Chroma Ate Aktie

Welcome, everyone, to Chroma's 2026 Second Quarter Earnings Conference Call. [Operator Instructions] And for your information, a webcast replay will be available within an hour after the conference is finished. Please visit www.chroma.com.tw/investor/index under the Investor Relations section.

Now I would like to hand it over to Chroma's management. Please go ahead.

Okay. Good afternoon, everyone. Welcome to Chroma's Second Quarter 2026 Earnings Conference. This is Jennifer, and I will be your host for today's section. As we held an on-site conference before this call, so today's sections will primarily focus on Q&A.

I will begin with the remarks from our former CFO, Paul Ying, and followed by the presentation of the second quarter financial results by our new CFO, Lawrence Wu. After the financial update, I will provide an overview of this quarter's product mix, followed by the question-and-answer section. All presentation materials are available for download from the company website.

And with that, I will now turn the call over to our CFO, Paul Ying.

Thank you, Jennifer, and all the -- my old friends from the investor sectors. And well, time flies. Today will be my last time to step in here to talk with you. And starting from tomorrow, I will be retiring from Chroma. And thank you for all your support and all your consideration and attention to Chroma. And please keep on. And with very amazing and record-breaking records for the second quarter of 2026.

Let me introduce our new CFO, Lawrence, to present to you. Thank you.

Hi, everyone. Good afternoon. My name is Lawrence. I'll been in charge this new CFO of Chroma, which is a pretty big challenge. So yes, let's brief the second quarter results for everybody.

First, second quarter consolidated revenue reached TWD 13.53 billion, up to 40% quarter-over-quarter and 110% year-over-year, making another record high quarter. Gross profit was TWD 8.19 billion with a gross margin of 61% compared with 63% in the first quarter, the decline was mainly due to the short-term higher cost of key components, including DRAM, passive components and ICs. We remain focused on maintaining a stable margin profile and might be considering a price adjustment if necessary.

Operating income was TWD 5.24 billion with operating margin of 39%, representing a 139% growth year-over-year. Nonoperating income totaled TWD 1.27 billion, driven by gains from the disposal of ADLINK shares and employee housing assets. Net income to shareholders reached TWD 5.12 billion, up to 162% year-over-year, while EPS was TWD 12.15, both record highs.

Secondly, the first half of the 2026 performance. For the first half of 2026, consolidated revenue was TWD 25.39 billion, up to 91% over -- year-over-year, which represents almost doubling growth. The gross profit was totaled TWD 15.61 billion, with a gross margin of 61%. Operating income was TWD 10 billion, which represents tremendous 130% year-over-year growth. Net income to shareholders reached TWD 8 billion -- almost TWD 9 billion, up to 120% and EPS was TWD 21.27. Overall, earnings continues to grow faster than revenue, reflecting strong operating leverage and improved efficiency.

Lastly, the financial position and cash flow. As of June 30, 2026, Chroma maintained a solid financial position. Cash and short-term investments totaled TWD 13.68 billion, up to 65% from year end 2025, while shareholders' equity reached TWD 33.71 billion. The company remains in a net cash position.

Okay. Inventory was TWD 11.58 billion, reflecting preparation for future demand. Inventory turnover days improved from 224 days to 177 days, indicating better inventory efficiency. Annualized ROE reached 54% and ROA reached 32%. Operating cash flow for the first half was TWD 5.35 billion with the major construction of our second manufacturing facility completed. Capital expense are expected to moderate. As a result, free cash flow reached TWD 3.29 billion, up to 86% year-over-year. That's basically the financial performance of our second quarter and the first half of 2026.

And I will turn over to Jennifer.

Okay. Thank you. Please refer to Slide 9 for details on our product mix for the second quarter. For the second quarter, the biggest driver of the growth still comes from the Testing Instruments and ATS section. which saw a remarkable increase of 14% quarter-over-quarter and 129% year-over-year. This surge was mainly contributed from AI server powered applications.

Currently, the AI server powered application has account for over, I would say, 60% of this power business. The Test Instruments and ATS sales revenue for the first half already exceeds total revenue in 2025. In addition to AI power -- server powers, the battery sales project is ready to ship out from the third quarter.

For semiconductor sectors, which has achieved revenue of TWD 4.4 billion in the second quarter, representing 29% growth over quarter-over-quarter and double year-over-year. We do see the growth momentum from semiconductor sections increased. The major growth driver were coming from system-level tester and photonics ran by the sales revenue contribution. The semiconductor and photonics will be the main contributions in the second half. We believe it will outperform in the first half.

The driver are system-level tester from the AI, HPC and ASIC and photonics is mainly contributed from the optics -- sorry, optical communication and CPO. As of today, we already received the PO for the insertion 3 and insertion 4.0, which start to contribute from the second half of this year.

And now we move on to Q&A section.

[Operator Instructions] Our first question will be coming from Alex Wang, Bernstein.

Congrats on your new role, Lawrence. I have questions about different segments. First of all, can you talk a little bit about your shipment progress for HVDC-related power testers?

So this will be the first question, right?

Yes.

Actually, as you may read from our first half results, we deliver this AI power, I would say, almost every month. So we see like maybe, I would say, every month, the shipment is pretty much the same based on the sales revenue.

I see. But I guess the testers for HVDC power rack could be different versus the testers for all these power components like PSU you shipped over the past few months.

But there's no difference between 400 volt and 800 volt.

Right. So do you mean that you already started mass shipment for both 400-volt and 800-volt HVDC power testers?

Yes, you could say that right from the day 1. But you just need to consider conversion doesn't mean the shipment. We could ship to our customers how they conversion that you need to ask our customers.

Sure, sure. And is there a trend like you see the orders of this HVDC power tester become stronger month by month? Or yes, because recently, there's a rumor saying there's a delay of the HVDC power rack.

Delta just hold their call, they said the production will start, but in small volume. I'm just wondering on the tester side, in which quarter would you see like large volume pickup for your testers?

But the issue is every quarter is pretty much the same. It's not very much like a turning up or trending down. Yes.

I see. I see. How about the order momentum? I'm now talking about your shipment of the order.

But they already blocked out for the whole year.

I see. Okay. But is there -- like they give you order for full year and do they adjust every quarter?

They didn't adjust. They just keep pushing us to speed up the delivery. We have not seen -- I really don't understand how you -- how this related to how fast converting to their product shipment. But we actually deliver to our customers almost every month. So since the pattern is pretty much the same. I really couldn't highlight, okay, which quarter is strong, which quarter is low.

I see. And I think in the second half last year, when we talk about your ATS, your power tester, you mentioned that you are quite -- that there is some capacity constraints like you can't fulfill the order. How about the situation now?

But beginning of this year, our Phase 2 already ready. So it's start ramping up. Last year, our Phase 2 was not ready.

I see. I see. Got it. And second question is about your ESS testers. I know this kind of projects tend to bring the lumpiness to your call it revenue. I understand in second quarter, there's 1 or 2 months that includes the ESS battery revenue. How about the rest of the year?

May not be similar pattern as the last time. This is because we do see the battery cell demand continue to increase. So it's very hard for me to give you this kind of a guidance saying it will be certain located at which month, but you will see very soon.

Do you mean you got a new order or it's the same order?

Well, I say increase, that mean demand continue to increase. So the order is piling up. So it's more than we guide in the beginning of the year.

I see. And the last question is about the SEMI testers. In your pre remarks, you said the semi momentum increase, including SLT and photonics. When you say momentum increase, do you mean versus 3 months ago comparing to your initial expectation, it grow or you just -- you mean quarter-over-quarter its growth?

Okay. You may -- just you can detail -- I'm sure you will build out the model of Chroma. And then you definitely will notice that the growth rate -- I mean, semiconductor growth rate in the first quarter versus second quarter, actually second quarter, this kind of growth rate has increased. And we believe momentum continue to increase in the second half. So we even give you a guidance that the second half will be better -- outperform the first half. This is very clear guidance based on equipment vendor.

[Operator Instructions] Next one. Alex Wang, Bernstein.

Sorry, just one more follow-up question about the CPO. Just want to get some update versus 3 months ago. You said you have PO for insertion 3 and insertion 4. Any difference versus 3 months ago?

3 months ago. Let me think about 3 months ago. We do see the order size is bigger.

The order size is for this year or it's like rolling 12 months?

No, this year. Because CPO is very complicated in testing. I can tell you so far, customers only placed order up to 4, not yet really rolling up to after 4. So I would say CPO is very, very challenging technology. And we do see because due to its complexity and then the units do revise up.

Okay. I see. Because over the past 2 months, there's also concerns on the market about the ramp-up of CPO. I know the key bottleneck is -- one of that is on the testing side, and there's a lot of challenges in the manufacturing. So you are saying that because of these difficulties, customers actually increased the order on your side?

Yes. we already received a PO. So PO is, I would say, the best reference to prove this is actually an ongoing project.

And do you see other competitors in insertion 3 and insertion 4?

Insertion 4.0 is 100% initiated by Chroma. So there is no competitor. But insertion 3, we already mentioned before we joined, there is actually existing peers.

I see. Okay. So you're competing with existing peers?

Yes. I don't think we compete. We actually have a better performance.

I see. And the PO is currently from a single customer or you have other customers under engagement?

Currently, if you talk about CPO, we do have NV and Marvell. But Marvell is not year-end, I think.

Okay. Okay. Cool. Understood. And maybe...

They are actually adopting different technology and design is different.

Okay. And you are also involved in design for their testers?

What do you mean by design a tester? We actually designed the tester. It's 100% our own technology.

