yet. So actually, we're about to do that next week. We'll have a better feel for what we expect for 2023.

所以琳達，我們有 - 在第四季度初，我們看到我們的一些主要客戶有點推出。但從我們與他們的討論來看，這種需求將會回來。正如我們所討論的，當我們將我們的長期模型（2024 年模型）放在一起時，我們預計在這個週期的某個時候會出現回調。我們現在進入了一個非常好的周期 3 年。我們都知道——儘管有些人認為現在不同了，但從未有過不同。因此，我們預計在預測期內的某個時候會出現回調。我們對到 2024 年的增長預期已經減弱，因為該行業放緩。這種放緩現在是否正在發生，我們不知道。我們預計我們的需求將在本季度回升。而且我們還沒有把 2023 年的預算放在一起。所以實際上，我們將在下週這樣做。我們將對 2023 年的預期有更好的感覺。

As you know, from the past, we do well to forecast 1 quarter at a time, and we never give guidance for the full year or for the following year. So the best we can do at this point is our guidance for Q4 with the knowledge that we have now.

如您所知，從過去開始，我們最好一次預測一個季度，我們從不提供全年或下一年的指導。因此，在這一點上，我們能做的最好的事情就是根據我們現在所掌握的知識對第四季度進行指導。

And this is Chris. I can make one additional comment. There's still a lot of capacity constraints in the global photomask industry, which will not be easily solved over the next year or 2 years. So even if demand pulls back a little bit, utilization should remain quite high in commercial photomask.

這是克里斯。我可以再發表一點評論。全球光掩模行業仍有很多產能限制，未來一年或兩年內不會輕易解決。因此，即使需求略有回落，商業光掩模的利用率應該仍然很高。

The other dynamic that often happens is as fab utilization goes down in the wafer fabs, you tend to see design activity pick up because they're working harder to try to refill that capacity. So it can be a little bit countercyclical if the downturn is not severe where design activity improves while fab utilization goes down. So these may give us buffers as well to not see the same kind of impact that some of the chip makers will see.

另一個經常發生的動態是隨著晶圓廠的晶圓廠利用率下降，您往往會看到設計活動有所增加，因為他們正在更加努力地試圖重新填補該產能。因此，如果經濟衰退並不嚴重，設計活動有所改善而晶圓廠利用率下降，這可能有點反週期。因此，這些也可能給我們提供緩衝，讓我們看不到某些芯片製造商會看到的那種影響。

I appreciate the color. And then as my last question, a bit above the pricing dynamics. Could you talk a little bit more about pricing changes in the quarter? And of course, we saw a good strong quarter-over-quarter growth in mainstream and advanced automask revenues. Can you maybe break down how much of the growth was coming from the pricing versus volume, which seems to be having a significant effect on revenue and gross margins?

我很欣賞這種顏色。然後作為我的最後一個問題，略高於定價動態。你能多談談本季度的定價變化嗎？當然，我們看到主流和先進的汽車口罩收入環比強勁增長。您能否分解一下定價與數量的增長有多少，這似乎對收入和毛利率產生了重大影響？

Yes, thank you for that, Linda. It's difficult to fix and quantify, but the effect is significant. We've seen an improvement in the pricing environment for our high-end business in Asia. So we've been able to take advantage of that. And as you know, we've had a very supportive pricing environment in Asia since our second quarter of last year.

是的，謝謝你，琳達。很難修復和量化，但效果顯著。我們看到我們在亞洲的高端業務的定價環境有所改善。所以我們已經能夠利用這一點。如您所知，自去年第二季度以來，我們在亞洲的定價環境非常有利。

We had -- we used to approach customers to try to put long-term purchase agreements in place, and that helped us support our revenue predictions for our investments in China. Over time, since then, it's now more symbiotic, and the customers are coming to us for long-term agreements as much as we're going to them because they want to ensure their capacity going forward to get the masks that they need.

