Hua Hong Semiconductor (1347) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $526.3M, down 7.4% year-over-year but up 10% sequentially, with gross margin at 12.2%, both exceeding guidance and driven by increased wafer shipments despite lower ASPs.

• Net profit attributable to shareholders reached $44.8M, up 222.6% year-over-year and 571.6% sequentially, mainly due to foreign exchange gains and government subsidies.

• Basic EPS was $0.026, up 188.9% year-over-year and 550% sequentially.

• Capacity utilization reached 105.3%, reflecting strong operational efficiency and resilience.

• Construction of the new 12-in Wuxi production line is on track, with trial production and process verification expected by year-end.

Financial highlights

• Gross margin was 12.2%, down 3.9 percentage points year-over-year but up 1.7 points sequentially, mainly due to improved capacity utilization.

• Operating expenses were $81.4M, down 4.3% year-over-year and 9.9% sequentially, mainly due to lower engineering wafer costs.

• Net profit for the period was $22.9M, compared to a loss of $25.9M in Q3 2023 and a loss of $41.7M in Q2 2024.

• Other income net was $51.8M, a significant improvement from a net loss in Q3 2023, mainly due to foreign exchange gains and increased government subsidies.

• Annualized ROE was 2.8%, up 1.6 percentage points year-over-year and 2.4 points sequentially.

Outlook and guidance

• Q4 2024 revenue expected to be $530–$540M, with gross margin in the 11%–13% range.

• Management expects mild market growth in Q4, with continued focus on key technology platforms and specialty technologies.

• Additional depreciation from the new Wuxi fab will be minimal in H1 2025, estimated at $10–$20M in Q1 and up to $150M for 2025.

• Gradual ramp-up of new fab capacity, targeting 20,000 wafers per month by end of next year.