Okay. Okay. I see. And maybe last question is about your FTE handler for AI chips. I think you showed the product in the beginning of this year. What's the progress on that tester?

Doing so well. This is the first time we don't need to do debug. So I'm sure next customer will adopt. Yes.

Next one, Josie Yu, JPMorgan.

So I'm very glad to hear that semiconductor segment is going to see very strong momentum in the second half. But just want to shift the gear a bit to ATS. Do you also expect this kind of growth momentum? Is it fair for us to also kind of expect this segment to grow half-over-half in the second half?

You -- are you asking about the mature node? Which part?

I think the AT&S overall segment.

You mean power business?

Yes, yes.

Sorry, we don't provide this kind of guidance. Because we already gave a very clear indication regarding the semiconductors. And I already said that every month, there's not very much difference about the shipment of the power business.

Next one, Jerry Su, UBS.

So on the semi -- mature or legacy or semi testing tools, can you give us some update on this one? Because I think early in the year, I think you are more conservative on this, but it seems like the demand is turning stronger at some of your customers. So I'm just wondering how should we think about your mature testing business going in second half of this year?

We do see the -- initially, our guidance regarding to the legacy FT is flat compared to last year. But we do see the demand increase, especially starting from the second quarter. We guess this is because some of the legacy makers are shifting their business to like a high-end AI application related. And we do see like a newcomer want to take over the traditional legacy parts.

And because since they are a newcomer, so they need to buy new tools. So yes, I do actually see maybe legacy start to increase by maybe 10% or 20%. So we can -- I think it should be not be...

For this year?

Yes. Maybe first quarter slow. For second quarter, actually, no matter compared to first quarter or compared to last year second quarter, it's actually better.

Okay. And then on the final test handler business, understanding that you're doing pretty well. And then just wondering when should we expect this business to see more meaningful revenue contribution?

I'm sure it should be from this year. But if you talk about large ramp, maybe next year, like a trend?

Okay. Okay. Got it. Then lastly, I think on the component cost increase that is a headwind for your gross margin. I think Lawrence earlier mentioned that you're considering to raise the price. Is there a time line that we should think the price hike should become effective? Will this be like second half of this year or it will be like next year?

I will let Lawrence comment on that.

Price increasing. I mean, it's by product actually. But it could be this year very likely, yes, for price adjustment of probably 10%, maybe. Maybe, but it's going to be this year.

Basically, we couldn't pass on the cost for the current immediate price increase, especially we need to prepare the material carry forward. So I think -- but for the next product, of course, we definitely can be reflect.

Yes, especially for the new products.

And Jennifer -- I'm sorry, we still have a next question and Alex Wang, Bernstein.

I want to ask about the testing time for SLT. Now you've mass shipped the SLT for MI450 and for Vera Rubin. I'm wondering if the testing time becomes longer versus before -- like I know when you ship for Blackwell, the testing time actually increased after the mass production. So I'm just wondering if there's a similar pattern here.

Alex, yes, that's why I commented before because MI300 is actually very challenged, very high power density, which is equivalent to power density of 300 watts. So actually, initially, customers target ideally is 4 hours, but now it's running between like 6 to 8 hours. Recently, they actually revised out the orders unit by, I would say, 70%, so almost double.

So we will -- since we already start to ship this MI300, so that is why we know the cycle times increase. So the revising up will start to deliver from the third quarter. And then as you could see, we also got the CSP is coming out in the fourth quarter and for the next year. And then I think recently, we also got the customers' new CPU. So we do see the CPU demand to continue to increase, and we do have exposure to CPU.

Interesting. For -- you said testing time 6 to 8 hours, that's just the SLT or including burn-in?

No, no burn-in, just system-level tester. You need to understand because AMD is chiplet, it's very large panel size.

And when you say CPU, it's referring to both AMD and NVIDIA or just one of them?

We also cover Google CPU. The things I want to emphasize here is we already could do and good at dealing with the CPU.

I see. So I assume the SLT for CPU is kind of relatively new business for Chroma for the next 12 months?

Yes. Of course. Yes.

Then Jennifer, there are currently no questions. Thank you.

Okay.

Yes. Thank you, Jennifer.

Yes. Thank you.

Okay. Then ladies and gentlemen, we thank you for your participation in Chroma's conference. There will be a webcast replay within an hour. Please visit www.chroma.com.tw/investor/index under the Investor Relations section. You may now disconnect. Thank you again. Goodbye.

Welcome, everyone, to Chroma's 2026 Second Quarter Earnings Conference Call. [Operator Instructions] And for your information, a webcast replay will be available within an hour after the conference is finished. Please visit www.chroma.com.tw/investor/index under the Investor Relations section. Now I would like to hand it over to Chroma's management. Please go ahead.

Okay. Good afternoon, everyone. Welcome to Chroma's Second Quarter 2026 Earnings Conference. This is Jennifer, and I will be your host for today's section. As we held an on-site conference before this call, so today's session will primarily focus on Q&A. We will begin with the remarks from our former CFO, Paul Ying, followed by the presentation of the second quarter financial results by our new CFO, Lawrence Wu.

After the financial update, I will provide an overview of this quarter's product mix followed by the question-and-answer session. All presentation materials are available for download from the company website. And with that, I will now turn the call over to our CFO, Paul Ying.

Thank you, Jennifer, and all the -- my old friends from the investor sectors. And well, time flies. Today will be my last time to step in here to talk with you. And starting from tomorrow, I will be retired from Chroma. And thank you for all your support and all your consideration and attention to Chroma. And please keep on. And with very amazing and great record-breaking records for the second quarter of 2026, let me introduce our new CFO, Lawrence, to present to you. Thank you.

Hi, everyone. Good afternoon. My name is Lawrence. I'll be in charging as the new CFO of Chroma, which is a pretty big challenge. So yes, let's brief the second quarter results for everybody. First, second quarter consolidated revenue reached TWD 13.53 billion, up to 14% quarter-over-quarter and 110% year-over-year, making another record high quarter.

Gross profit was TWD 8.19 billion with a gross margin of 61% compared with 63% in the first quarter, the decline was mainly due to the short-term higher cost of key components, including DRAM, passive components and ICs. We remain focused on maintaining a stable margin profile and might be considering a price adjustment if necessary.

Operating income was TWD 5.24 billion with operating margin of 39%, representing a 139% growth year-over-year. Nonoperating income totaled TWD 1.27 billion, driven by gains from the disposal of ADLINK shares and employee housing assets. Net income to shareholders reached TWD 5.12 billion, up to 162% year-over-year, while EPS was TWD 12.15, both record highs.

Secondly, the first half of the 2026 performance. For the first half of 2026, consolidated revenue was TWD 25.39 billion, up to 91% year-over-year, which represents almost doubling growth. The gross profit was totaled TWD 15.61 billion with a gross margin of 61% (sic) [ 62% ]. Operating income was TWD 10 billion, which represents tremendous 130% year-over-year growth. Net income to shareholders reached almost TWD 9 billion, up to 120% and EPS was TWD 21.27. Overall, earnings continues to grow faster than revenue, reflecting strong operating leverage and improved efficiency.

Lastly, the financial position and cash flow. As of June 30, 2026, Chroma maintained a solid financial position. Cash and short-term investments totaled TWD 13.68 billion, up to 65% from year end 2025, while shareholders' equity reached TWD 33.71 billion. The company remained in a net cash position. Inventory was TWD 11.58 billion (sic) [ TWD 11.36 billion ] reflecting preparation for future demand. Inventory turnover days improved from 224 days to 177 days, indicating better inventory efficiency.

Annualized ROE reached 54% and ROA reached 32%. Operating cash flow for the first half was TWD 5.35 billion with the major construction of our second manufacturing facility completed. Capital expense are expected to moderate. As a result, free cash flow reached TWD 3.29 billion (sic) [ TWD 3.24 billion ] up to 86% (sic) [ 48% ] year-over-year. That's basically the financial performance of our second quarter and the first half of 2026, and I will turn over to Jennifer.

Okay. Thank you. Please refer to Slide 9 for details on our product mix for the second quarter. For the second quarter, the biggest driver of the growth still comes from the testing instrument and ATS section, which saw a remarkable increase of 14% quarter-over-quarter and 129% year-over-year. This surge was mainly contributed from AI server-powered applications. Currently, the AI server-powered application has account for over, I would say, 60% of this power business. The test instruments and ATS sales revenue for the first half already exceeds total revenue in 2025. In addition to AI-powered -- server powered, the battery cells project is ready to ship out from the third quarter.

For semiconductor sector, which has achieved revenue of TWD 4.4 billion in the second quarter, representing 29% growth over quarter-over-quarter and double year-over-year. We do see the growth momentum from semiconductor sections is increased. The major growth driver were coming from system-level tester and photonics driven by the sales revenue contribution. The semiconductor and photonics will be the main contribution in the second half.

We believe it will be outperforming the first half. The drivers are system-level tester from the AI, HPC and ASIC and photonics is mainly contributed from the optics -- sorry, optical communication and CPO. As of today, we already received the PO for the insertion 3 and insertion 4, which start to contribute from the second half of this year. And now we could move on to Q&A section.

[Operator Instructions] Our first question will be coming from Alex Wang, Bernstein.

Congrats on the new role of Lawrence. I have questions about different segments. First of all, can you talk a little bit about your shipment progress for HVDC-related power testers?

So this will be the first question, right?

Yes.

Actually, as you may read from our first half results, we deliver this AI power, I would say, almost every month. So we see like maybe, I would say, every month, the shipment is pretty much the same based on the sales revenue.

I see. But I guess the testers for HVDC power rack could be different versus the testers for all these power components like PSU you shipped over the past few months?