我們曾經——我們曾經與客戶接觸，試圖簽訂長期採購協議，這有助於我們支持我們在中國投資的收入預測。隨著時間的推移，從那時起，它現在變得更加共生，客戶來找我們簽訂長期協議的次數和我們去找他們的次數一樣多，因為他們希望確保他們有能力獲得他們需要的口罩。

So as a result, the number of long-term purchase agreements we have in place continues to increase. Many of those rolled over in March and April, March 15 and April 1. And we got the benefit of those price increases in third quarter. I think if we just look at the differences in gross margin over the time period since the pricing environment started to improve, we can come up with a rough estimation on our own of what that pricing effect has been. We can't really put a fixed number on it.

因此，我們簽訂的長期採購協議的數量不斷增加。其中許多是在 3 月和 4 月、3 月 15 日和 4 月 1 日發生的。我們從第三季度的價格上漲中受益。我認為，如果我們只看自定價環境開始改善以來的一段時間內毛利率的差異，我們就可以對定價效應做出粗略的估計。我們真的不能給它一個固定的數字。

And our next question will come from the line of Patrick Ho of Stifel.

我們的下一個問題將來自 Stifel 的 Patrick Ho。

Congrats on a nice quarter. Maybe first off, as a follow-up to the comments you made about the high-end market and seeing some pushouts, are you able to discern if they're in marketplaces that are currently weak today? So what I'm getting at is, are they in markets like PCs, low-end smartphones, consumer electronics, where we've seen tangible reductions in overall orders across the semiconductor chain? Or are you seeing them in other markets that haven't been as for weak?

祝賀一個不錯的季度。也許首先，作為您對高端市場的評論的後續行動並看到一些推銷，您是否能夠辨別它們是否處於目前疲軟的市場中？所以我想說的是，它們是否在個人電腦、低端智能手機、消費電子產品等市場中，我們已經看到整個半導體鏈的整體訂單明顯減少？或者您是否在其他不那麼疲軟的市場中看到了它們？

I think from customer to customer, the situation may be different. But one thing we see, one of the main factors is the inventory build-up in end user, especially the IC design house. So before the cleanout of the inventory, some customers are reluctant to make a new product. So according to our input and interface with customers, the high-end tape-out activity should start to recover perhaps by the end of September or in October. So we believe there's a pushout due to inventory -- high inventory and -- but the design activity should continue.

我認為從客戶到客戶，情況可能會有所不同。但我們看到的一件事，主要因素之一是最終用戶的庫存積累，尤其是 IC 設計公司。所以在清理庫存之前，一些客戶不願意做新產品。因此，根據我們的輸入和與客戶的溝通，高端流片活動可能會在 9 月底或 10 月開始恢復。因此，我們認為由於庫存 - 高庫存和 - 但設計活動應該繼續進行。

And as Chris mentioned, because the wafer fab utilization is a little bit down, and that allows customers to have the room to tape-out pilot activity. So we hope and we believe this is a short-term effect.

正如克里斯所提到的，因為晶圓廠的利用率有點下降，這讓客戶有空間進行試點活動。所以我們希望並且我們相信這是一個短期的影響。

Great. That's helpful. And maybe my follow-up question for you, John, in terms of CapEx. Obviously, customer demand is quite high, both particularly in the mainstream IC business. Is there any nuances or differences in the type of CapEx you need to acquire for either the high end versus, say, mainstream? And does that affect the overall CapEx dollars? Or are they kind of fungible, the type of equipments you buy?

偉大的。這很有幫助。約翰，也許我的後續問題是關於資本支出。顯然，客戶的需求是相當高的，尤其是在主流IC業務中。無論是高端還是主流，您需要獲得的資本支出類型是否有任何細微差別或差異？這會影響整體資本支出嗎？或者它們是可替代的，你購買的設備類型？

They're hardly fundable, Patrick. Thanks for that question. During my comments, I mentioned that our CapEx for next year will increase. And as I also mentioned, we're having our planning meeting next week when we're going to determine just what that increase is going to be. As you've observed over the past several years, we've been doing very well with our investments. The criteria that we use to make sure that our investments are going to produce improvements in ROIC have been effective in making sure that we do exactly that. And we've seen the result of that scrutiny over CapEx, and we've seen the improvement in ROIC.

