Hua Hong Semiconductor (1347) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $478.5 million, down year-over-year but up sequentially, with gross margin at 10.5% and net profit attributable to shareholders at $6.7 million; 1H 2024 revenue was $938.5 million, down 25.6% year-over-year, with a net loss of $67.0 million.

• Gross profit for 1H 2024 dropped 78.9% year-over-year to $79.7 million, with gross margin at 8.5% versus 30.3% in 1H 2023.

• The semiconductor market is stabilizing, with recovery driven by consumer electronics and improved capacity utilization, as 8-inch utilization exceeded 100% and 12-inch lines neared full production in Q2 2024.

• Construction of the second 12-inch production line is ahead of schedule, with trial production expected by year-end and capacity release in Q1 2025.

• Analog and power management platforms performed strongly, while high-end power discrete devices faced demand and price pressure.

Financial highlights

• Q2 2024 revenue was $478.5 million, down from $631.4 million in Q2 2023 but up from $460 million in Q1 2024; 1H 2024 revenue was $938.5 million, down 25.6% year-over-year.

• Gross margin was 10.5% in Q2 2024 (down from 27.7% in Q2 2023, up from 6.4% in Q1 2024); 1H 2024 gross margin was 8.5%.

• Net profit attributable to shareholders was $6.7 million in Q2 2024, compared to $78.5 million in Q2 2023 and $31.8 million in Q1 2024; 1H 2024 net loss was $67.0 million.

• Net cash flow from operating activities was $96.9 million in Q2 2024; cash and cash equivalents reached $6,423.9 million as of June 30, 2024.

• Basic EPS was $0.004 in Q2 2024 (vs. $0.006 in Q2 2023 and $0.019 in Q1 2024); 1H 2024 EPS was $0.022.

Outlook and guidance

• Q3 2024 revenue is expected to be $500–$520 million, with gross margin guidance of 10%–12%.

• ASP is expected to have bottomed in Q2, with gradual price increases anticipated in Q3 and Q4.

• Utilization rates are expected to remain above 95% through 2024 and into 2025.

• Gross margin improvement is targeted, aiming for 25%–30% for 12-inch fabs and 45%–50% for 8-inch fabs over the next 12–16 months.

• The company plans to expand production capacity, accelerate process development, and focus on advanced specialty IC and power discrete technologies.