So there's no difference between 400-volt and 800-volt.

Right. So do you mean that you already started mass shipments for both 400-volt and 800-volt HVDC power testers?

Yes, you could say that right from the day 1. But you just need to consider conversion doesn't mean the shipment. We could ship to our customers, how they conversion that you need to ask our customers.

Sure, sure. And is there a trend like you see the orders of this HVDC power tester become stronger month by month? Or yes, because recently, there's a rumor saying there's a delay of the HVDC power rack. Delta just hold their call, so they said the production will start, but in small volume. I'm just wondering on the tester side, in which quarter would you see like large volume pickup for your testers?

But the issue is every quarter is pretty much the same. It's not very much like it's trending up or trending down. Yes.

I see. I see. How about the order momentum? I'm not talking about your shipment, but the order?

So they already blocked up the whole year.

I see. Okay. But is there -- like they give you order for full year and do they adjust every quarter?

They didn't adjust. They just keep pushing us to speed up the -- we have not seen -- I really did not understand how you -- how this related to how fast converting to their product shipment. But we actually deliver to all our customers almost every month. So since the pattern is pretty much the same, I really couldn't highlight, okay, which quarter is strong, which quarter is low.

I see. And I think in the second half last year, when we talk about your ATS -- your power tester, you mentioned that you are quite -- that there is some capacity constraints like you can't fulfill the order. How about the situation now?

The beginning of this year, our Phase 2 already ready. So it starts ramping up. But last year, our Phase 2 was not ready.

I see. I see. Got it. And second question is about your ESS testers. I know these kind of projects tend to bring the lumpiness to your core revenue. I understand in second quarter, there's 1 or 2 months that includes the ESS battery revenue. How about the rest of the year?

May not be similar pattern as the last time. This is because we do see the battery cell demand continue to increase. So it's very hard for me to give you this kind of a guidance saying we will be certain located at which month, but you will see very soon.

Do you mean you got a new order or it's the same order?

Well, I say increase, that means demand continue to increase. So the order is piling up. So it's more than we guide in the beginning of the year.

I see. And the last question is about the semi testers. In your prepared remarks, you said the semi momentum increase, including SLT and photonics. When you say momentum increase, do you mean versus 3 months ago compared to your initial expectation, it grows or you just -- you mean quarter-over-quarter it grows?

Okay. You may -- just you can detail -- I'm sure you would build out a model of Chroma. And then you definitely will notice that the growth rate -- I mean semiconductor growth rate in the first quarter versus second quarter, actually second quarter, this kind of growth rate increased. And we will see momentum continue to increase in the second half. So we even give you a guidance that the second half will be better -- outperforming the first half. This is very clear guidance based on equipment to vendor.

[Operator Instructions] Next one Alex Wang, Bernstein.

Sorry, just one more follow-up question about the CPO. Just want to get some update versus 3 months ago. You said you have PO for insertion 3 and insertion 4. Any difference versus 3 months ago?

3 months ago. Let me think about 3 months ago. We do see the order size is bigger.

The order size is for this year or it's like rolling 12 months?

No, this year. Because it is very complicated in testing. I can tell you so far, customers only placed order up to 4.0, not yet really rolling up to after 4.0. So I would say CPO is very, very challenging technology. And we do see because due to its complexity and then the units truly light up.

Okay. I see. Because over the past 2 months, there's also concerns on the market about the ramp-up of CPO. I know the key bottleneck is -- one of that is on the testing side, and there's a lot of challenges in the manufacturing. So you are saying that because of these difficulties, customers actually increased the order on your side?

Yes. We already received the PO. So PO is, I would say, the best reference to prove this is actually an ongoing project.

And do you see other competitors in insertion 3 and insertion 4?

Insertion 4.0 is 100% initiated by Chroma. So there is no competitor. But insertion 3, we already mentioned before we joined, there is actually existing peers.

I see. Okay. So you're competing with the existing peers?

Yes. I don't think we compete. We actually have a better performance.

I see. And the PO is currently from a single customer or you have other customers under engagement?

Currently, if you talk about CPO, we do have NV and Marvell. But Marvell is [ not year-end ], I think.

Okay. Okay. Cool. Understood. And...

They are actually adopting different technology and design is different.

Okay. And you are also involved in design for their testers?

What do you mean by design their tester? We actually designed the tester, it's 100% our own technology.

Okay. Okay. I see. And maybe last question is about your FT handler for AI chips. I think you showed the product in the beginning of this year. What's the progress on that tester?

Doing so well. This is the first time we don't need to do debug. So I'm sure next customer will adopt.

Next one, Josie Yu, JPMorgan.

So I'm very glad to hear that semiconductor segment is going to see very strong momentum in the second half. But just want to shift the gear a bit to ATS. Do you also expect this kind of growth momentum? Is it fair for us to also kind of expect this segment to grow half-over-half in the second half?

Are you asking about the mature node? Which part?

I think the ATS overall segment.

You mean power business?

Yes, yes.

Sorry, we don't provide this kind of guidance. We've given already -- we already gave a very clear indication regarding to semiconductors. And I already said that every month, there's not very much difference about the shipment of the power business.

Next one, Jerry Su, UBS.

So on the mature or legacy semi testing tools, can you give us some update on this one? Because I think early in the year, I think you are more conservative on this, but it seems like the demand is turning stronger at some of your customers. So I'm just wondering how should we think about your mature testing business going in the second half of this year?

We do see the -- initially, our guidance regarding to the legacy FT is flat compared to last year. But we do see the demand increase, especially starting from the second quarter. We guess this is because some of the legacy makers are shifting their business to like high-end AI application related. And we do see like a newcomer want to take over the traditional legacy parts. And because since they are a newcomer, so they need to buy new tools. So yes, I do actually see maybe legacy start to increase by maybe 10% or 20%. So we can -- I think it should be....

For this year?

Yes. Maybe first quarter is slow, but second quarter, actually, no matter compared to first quarter or compared to last year, second quarter, it's actually better.

Okay. And then on the final test handler business, understanding that you're doing pretty well. And then just wondering when -- where should we expect this business to see more meaningful revenue contribution?

I'm sure it should be from this year. But if you talk about large ramp, maybe next year, we'll take a chance.

Okay. Okay. Got it. Then lastly, I think on the component cost increase that it's a headwind for your gross margin. I think Lawrence earlier mentioned that you're considering to raise the price. Is there a time line that we should think the price hike should become effective? Will this be like second half this year or it will be like next year?

I will let Lawrence comment on that.

Price increasing. I mean it's by product actually. But it could be this year very likely, yes, for a price adjustment of 10% maybe. This is maybe, but it's going to be this year.

Basically, we couldn't pass on the cost for the current immediate price increase, especially we need to prepare the material carry forward. So I think -- but for the next product, of course, we definitely can reflect those cost increases...

Yes, especially for the new products.

Yes.

And Jennifer, I'm sorry, we still have a next question from Alex Wang, Bernstein.

I want to ask you about the testing time for SLT. Now you've matched the SLT for MI450 and for Vera Rubin. I'm wondering if the testing time becomes longer versus before -- like I know when you ship for Blackwell, the testing time actually increased after the mass production. So I'm just wondering if there's a similar pattern here.

Alex, yes, that's why I commented before because the MI300 is actually very challenge -- very high power density, which is equivalent to power density of the 300 watts. So actually, initially customers target ideally is 4 hours, but now it's running between like 6 to 8 hours. Recently, they actually revised order units by, I would say, 70%, so almost double. So we will -- since we already start to ship this MI300, so that is why we know the cycle times increase.

So the revising now will start to deliver from the third quarter. And then as you could see, we also got the CSP is coming out in the fourth quarter and close to next year. And then I think recently, we also got the customers' new CPU. So we do see the CPU demand to continue to increase, and we do have exposure to CPU.

Interesting. For -- you said testing time 6 to 8 hours, that's just the SLT or including burn-in?

No, no burn-in, just system-level tester. You need to ask them because the AMD is chiplet. It's very large panel size, yes.

And when you say CPU, it's referring to both AMD and NVIDIA or just one of them?

We also cover Google CPU. The thing I want to emphasize here is we already could do and good at dealing with the CPU.

I see. So I think the SLT for CPU is kind of a relative new business for Chroma for the next 12 months?

Yes, of course.

And Jennifer, there are currently no questions. Thank you.

Okay. Thank you, sir -- yes, thank you.

Then ladies and gentlemen, we thank you for your participation in Chroma's conference. There will be a webcast replay within an hour. Please visit www.chroma.com.tw/investor/index under the Investor Relations section. You may now disconnect. Thank you again. Goodbye.

Welcome, everyone, to Chroma's 2026 First Quarter Earnings Conference Call. [Operator Instructions] For your information, a webcast replay will be available within an hour after the conference call is finished. Please visit www.chroma.com.tw/investor/index under the Investor Relations section.

I would like to introduce our IR Director, Jennifer Chieng. Ms. Chieng, please begin.

Okay. Thank you, Frank. Good afternoon, everyone. Welcome to Chroma First Quarter 2026 Earnings Conference. My name is Jennifer, and I will be your host for today's session. Today's agenda includes our CFO, Paul Ying, will begin by presenting the financial results for the first quarter. I will then provide an overview of the product mix for the first quarter too. Afterwards, we will open the floor to questions and answers. All presentation materials are available for download from the company website.

With that, I will now turn the call over to our CFO, Paul Ying.