他們很難得到資助，帕特里克。謝謝你的問題。在我的評論中，我提到我們明年的資本支出將會增加。正如我還提到的，我們將在下週舉行計劃會議，屆時我們將確定增加的幅度。正如您在過去幾年中所觀察到的那樣，我們的投資一直做得很好。我們用來確保我們的投資將產生投資回報率改進的標準已經有效地確保我們做到這一點。我們已經看到了對資本支出進行審查的結果，我們也看到了投資回報率的改善。

We've already -- as we mentioned in prior calls, the CapEx for this year was primarily for mainstream and also deposits on high-end tools for IC for next year. And there are going to be a lot of tools delivered next year. We've expanded a couple of facilities, and we've got high-end lithography tools, inspection tools, et cetera, to really expand our high-end capabilities, especially in Asia. We did that in the U.S. last year, and we're going to do it in Asia next year.

我們已經 - 正如我們在之前的電話會議中提到的那樣，今年的資本支出主要用於主流，並為明年的 IC 高端工具存款。明年將會有很多工具交付。我們擴大了一些設施，我們擁有高端光刻工具、檢測工具等，以真正擴大我們的高端能力，尤其是在亞洲。我們去年在美國做到了這一點，明年我們將在亞洲做到這一點。

To the extent that they're available, we're also buying point tools for mainstream as we've discussed previously. So as specific as I can be, we're buying almost full lines, if you put everything together, to expand our capabilities in high end IC. They aren't full lines. But if we took the tools that we're putting in each of the lines and put them together, we'd wind up with real expansion in our high-end capacity.

在它們可用的範圍內，我們還為主流購買點工具，正如我們之前討論的那樣。因此，盡我所能，我們將購買幾乎完整的產品線，如果你把所有東西放在一起，以擴大我們在高端 IC 方面的能力。它們不是完整的線條。但是，如果我們採用我們在每條生產線上安裝的工具並將它們放在一起，我們最終將真正擴大我們的高端產能。

Patrick, this is Frank. Actually, in Taiwan, we are building a fab expansion, and the facility will be ready by the end of this year. And we -- after the clean room is ready, we do have several writer and inspection tour move in next year, including the high-end and also the middle-end tools. So we do have some CapEx in 2023 to meet our customer demands.

帕特里克，這是弗蘭克。實際上，在台灣，我們正在建設一個晶圓廠擴建，該設施將在今年年底前準備就緒。而且我們——在潔淨室準備好之後，明年我們確實有幾個作家和考察團搬家，包括高端工具和中端工具。因此，我們在 2023 年確實有一些資本支出來滿足我們的客戶需求。

And the only other thing I'd add, Patrick, is we can run mainstream products on high-end tools. I mean the capabilities are there. It just doesn't make sense economically for cost reasons. So we really look very, very hard at price on mid-range tools and productivity. We also look at that at high-end tools, but capability tends to be the overriding decision factor and how we look at CapEx. So the high-end tools and cost of ownership, ROI, those sorts of things get a lot more scrutiny for midrange mainstream tools. So the capacity is a little bit fungible, but if we need to, we can run lower-end products on higher-end equipment, but it isn't really the right way to operate the fab.

帕特里克，我唯一要補充的另一件事是，我們可以在高端工具上運行主流產品。我的意思是能力是存在的。出於成本原因，這在經濟上沒有意義。所以我們真的非常非常看重中檔工具和生產力的價格。我們也關注高端工具，但能力往往是最重要的決策因素，也是我們看待資本支出的方式。因此，高端工具和擁有成本、投資回報率，這些東西在中端主流工具中得到了更多的審查。所以產能有點可替代，但如果需要，我們可以在高端設備上運行低端產品，但這並不是運營工廠的正確方式。

(Operator Instructions) Our next question will come from the line of Gus Richard of Northland Capital Markets.

（操作員說明）我們的下一個問題將來自 Northland Capital Markets 的 Gus Richard。

Just real quick on the slowdown in tape-outs. Is there any regional impact on that? Is it China or Asia in general or just across the board?