Thank you, Jennifer. This is Paul Ying. I'm the CFO of Chroma ATE. Thanks for coming to this earnings release of the first quarter of 2026. Let's go through the first quarter condensed consolidated income statement. We can start it from the 2026 first quarter's net sales, which is reached to TWD 11.8 billion, and this is a record high at the first quarter of '26. And well, please keep in mind that normally, first quarter is a low season in all four seasons every year. So this is quite exciting achievement for Chroma at the first quarter. And from here, you can see that compared to last year fourth quarter, Q-over-Q, we have a 38% growth. And compared to first quarter of '25 last year, this is 73% of growth.

If we look at the gross margin and the gross profit, it reached approximately TWD 7.4 billion and reached 63% of the gross margin. And this is, I think, the second highest on our quarterly gross margin achievement. And compared to last year fourth quarter, this is a 42% growth and another 79% growth compared to first quarter of last year. As to the operating expenses, if we look at the percentage, well, on a Q-over-Q base, it's approximately 17% growth. And compared to last year first quarter, it's approximately 32% of growth so that we reached an operating income by 4.7 -- nearly TWD 4.8 billion and occupied like 40% of the top line. And this is a 61% growth on a Q-over-Q base and another 122% doubling the size of the -- compared to the last year first quarter.

So our net income reached by TWD 3.9 billion and occupied 33% compared to the top line. And this is a 49% growth compared to last year fourth quarter. And on a Y-o-Y basis compared to the first quarter of last year, it's 83% growth. So in there, you can see that we reached somewhere in TWD 9.12 of the earnings per share. And compared to last year, fourth quarter, it's a 51% growth and another 81% growth on a year-over-year basis. And this is the achievement on the bottom line.

And let's go to the next page. On the Slide #6, you can see the balance sheet highlights and the financial ratios. Here, you also can see that the consolidated balance sheet highlights. From here, you can see that our cash and short-term investment grows by 10% compared to last year, year-end and inventory grows by another 14%. And total assets reached up by TWD 54.6 billion. It's a 16% growth. And on the inventory turnover days, it is approximately less than the 6 months, reaching by 172 days, which is pretty much the expectation of the management. And accounts receivable turnover days is less than 80 days, which is 77 days. And net debt to equity is still net cash. And our return on assets is reaching 51% and compared to last year, year-end, 29% is a pretty good growth.

And for the return on assets, it's 30%, it's also another 10% growth compared to last year. And for the cash position, our EBITDA reached by TWD 5.3 billion -- and our cash flow from operation is approximately TWD 1 billion. And free cash flow due to the investment on the fixed income financial instrument, it reached a negative TWD 825 million. And this is the highlight for the balance sheet.

And let's go through the operation highlights and Jennifer, I turn it to you.

Okay. Thank you, CFO. Please refer to Slide 8 for details on our product mix for the first quarter. The key drivers during the first quarter, the primary driver of growth was our test instruments and ATS sections, which saw a remarkable increase of 105% quarter-over-quarter and 145% year-over-year. This surge was mainly contributed by AI server power applications. In addition to AI server power, we anticipate the battery cell project will start to contribute in sales revenue from second quarter. Moving on to semiconductor sector performance. The semiconductor sector achieved revenue of TWD 3.4 billion in the first quarter, representing 19% growth over quarter-over-quarter, and 31% year-over-year. The main contributors to this growth were system-level testers and photonics sectors, rank by sales revenue contribution.

Looking ahead, we expect orders to increase in the coming quarters. Currently, the world's top 3 AI HPC companies have adopted our system-level testers. And in addition to NVIDIA, both AMD and Google are expected to make meaningful contributions this year. As the demand from the customers continue to increase, plus the cycle times also increase, we are considering revising our forecast upwards for the coming quarters. For photonics and CPO development, another area exceeding expectation is the photonics. The demand from the transceiver market, CPO will also make a meaningful contribution beginning this year.

The CPO section is now structured into 4 insertions, Insertion 1, PIC testing, Insertion 2, EPIC testing. Insertion 3, optical engine testing. Chroma has already received the purchase order for these insertions. Insertion 4 break down into 2 process. First one is Insertion 4.0, testing optical light in and out 100% Chroma. The confirmed purchase order has been received. Another Insertion is so-called Insertion 4E, BER testing. It's kind of a signal testing. The customer is ready and plans to begin a pilot run from June of this year. The same optical engine will be applied for both scale-out and scale-up scenarios. According to recent customers released their vendor list and PO. And that's our highlights for this quarter. And now we move on to Q&A.

[Operator Instructions] First question is coming from Arthur Lai with Macquarie.

Paul and Jennifer, first, congrats on the strong results. So I have a very simple question, maybe to both of you guys. So this quarter, we have a very good ATS revenue year-over-year up 145%. Is it sustainable or not? Based on our experience, this sector actually is our strength, but usually, we don't see so strong growth rate. So this is the first question. And if I may, and I have a second question on the gross margin. And we also see your very strong gross margin as well. I personally believe it's a mix, right? Do you foresee any mix change in the second half or when the other semiconductor products impact your mix? My two questions.

Arthur, I comment on your first question. You mean the growth rate or the dollars?

Growth rate.

That means every quarter, we need to present like 100%. We cannot give guidance like that. But I'm sure this year, we definitely will have some very good results from the testing instruments and ATS. And regarding to the second question, we usually don't comment on gross margin as you've already assess this kind of number from our financial statements.

The next question come from Kevin Chen with Citi.

I have two questions also. The first one was for this quarter in the semi and photonics division, I just want to get a sense of how much of that come from photonics-related? And also, I think so far this year, most of this photonics revenue was still driven by pluggable transceiver. So I want to get a sense of how much incremental opportunity can we expect from CPO ramp-up starting, let's say, second half this year and also into next year?

I think at the time we did our forecast for this year, we didn't include the CPO because at that time, the CPO was not very clear. So you could think CPO is actually extra on top of the transceiver despite we actually see very strong transceiver growth this year at the time we make the forecast for 2026. And currently, our customers already finalized the scale-out and scale up. They were using the same type of design of optical engines.

So yes, I think customers already gave us the forecast, especially for Insertion 3 for '27. So I think you could have some expectation from the second half this year.

Okay. Got it. My second question is on the SLT. I think you just mentioned that we're seeing very strong demand increase as well as cycle time getting longer. I was wondering what kind of incremental cycle time or order size are we seeing? And also, if I may, I was wondering how are we seeing the SLT upgrade cycle? Because I think in the past, we usually see a two major upgrade driven by power density increase because all the -- right now, the AI chip systems are migrating faster and faster. But let's say next year's key custom upgrade. Are we going to see another round of faster upgrade next year as well?

I think your thesis is based on NVIDIA solution, but I think please don't forget that this year, we are also having the other 2 giant HPC company. So like include AMD and Google. And AMD will be -- we haven't really finished all the Rubin, all the delivery, but AMD is coming up. And AMD actually have a very heavy weight, especially on system level testers. Based on their power density, AMD, the cycle time is started from the design for 4 hours. And now is actually running much more than 4 hours. So actually, orders increased too.

And our next question is coming from Haas Liu with Bank of America.

This is Kathy on behalf of Haas. And the first question is regarding the burn-in. Could you be able to share more detail on your current engagement with customers on the burn-in solution? And how should we think about the long-term opportunity?

We already received one CS customers placing order for our new burn-in systems. And for the others trial or you could say in the middle process for adopting our burning systems. I think this will be one of the drivers for coming years for sure.

Sure. And my next question is related to power testing. Given the continued uptake in the AI power solutions, could you provide some updates on the backlog from your customers? Are you seeing more traction across your long-term power solution partners along with more requests from your ESS and battery customers?

I don't quite understand your question. You mean the AI server powers or everything. Yes, it has nothing to do with AI server power.

Both from the AI powers and also from the ESS and battery customers.

I guess everyone knows about AI server power, someone like Delta, Foxconn, AI photonics and some Chinese makers.

And would you like provide some updates on the backlog you are seeing right now or...

We can't comment on individual customers' their backlogs.

And my last question is related to system-level testing. Would you be able to provide like how do you think about the addressable markets into 2027 and 2028?

We'll let you know when we finalize the forecast for next year.

And our next question is coming from Alex Wang with Bernstein.

This is Alex from Bernstein. Great results. My first question is, I understand that in the past, photonics normally represents 15% to 20% of your semi revenue. So looking at this year, what will be the ballpark of photonics mix, do you think?

Honestly, I have no idea.

Because it's too strong.

We just guide before, we didn't include the CPO as a projection for this year. So -- and then we also do see the increasing demand from transceiver. I think -- I only could say please do not underestimate our contribution from CPO.

I see. I assume the mix will be higher than previously, 15% to 20%.

Yes. But as we just mentioned, our system-level tester, the orders also increased. We probably will only have this kind of idea about the breakdown by end of this year.

Okay. Fair enough. And second question is that last quarter, you showed a slide about your AI FT handler. So I'm wondering if you have any update on that regarding client tractions, order size, et cetera?

It's everything on schedule. You will see the results coming up.

Okay. I see. And then maybe my last question is that I understand equipment shipment is very lumpy every quarter, but you have so many types of equipment that might smooth out the seasonality. So what do you see the quarterly sales trend in the remainder of this year?

This is actually a very good question, but we do -- I wouldn't say -- yes, it looks lumpy sometimes, but not that lumpy because sometimes we deliver like all in one just because to meet the customer's supply, their schedule or ramping up schedule. We do everything to maximize customer satisfaction. So based on our current order visibility is quite low. So it's very hard for me to comment on seasonality pattern.

Because I'm looking at your last year seasonality, the first few quarters, like TWD 6 billion to TWD 7 billion and jumped to TWD 9 billion. And this first quarter is too strong, TWD 12 billion. So in the remainder of this year, should we expect something similar to first quarter number?

I have no idea. As you can see, we maybe just started because we have nothing booked for the battery cell at the moment, and we will not stop taking order from today.

And our next question is coming from Jerry Su with UBS.

First question on the SLT side, I think Jennifer previously, you commented that you'll potentially raise your forecast. Any idea how much of upside you are seeing right now for this SLT business?

Jerry, we do seriously consider to revise up because first, we have not complete the delivery for our big customers. And we currently would like to increase the cycle time. So they recently also add up more orders. And I really have to especially highlight that we are very strong in the liquid cooling. So that's why we're glad to have this customer. And Google is starting up. So I think maybe they will be located in the second half this year. And our big customers, which is NVIDIA, they're also planning to ramp up LPU. So this is also one of the reasons we do consider to revise our system.

So any ballpark idea compared with previous forecast, what kind of magnitude you're expecting right now?

But since we are not releasing individual factor forecast, so we will not provide any further numbers regarding to that.

Okay. Understood. Then on the metrology side, can you give us some update on this business?

We do everything to support the Taiwan foundry. So whatever the schedule or plan, that's the statement to be able to comment.

Okay. outside of the main foundry, I think a lot of OSATs are also helping or developing similar process as the foundry. Should you think that this should be your opportunity as well?

Yes, that actually happened started from last year. And as you could see, we also designed another metrology tool which is ProMark. And then we do see the order continue to contribute from this year too.

And our next question is coming from [ Michael Xu ] with Hyundai.

Jennifer, can you hear me?

Yes, please go ahead.

Congrats for the great results. And first one, I also want to follow up on transceiver and Photonics business. And because we also have very strong supply chain no matter transceiver or CPO has a very strong demand. So could we have more color about for CPO product, like is there any like the contribution for Insertion 4, is there similar -- fully similar to the Insertion 3 or will be higher or lower?

I think I would suggest analyst to break these CPO things into wafer levels and die level. But if you look at the die level according to current customers' forecast for coming up 2027, the volume ramp, I would say Insertion 3 is more higher addressable dollar overall.

And -- and like the other chips, is there likely for the CPO which have SLT test or it's still uncertain?

Depends on how you define because right now, as I just briefed, Insertion 4 right now break down into 2 sections, Insertion 4.0 and Insertion 4E. But if you also could consider because under Insertion 4.0, which is even its optical light in and out, this is also kind of concept of system-level testers. So it just depends on how you define that. If you say this kind of real practice is also in line with the thesis of design like GPU system-level tester, I would say this is some kind of optical type of system level testers. Insertion 4E is just a signal testing. It's not about -- it's not like a final testing back to Insertion 2. It just measure the signal how it is BER testing, we just turn the light between light and electrical. That's like IO-IO testing.

Great. It's helpful. Great detail. And my second question is about do we have more color for the first quarter on the ESS and the power business for ATS? Could we have a breakdown like it's more on how -- because you mentioned it's mainly driven by the AI power demand. But could we have some more color on power parts and also ESS part. And could it sustain to the further quarters in 2026?

Well, first quarter mostly come from AI server power. And you actually can expect the contribution from ESS from second quarter, but it doesn't mean we don't have AI server power in the second quarter because we do have customers which just booked up the whole year's orders capacity. So you need to consider maybe some of the months we have to like one shot regarding to this battery cell project.

Got it. My last one is for the capacity plan, sorry, because we saw the really strong demand for '26 and '27. So what's our plan for, like, '27 or '28? And will we need to have more space in like second half of '27 or '28?

That's a very good question because actually, regarding to our Phase 2, originally, we decided for 2 tower North and South towers. And then due to the kind of strong visibility in the coming years, we decided not to sell any of the towers. So we will keep it for our later capacity ramp. So we're supposed to have a sufficient capacity in the coming maybe 3 or 5 years.

And there are currently no more questions. Thank you for your participation in Chroma's conference. There will be a webcast replay within an hour. Please visit the website, www.chroma.com.tw/investor/index under the Investor Relations section. You may now disconnect. Goodbye.

Welcome, everyone, to Chroma's 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] For your information, a webcast replay will be available within an hour after the conference is finished. Please visit www.chroma.com.tw/investor/index under the Investor Relations section.

Now I would like to introduce the CFO, Paul Ying. And Mr. Ying, please begin.

Thank you, Jason. Welcome, everyone. This is Paul Ying from Chroma ATE, and this is the fourth quarter of 2025 financial review. Well, I expect everyone, you see the presentation material at the website we have already posted. And on the Page #5, you can see that the bar chart on the right-hand side, you can see in 5 years span and for the past 3 years, starting from 2023, we grew the top line from TWD 18.6 billion all the way to TWD 28.3 billion for the consolidated sales. And for the 2025, the net income comes to the TWD 11.7 billion and grew from the 2023. And the total head count for Chroma globally is somewhere over 3,800 employees.

And if we turn to the Slide #6, you can see the financial performance for the consolidated sales and gross margin. On this page, you also can see -- in 5 years span, you can see the growth of the gross margin from 58% (sic) [ 48% ] all the way to the 61% in 2025. And for the parent only, the sales and gross margin is similarly grew in the past 3 years from 54% to somewhere like 55% to 53%. And the top line, again, also grew from TWD 12.5 billion all the way to TWD 22 billion. With the investment in the R&D expense, the ratio is somewhere between 11% to 13%. But absolute numbers amount for the investment over the R&D expenses is already exceeding TWD 2.3 billion. And this is for the financial performance.

And next page on the Slide #7, you also can see the return on equity. It's a double-digit, again, growth in the 3 years period from 18% to 29% at the -- 2025. As to the dividend, you also can see that our dividend policy, normally, we pay out like 70%. And for the earnings per share for the year of '25, it's reaching TWD 27.7. And our dividend for this year, just as approved by the Board members this morning, reached to TWD 19.5. It's 70% again.

As to the condensed consolidated income statement for the fourth quarter of 2025, in this page, you also can see that we have made a record high on the fourth quarter of 2025 on the top line, which is approximately TWD 8.58 billion, and this is a 34% growth in a Q-over-Q basis and 42% growth on a year-over-year basis. And majorly, it's coming from the sales of the Testing Equipment business, which has occupied most of that 96%. As to the gross margin, again, the fourth quarter gross margin is 61% and reaching TWD 5.2 billion. And this is a 36% growth in a Q-over-Q basis and 45% growth on a year-over-year basis.

As to the OpEx, I think the growth of the OpEx on a quarter-by-quarter basis, I think it's 17% on general and administration and another 3% on the R&D. So totally, you can see that the operating income reached somewhere approximately TWD 3 billion and reaching 35% of the top line, and this is a growth of 62% growth on Q-over-Q basis and another 92% growth on a year-over-year basis. As to the net income, we are reaching TWD 2.6 billion, occupied 31% of the top line. And on a Q-over-Q basis, it's a 48% decrease, simply because on the third quarter, we have the capital gain reaching somewhere approximately TWD 3.2 billion on the real estate. And if we compare to the fourth quarter of last year, it's a 72% growth on the net income. So here, we have enjoyed TWD 6.03 as the fourth quarter earnings per share. And for total, again, this is a drop compared to Q-over-Q, but 73% on a year-over-year basis.

As to the annual numbers, you can see from this page, Slide #10, in '25, the net sales reaching TWD 28.3 billion. Compared to last year, this is a 31% growth, again, majorly contributed from the Testing Equipment business, which occupies like 96%. And for the gross margin, well, we are reaching 61%, which is pretty high. And compared to last year, it's a 37% growth. And for the operating income, we are reaching approximately TWD 9.2 billion, occupy like 32%. And compared to last year, this is a 68% growth. And for the nonoperating items, here, you also can see that we approximately nearly tripled the size of the year of '24 to TWD 4.7 billion. And for the net income, here, you can see that we are over TWD 10 billion, reaching nearly TWD 12 billion, occupy 42% of the top line and another 121% growth compared to last year. So this is a very good year for Chroma, and our earnings per share for 2025 reaching TWD 27.7. And again, this is a 122% growth compared to last year. And this is for the income statement.

Then we turn to the balance sheet highlights. In this page, you also can see that -- well, due to the operation results, you can see that our cash growth like 65% and the inventory growth like 45%. And the major reason for the growth for the inventory is preparing for the shipment for the year end, also backlog orders for the year '26. And you also can see that our short-term debt is decreased and the long-term debt has increased due to our expansion for the second phase of our headquarters construction. So here, you also can see that we maintained pretty much the same inventory turnover and also accounts receivable turnovers. And for the return on equity and return on assets, also improved from the 22% last year to 29% for the return on equity. And for the 15% of the return on assets at '24, it grows to 20% at the year of '25. And for the cash position, you also can see that our free cash flow is nearly TWD 6.6 billion. Compared to last year, it's 131% growth. And this is for a very short briefing on the financial side.

And next, Jennifer will give you the presentation for the product mix and also for the highlights for the '26.

Good afternoon, everyone. This is Jennifer. I will go through the product mix. Please refer to Slide 13. Let's start with the fourth quarter. In the fourth quarter, Chroma generated TWD 8.6 billion consolidated sales and the biggest growth was coming from Semiconductors and Photonics Testing Solutions, which has increased by 37% quarter-over-quarter and the same 37% year-on-year. This quarter was mainly due to the metrology delivered. The Test Instruments and ATS was lower than third quarter, but year-on-year still grew by 56%.