在流片放緩的情況下真的很快。對此有任何地區影響嗎？是中國還是亞洲，還是全盤？

Actually, China, we don't see any slowdown, a little bit slowdown in other regions. China activity remain very strong. So thus, while our China operation still run at overcapacity. So the slowdown is in our region. And as I mentioned, we do see some coming back recovery happen.

實際上，中國，我們沒有看到任何放緩，其他地區略有放緩。中國的活動仍然非常強勁。因此，雖然我們的中國業務仍然產能過剩。所以放緩是在我們地區。正如我所提到的，我們確實看到了一些復甦的發生。

Okay. And then as I recall over the last few decades, is Q4 -- your Q4 are seasonally down quarter? Or is it typically up?

好的。然後我記得在過去的幾十年裡，第四季度——你的第四季度是季節性下降的季度嗎？或者它通常是向上的？

So Gus, if we didn't have incremental revenue coming on from CapEx additions during the year, Q4 typically would be lower seasonally than Q3. But for the last several years, starting with the big investments in China, Q4 has benefited from the incremental revenue from CapEx during the year. So it's been stronger.

因此，Gus，如果我們在這一年沒有從資本支出增加中獲得增量收入，那麼第四季度通常會低於第三季度。但在過去幾年中，從在中國的大筆投資開始，第四季度受益於當年資本支出的增量收入。所以變強了。

In this case, we don't have as much incremental revenue coming on. And we also have the dampening effect from foreign exchange in a couple of the locations where they record revenues in the local currency, and then they have to translate them into dollars. So we know the dollar is strong, so that's giving rise to some muted translation in muted-translated revenues.

在這種情況下，我們沒有那麼多的增量收入。我們還受到外彙的抑製作用，在他們以當地貨幣記錄收入的幾個地方，他們必須將其轉換成美元。所以我們知道美元很強勢，所以這導致了一些隱含轉換收入的隱含轉換。

Got it. And then the last one for me. When I look at your FPD revenue, it was flat sequentially. It's had nice growth over the last few years. I'm just wondering, are you at a point where you're fully utilized and there's not much upside in that part of your business until more capacity comes on? And if so, when would you expect that incremental supply to come on?

知道了。然後是我的最後一個。當我查看您的 FPD 收入時，它按順序持平。在過去的幾年裡，它有很好的增長。我只是想知道，您是否處於充分利用的階段，並且在更多容量出現之前，您的這部分業務沒有太大的上升空間？如果是這樣，您預計何時會出現增量供應？

In FPD, we are focusing more on the higher profit product, and our booking is over the capacity. But at this moment, we finished our first major capacity, especially in (inaudible) last year. So at this moment, we focus on making profit, and we kind of cherry-picking our orders for the time being, before we make a next decision for our next wafer of investment.

在 FPD 中，我們更關注利潤更高的產品，我們的預訂量已經超過了產能。但此時，我們完成了我們的第一個主要產能，尤其是在去年（聽不清）。所以此刻，我們專注於盈利，在我們為下一個投資做出下一個決定之前，我們會暫時挑選我們的訂單。

Thank you. And I see no further questions in the queue. I would now like to turn the conference back over to Frank Lee for closing remarks.

謝謝你。我在隊列中看不到其他問題。我現在想把會議轉回給 Frank Lee 做閉幕詞。

Thank you. Thank you for joining the meeting this morning. We performed well in the third quarter, and we are on the way to delivering another record year. End market is strong, end-market demand remains strong across the business. And our entire team is working hard to serve our customer. I'm proud of our achievement this year, and we look forward to continued success in the future. Thank you.

謝謝你。感謝您參加今天上午的會議。我們在第三季度表現良好，我們正朝著另一個創紀錄的年份邁進。終端市場強勁，整個業務的終端市場需求依然強勁。我們的整個團隊都在努力為我們的客戶服務。我為我們今年的成就感到自豪，我們期待在未來繼續取得成功。謝謝你。

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a pleasant day.

女士們，先生們，今天的電話會議到此結束。我們感謝您的參與，並要求您斷開線路。度過愉快的一天。