In year 2025, the outstanding growth was coming from the power business, the Test Instruments and ATS present a strong growth of 55% compared to year 2024. And this year, we expect another year of growth for this sector, mainly coming from AI server power include HVDC adoptions and the demand from the ESS markets, which is battery cell, okay? The Semiconductor and Photonics sectors in year 2025 was growing by 40% compared to 2024, and it has consecutively grown for the second year and reached almost same point as the power business.

In 2026, we expect another year of good growth from the Semiconductor sectors, mainly contribute from the 3 major drivers. First one, the system-level test, particularly the demand comes from AI, HPC and ASIC. And second, the Metrology for advanced package capacity ramp. And then third, Photonics from CPO adoption.

And now we are open for the Q&A section.

[Operator Instructions] Now we'll have the first question, Kevin Wang, Mizuho.

Congratulations on your strong Q4 results. The first question is regarding your revenue growth this year. I think you should still deliver very strong growth this year, but do you have any quantified numbers for your revenue growth this year?

And also, could you also share the growth outlook for Test Instruments and also Semiconductor, respectively, this year? As you mentioned a good growth, but if you can give any rough idea for the quantified number, that would be great.

Kevin, we couldn't provide any forecast based on the regulations in Taiwan. But basically, we do have very outstanding orders on hand. Let me give you some color regarding to our ATS, which is the power business. Well, as you know that last year, we were mainly [indiscernible] grew by this kind of AI power and not from HVDC. So if you look at our power sectors, I think roughly close to 50% actually come from those AI powers. And then we're expecting we will have another year of growth from these sectors due to HVDC adoptions. And plus, this year, we see the strong demand come from ESS markets. The best hint I could provide is you could refer to the good year we have for '22, '23, those battery cell booming.

Got it. Okay. So my follow-up question is for your gross margin. Q4 gross margin looks very good, and it keeps at 60% or higher for every quarter in 2025. So how should we think about -- and also expect the gross margin this year? In addition, I mean, the Q4, there is a very high revenue contribution from overseas subsidiaries. So what's the major reason for this kind of high revenue? And also, how should we think about the gross margin impact from overseas subsidiary?

As you know, as a practice, we don't discuss gross margins. But however, our target always try our best to maintain gross margins, okay? And overseas, sometimes -- I would say, every year, maybe between the quarter, there was some change. I think that's due to the shifting timing and also could be the customs issues. But however, I think the markup to overseas, I think, it's around 15% to 20%, but cannot be very precise, exactly markup percent for every quarter due to the factor which I just mentioned.

And next one, Alex Wang, Bernstein.

Congrats on the great results. You include some CPO testers in the presentation. I'm wondering, have you secured the order for these testers as well as, I think, you also have SAU assembly equipment that you showed last year? And when do you expect volume shipment will start for this CPO equipment?

You may refer to our slides regarding to the CPO. But basically, these slides actually show you the 4 major stages for making the so-called CPO. So I think we already have order and the customer planning [indiscernible] around this year for the -- we cover Stages 3 and 4, which we particularly blocked up. As you could see, Light Engine and CPO Automation Testing Solutions. And SAU, yes, we changed a little bit of our strategies. We are very much focused on this kind of manufacturing process instead of focus on SAU because SAU could come with several models.

I see. I see. And then maybe a broader question. In the beginning of last year, the surge of AI power demand was a pleasant surprise to the company. Now based on your observations of the market trends this year and your order book, anything that surprised the management so far this year?

You mean semiconductor sector?

Which have a segment that surprised the management team?

I would say every sector.

Okay. Okay. And then so for the power testers, may I know what's the order visibility looks like and your shipment lead time?

Say surprised. Yes. I already guide -- HVDC is like a -- this will be whole year. And then on top of that, you can consider, as I already give a very clear hint, which is please [indiscernible] what we had before regarding to the battery booming back to '22 and '23. I think that's the best, at least, I could give.

Next, we have Jerry Tsai, JPMorgan.

Congratulations on a very good quarter and also Happy New Year, of course. Yes, just a couple -- a quick confirmation. First one, on the ESS, what category is it placed under? Is it ATS? Or is it Turnkey? Or maybe overseas operations? Just want to get that.

The ESS market ramp is mostly contributed from -- I think you may refer to the reasons the Chinese government would like to -- the infrastructure is mostly focused on the power. So that's why it brought up this kind of, I would say, huge ESS batteries demand. And I think in order to generate more margins and the cost concerns, we will repeatedly, like last time, do those assembly in China.

Okay. So it could be recognized under overseas. And then would you say the margin will be comparable to the previous cycle back in 2022?

I would not go through the margin, but we always try our best to maintain the gross margin.

Sure, sure. I understand that. Just curious that for this particular project, would it be like 2-year, like multiyear type of duration or...

I don't give a time frame guidance in case of a speculation. However, if we [indiscernible] out these 2, that -- this is already order on hand. I'm not talking about expecting [indiscernible]. Now it's [indiscernible], we still continue to receive the order. We don't stop this today, right?

Okay. Okay. Okay. Just also, I was going through the slides. There are some interesting kind of products you're showing. First one naturally is that you actually show an FT handler. Just wondering, is this something new or something you previously had a capability of doing that? Or is this something you expect to generate a meaningful contribution in the coming year or so? Yes.

Everything we list here, of course, it's definitely something we already -- we're about to present or customers is trial at the moment. I think this is sort of the guidance I could provide. Like [indiscernible] before I ever mentioned, every product we list here is mostly in progress or we already have order. There's no point to present here without significant orders.

Okay. I see. But would you say how you maybe have some differentiation in terms of performance or that kind of like a targeted market for this type of FT handler?

We try to bring up the customer satisfaction. As we list here first, we're able to process due side, which is more better throughput, more efficient. Second, we're able to reach out to 3,000 watts, okay, which is very good at it and...

That makes a lot of sense. And also maybe quickly, another question -- another interesting tool I noticed is the 799X series, which is supposedly for the corporate side. Would you have some kind of timing and also your expected kind of market share in the main customers? Would you have some kind of comments about timing and all those stuff?

I think we all focus on one customer, right?

Yes. Sure. Sure.

Very big one.

Yes.

We already have a PO.

Okay. So timing of shipment will be...

This is confidential between Chroma and that big customer.

Okay. I see. I see. Okay. And also one last question, sorry, I'm asking quite a few. I'm just wondering about the -- because there's a lot of quite a few testers you list out for the CPO, some of them is going through the PIC, some of them is for the, I guess, the EIC parts. Just how do we think about the kind of like the CapEx intensity of this kind of testing tool, i.e., is it possible to kind of give us some idea like how big this kind of CapEx could be, I mean, in terms of testing investment, tester investment among the customers, how is it compared to like a traditional transceiver type of investment. Yes.

Okay. Customers are already structured out of the 4 major manufacturing process for this CPO. So I think you may refer to [indiscernible] indication is. The [indiscernible] indication is you may refer to NVIDIA's Spectrum-X switch. So that -- the first stage is scale up. In order to fulfill so-called scale up, which is the communication between rack to rack, then to make the CPO, they already list out the fourth major stage. We already have the Stage 3 and 4. Yes. So you see, we already -- yes. And then I think from the diagram, you already probably could figure out each process.

Okay. I see. Okay. Maybe just one real quick follow-up. In terms of this optical fiber or optical transceiver type of kind of business, in 2025, can you give us some idea of how big the growth was back in last year, roughly speaking?

Last year was increased by 26%, yes. And this year will be outstanding. So far, I can sort of hint is, okay, our Photonics business [indiscernible] order has already exceeds Metrology. So you can [indiscernible] our Metrology decline -- is actually continued to have a strong growth. But besides that, our CPO even -- today's overhead is more than Metrology.

So in a way, you can say this order could be shipped within the next 12 months.

Yes, because the customer is planning to [indiscernible] second half this year.

[Operator Instructions] Next one, Alex Wang, Bernstein.

I just have a follow-up question. I just want to confirm, did you just say this year, Photonics order has exceeded your order for Metrology this year or your Metrology revenue last year?

I think, current order on hands was for Photonics versus -- I think it's already -- we also have order on hand for Metrology, I mean, currently CPO -- sorry, Photonics more than Metrology.

I see. And I assume your Metrology this year will also expand quite significantly versus last year, right?

If you want to look for the -- really big volume should be next year. Yes.

Okay. Okay. So large volume of Metrology revenue coming from next year -- sorry, this Metrology is the foundry, the RDL [indiscernible] Metrology that we talk about...

Yes. I'm not saying it will be declined. I just say today's order on hand.

And ladies and gentlemen, we thank you all for your questions. There are currently no questions at the moment. We're going to close the meeting. Thank you. We thank you for your participation in Chroma's conference. There will be a webcast replay within an hour. Please visit www.chroma.com.tw/investor/index under the Investor Relations section, and you may now disconnect. Thank you, and goodbye.

Thank you.

Thank you.

Everyone to Chroma's 2025 Third Quarter Earnings Conference Call. [Operator Instructions] And for your information, a webcast replay will be available within an hour after the conference is finished. Please visit www.chroma.com.tw/investor/index under the Investor Relations section. Now I would like to introduce CFO, Paul Ying. Please begin.

Thank you. Hello, everyone. This is Paul Ying. I'm the CFO of Chroma ATE. And today, I will be holding this meeting with Jennifer Chieng, which is the Director of IR. And welcome to the 2025 Third Quarter Earnings Conference Call.

Well, let's start with the 2025 third quarter income statement. If you look at this page on the website, you can see that the net sales for the third quarter of this year is TWD 6.4 billion compared to the last quarter, it's about flat and 1% drop, but compared to last year on a year-over-year basis, it's a 14% growth. And with this content, you also can see the consolidated sales of testing equipment for the main -- in the core business, it occupied like 96% of the total sales revenue, which is TWD 6.155 billion. Compared to last quarter, it's a 2% drop, but compared to last year, it's a 19% growth.

And our gross margin approached TWD 3.8 billion and over 60%. And compared to last year, it's a 9% drop, but compared to last year, it's a 16% growth. And here, if you look at the percentage of the gross margin, I think mainly it is due to the product mix. So there's nothing that material to present. And as to the operating expenses, well, compared to the last quarter, it's a 4% drop on the general -- SG&A expense and R&D is a 3% growth compared to last year, it's a 4% and 28% growth consecutive separately.

For the operating income, it's TWD 1.8 billion. Compared to the last quarter, it's a 16% drop, but compared to last year, it's a 23% growth. So if we go down to see the nonoperating items, you can see that net nonoperating items, it contributed TWD 3.6 billion, compared to the last quarter or to last year, I think it's a tremendous growth. Well, mainly it's due to we enjoyed the gain from the disposal of residential apartments held for sale and it's all to the employees of net value of the contributed to the bottom line straight approach to TWD 3.2 billion.

So for the net income for this quarter, it's TWD 5.1 billion and compared to the last quarter, it's 155% growth. And compared to last year, it's a 253% growth. I think -- again, although it's mainly contributed from the sales of the residential apartment, for that part, I think for the single quarter, it contributed somewhere like TWD 7.6 for the EPS. But outside of that, we still enjoy TWD 4.4 EPS for the third quarter.

Well, let's go to the next page. For the first 3 quarter condensed consolidated income statement. Here, you can see that the first 3 quarters of 2025, the net sales approach to the TWD 19.7 billion compared to last year, it's a 27% growth, and it's mainly coming from the sales of testing equipment business, which is TWD 18.9 billion compared to the last year, it's a 29% growth.

As to the gross margin for the first 3 quarter of this year, it's TWD 12.2 billion compared to last year, it's a 34% growth. And Here, you also can see the operating income approached TWD 6.2 billion compared to the last year, it's a 58% growth. And here, you also can see that for these 3 quarters of this year, the operating income approaches to over 30% to 31% now. And again, for the nonoperating items, net of that is TWD 4.3 billion compared to last year, it's 4x growth, which is tremendous. And mainly it is contributed from the sales of the residential apartment to employees, and here, you also can see the first 3 quarters net income approached to the TWD 9.2 billion compared to last year, it's almost 1.5x of last year's contribution. And again, for the EPS for these 3 quarters this year, approached to TWD 21.67, which is, I think this is a good result we've contributed to our shareholders and investors.

Well, again, let's see the balance sheet highlights and the financial ratios. Here, you can see that the asset mainly is increasing due to the sales of the residential apartments as well as the growth of the top line. So you can see the cash on hand, which is 42% growth compared to last year year-end. And inventory, we have a 20% of growth. And for those items like long-term debt -- short-term debt is decreasing due to the cash on hand -- full of cash on hand, but for the long-term debt is due to the capital expenditure for the second phase of our expansion plan and the building is still ongoing.

And for those return on equity, I think approaches 30%, which is 29% for the third quarter end, and compared to last year, it's 22%. For the return on assets, it's over 20%, and compared to last year, 15%, which is a big growth. And for the -- we still net cash on hand and also the free cash flow is somewhere like TWD 5 billion, compared to last year, it's 166% of growth. Well, this is the financial highlights. And again, ask the Jennifer to take it over to give you some highlights of the product mix and sales breakdown.

Thank you. Good afternoon, everyone. This is Jennifer. Please refer to Slide 9 for the product mix breakdown. For the third quarter only, test instrument and ATS have made another quarterly record high, reached TWD 3 billion. So last quarter was a historical high and the third quarter compared to last year further increased by another 12% and 74% compared to last year. This has been demonstrated strong demand of AI server power.

Some for the first 3 quarters, the total sales have increased by 54% compared to last year, first 3 quarters and higher sales than total annual sales revenue in 2024. Since the new AI power infrastructure will start to build new capacity next year, we expect the power business, test instruments and ATS will continue to grow in 2026. For semiconductor sectors in third quarter has declined 5% quarter-over-quarter, but still increased by 15% year-over-year. The slight decline was due to some adjustment for the shipping and -- but we expect semiconductor remain strong compared to last year.

Last year, our semiconductor sector had an outstanding growth of 135%. This year, year-to-date, first 3 quarters of semiconductor sectors have reached to TWD 6.9 billion, which has continued to increase by another 41%, an improvement to the annual sales in 2024. Based on our recent receipt from our customers' orders and plans for next year, we believe the semiconductor sector will continue to grow another year.

The turnkey solution due to slow sentiment of EV industries and reschedule of deliver the automation of all AI applications year-to-date has declined around 40%. We don't expect this sector will have a large pickup in the fourth quarter. Overall, parent company sales reached TWD 5.5 billion in third quarter, similar to second quarter, but increased by 38% compared to last year.

For first 3 quarters, the total sales revenue for parent company reached to TWD 16 billion, giving a growth of 40%. And for consolidated sales in the third quarter is about TWD 6.1 billion, kind of flat compared to last quarter and increased by 19% compared to last year. First three quarter was about TWD 18.9 billion, giving a growth of 29% compared to last year. The consolidated entity MAS, as we think should be similar to last year. So the total consolidated sales for first 3 quarters reached TWD 19.7 billion, a growth of 27%. And we think we will have another year of good growth. We can move on to Q&A.

[Operator Instructions] Alex Wang from Bernstein.

This is Alex from Bernstein. I have a couple of questions. The first one is about AI power tester. What's the lead time now for your product? I remember last time you mentioned it's about 6 months. Any update on that?

Willing to speed up for special customers. So now it's really short. We do everything we could. Otherwise, we couldn't digest. We couldn't really be ready for the next product capacity building next year. Because so far, I think this year is mostly build out the capacity for existing solutions. If you talk about new solution like 800 volt or other [indiscernible] I think they schedule next year.

I see, very clear. Yes, so about the 800-volt HVDC or 400-volt HVDC, so you do see more business opportunities for this new architecture. So you will have more product solutions for these power racks, [indiscernible]

I think power already is ready. We just need -- but the customer scheduled to next year start to build the capacity.

I see the product you have -- is this thing like your product for PSU, DDU, supercapacitor, the stuff you already sell?

Yes, because this is a new AI -- you could say new AI power infrastructure.

Okay. Okay. I see. And then a question about the SLT. How should we think about the testing time for Rubin SLT versus Blackwell? Do you have more color about that?

Okay. First, we already received the PO and the forecast for next year. And we think according to the number we received, it should be similar cycle time. But due to Rubin is quite -- higher level compared to GB. So the number of units is actually increased.

I see. So although Rubin is more compact and thermal design power is much higher than Blackwell, but you see the testing hours is similar to Blackwell. Is that right?

Based on how we preliminary forecast the units, I mean, the total units you may need full capacity. But as I said, this capacity start to build for next year. So this is just not yet [indiscernible] but start to build up capacity from next year. But as I said, the total unit according to customers' recent forecast to us is more than GB.

I see. And then final question is about metrology. Last time you mentioned this year, the guidance is over $1 billion revenue. Any update to that?

What kind of update you're looking for?

I mean for the metrology revenue guidance this year, is it still the multibillion? And then for next year, how would that compare to this year?

I don't comment on the numbers, but we just pretty match with -- we just support the customer schedules. I think how much people think about the capacity next year, that will be how much growth rate for the equipment.

Next one to ask question, Kevin from Citi.

So first of all, I would like to get a quick sense from the power sectors right now. So I think in addition, we have seen the strong strength at [indiscernible] customers. So I guess in addition to the [indiscernible] growth, are we also seeing -- how should we think about the content growth? For example, like we are testing more and more components inside those products. So are we -- how should we think about the content growth in terms of power tester as well? Are we seeing that value increase as well?

I think if you talk about those design and the content change, I think you may -- you probably need to ask Delta, yes, but I think current situation is they are going to change it to another new format of AI-powered infrastructures. So that's clear the new capacity built. It's not -- it's hard to do this kind of comparison. However, based on the preliminary customer forecast for next year, we supposed to have another double-digit growth.

Okay. Would this be like a high double digit similar to this year or...

I'm not going to comment on that. But, however, recently market mostly talk about like 800V, something, [indiscernible] is not yet built. So you need to think this is new capacity built.

Okay. So that will be the new capacity. Got it.

New driver. Yes.

All right. My next question is more on the SLT side. So I think you just mentioned that the -- about the -- I think that the unit wise might still need to have some upside compared to this year, right? So I was wondering how should I think about the ASP for the Rubin generation of SLT? Is it going to increase similar to the past generation, let's say, from the hardware to software as well?

Okay. Overall, according to our -- okay, Rubin is kind of final, it's final. So we already received a PO. And they -- of course, the price has increased and same is the number of units has also increased. So there's no doubt for the -- I think will be more than this year. I think overall system-level test, we think will be more than this year due to 2 factors. First one, of course, come from NVIDIA, I said, [indiscernible] on the unit price or number of units for new capacity, both are increased.

Another factors are just everybody pretty much already aware that we are gaining the market share from AMD. So AMD [indiscernible] already released, and we will be acting as a sole vendor for AMD. So this is kind of gaining extra customer space. And not -- this thesis is not account of the driver for ASIC. We do see like 1 or 2 ASICs actually turning to more aggressive next year.

Lastly, I think just following up on the AMD part. So I think in the past few years -- yes, in the past few years that due to the strong growth of the key customer, so the contribution from SLT from these are rather limited. So are we seeing like a significant increase in terms of contribution from SLT for next year from the new customer? And how should we think about the automotive demand going forward as well for SLT?

I don't really clear about your -- I don't quite understand your question. But basically, we already guide -- since mid of this year, we already revised up our system-level tester sales contribution for this year. So this is already more than last year by double digits. And according to [indiscernible] , I think we do have a confidence level that next year probably will be more than this year by gaining market share. As you know before, we are not a system level test provider for AMD because they mostly cover CPU. So starting from MI 400, now we are big designer supplier.

All right. And lastly, on the automotive demand for SLT.

Sorry, I don't understand your question, sorry.

I think so far this year, much of the demand actually comes from auto chip testing, much of the SLT demand comes from the auto testing, right? So are we going to see -- yes, are we going to see similar strength for next year as well?

Well, same product continue -- due to our capacity doesn't apply for equipment making -- equipment company. So this year's driver, remember, we mentioned that some amount is -- small amount carried forward from last year GB plus ASIC. So initially, our guidance regarding the system level test is flat to decline. But later, we rewrite out because the customers want to build on non-GB products. Non-GB product customers actually position those chips are for autonomous driving plus edge AI. But if you want to know the really detailed split, I think it depends on MDR.

Next one to ask question, [indiscernible]

First one, I want to know about how do we imagine the [indiscernible] SLT about the amount and its units, is similar to which generation about NVIDIA's solution like Hopper or Blackwell. How -- just how to imagine it.

You could try Hopper, yes.

And the second one is to update about the photonics solution and so from -- maybe some [indiscernible] and they mentioned about them, will have some progress in November. Is there any update about this?

Are you asking [indiscernible] CPU?

CPU, yes.

Sorry, are they being qualified, yet.

Still on -- yes, it progressed. But I'm not sure [indiscernible] about rumors. So I just want to check about is there any update or not?

I think they need to get qualified by customers before we talk about capacity built.

Okay. Got it. And sorry, the final one is about -- could we update about integration about power testing and -- yes, just power testing. Thanks.

Too many to account for integration.

Next one to ask question [indiscernible] from Bank of America.

A couple of questions, probably just from the third quarter first. How much contribution from data center-related power equipment now? Last time it was 40%. Would you provide some update? And how much of it is coming from China?

I think we still forecast 40%. I think just -- I think the proportion wise, maybe next year will be more than 40%, maybe, maybe because according to recent order received, still mostly the capacity is from the AI power because as I said, because AI power infrastructure migrate to another format, that's the key driver. I [indiscernible] for China because you know, [indiscernible]

Okay. Yes, that's right. So 40% for full year at the end of this year and could be higher for next year. So that's pretty helpful. And then just on the gross margins, down [indiscernible] versus same quarter in third quarter. But I think compared -- from a year-on-year comparison perspective, it is still improving and still compared with the historical rate, it is still on the high end. So should we think about this as a new norm going forward at least going to be like 50% levels or it is going to be dropping back to like high 60% level.

I think we see where we are, anything above 55%, we're very happy, that's it. Yes.

Okay. So you're not seeing your structural profitability guidance yet?

No. If you ask me the gross margin, which is we mostly reluctant to comment. I think we will maintain we are happy over 55%.

Okay. Okay. That's helpful. And then just on the forward outlook, could you share a little bit on the book-to-bill? I understand there is someone asked this question, but I mean, just from the qualitatively speaking perspective, would you say that the current book-to-bill for both power and also the semiconductor business is actually at the high end or even probably [indiscernible] high at this stage?

Okay. This is only 2 months left. So if you're using 3 months rolling, I can't do the BB ratio because the customers mostly place the order for next year. So -- but customers sometimes they give you the orders, which need to break down by 3 different period. How could I really provide you the BB ratio with 3 months rolling. Yes, we have to skip this question. Thank you.

Sure, sure. Okay. I won't follow up on this one. But just on the semi business versus the power business. Previously, you guided semi is going to outgrow, but with stronger than-expected power demand year-to-date, are you still holding the guidance? Or it seems that power is going to outperform semi for this year at least?

Maybe semi will catch up next quarter.

That sounds pretty promising. Okay. And then initial view in 2026 -- this is going to be my last question, and I'll be back in the queue. Do you have a view which segment is stronger? Is it semis or power because you mentioned that power is going to grow double digit. And I assume that based on your comment on [indiscernible] metrology just now, semi should also be at least growing double digits as well. So just wondering if you could comment based on the current customer backlog, which segment is probably going to outperform the other?

Okay. Next year, 2026, our new -- our second step will start ramping. And we're glad to receive those orders and to meet the customers' needs. So this already answered your question.

[Operator Instructions] Next one, we have Jerry Tsai from JPMorgan.

Jennifer, yes, two questions for me. I think, first of all, the -- yes, for the power business, we understand like [indiscernible] key customers. But just wondering if the international U.S. power ODMs such as Vertiv, Flex, are those are -- do they also use your equipment -- testing equipment extensively? That's my first question.

I think Vertiv mostly is very, very high power like a power station type. We don't cover those high-end. And if you want to say initial period, someone like AI. But the fact is you talk about those AI components, especially for server data centers, I think those have already account for quite a big chunk.

My question is basically, you probably still see some newcomer or people want to grab a piece of the very strong data center power inside the data center, right? So just wondering if the new -- anyone new come to this market, would they mostly buying the Chroma equipment?

But for new solution, the new structures need to be approved by the customers. This is not something all you want to make and you can sell.

So maybe you can give us some indication about the competition landscape.

What do you mean by competition? You mean our competition or Delta's competition?

Yes, yes, your competition, yes. Or you don't see any competition?

I wouldn't use the word [indiscernible] vendors, but Delta -- we could say Delta [indiscernible] others AI that prefers. So I have to say product is ready, but just scheduling to build out the capacity next year. So my key point is scheduling next year. So with me everyone is ready for that.

Okay. Understood. Okay. Maybe move on to the next question. Next question is related to potential future acquisition. I was just wondering -- because I think I recall a few years ago, you bought some start-up that focused on the thermal technologies. Are you looking to do that in the future?

We always do. Every year, we have 5 to 10 acquisition opportunity and under evaluation. Yes.

We always keep the radar out, yes.

Yes.

Yes. Well, without reviewing the details, but can I say thermal management will be one of the key areas that you're looking into?

Not only to that.

Not only that. All of them.

Next one to ask question, from [indiscernible] Capital.

Also a follow-up on AI server power-related business. Based on your customers' capacity expansion plan, it seems like next year or 2027 onwards will be even bigger years for them. And I understood you have many power testing products. May I assume on 800V HVDC, your products are ready, but not yet shipped to the customer?

Yes. [indiscernible] this year. So all of these driver of sales contribution only for current [indiscernible] product, is not yet to ramp up 800V and HVDC.

Yes, sure. And then -- but based on this, we already saw 3Q deliver quite strong growth for this business. But you have still so many projects on hand and we can assume the 800V HVDC will be very big. So can we assume still quite strong growth for power business next several quarters or several years?

I would say like several, like 5 years, but you say a couple of years, yes.

Next one to have question, Arthur Lai from Macquarie.

I would like to ask non-power question. So in the semiconductor on the same test solution, we know the 15% year-over-year growth. And can you give us more color on the future booking.

What do you mean by future booking. Okay.

Probably quarter 4 or next year, right, yes.

Okay. Equipment company, some has -- actually most [indiscernible] forecasting the schedule. And they cannot be just like the components makers, equally break down into like 3 or 4 quarter like this. They couldn't do that. To be honest, on the semiconductor sectors, I don't think this evolves -- was kind of disappointment because I think third quarter, we just, I would say, mostly is the system level testers. And the photonics sectors have not been changed, as I -- I probably mentioned before, all this year remains strong due to the migration to 1.6T.

So it was dollar-wise, I think photonic sectors in every quarter is not very much -- by dollars, it's not very much change. But I have to say maybe system-level test is the biggest contribution and metrology really need to support the foundry date schedule. So that's why I said we still remain the whole year strong, will be strong. But that's why I said I will probably know, you would not start do better than what we have for the third quarter, I mean, for the coming fourth quarter.

But, you know, this year is the -- this year is -- okay, this year is only 2 months left. I think for equipment company, those numbers, whatever we could have is pretty much that kind of level. I think we will pretty much somehow meet the market expectation. But I think people should look forward for the '26 because currently all the orders, including metrology, system level testers, customer order, customers all asking for '26 already.

I think we -- already we're having strong demand from the '26, we [indiscernible]

Some of the critical component, maybe a little bit [indiscernible] not seen any shortage.

Just to followup on next year. You just [indiscernible] looking through the -- actually, hoping how much percentage [indiscernible] system actually.

From a stake wise...

I think from a stake wise, I think we have at least, we can probably at least 50% to double.

I know we are based on floor space turnover, it doesn't mean we could fully occupy [indiscernible] we gradually extend...

Exactly...

But you know, we're glad to have this second phase. As you could see, foundry definitely, you always need to maintain certain level of inventory to support whatever they want the equipments. And then as you could see from want to sell short for those deltas and light on demand, we're willing to build up a special growth phase to them.

Currently, there are no questions. So ladies and gentlemen, we thank you for your participation in Chroma's conference. There will be a webcast replay within an hour. Please visit www.chroma.com.tw/investor/index under the Investor Relations section. You may now disconnect. Thank you again, and goodbye.