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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to Hua Hong Semiconductor First Quarter 2021 Earnings Conference Call. Today's call is hosted by Mr. Junjun Tang, President and Executive Director; and Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. [Operator Instructions]
The earnings press release and first quarter 2021 summary slides are available to download at our company website, www.huahonggrace,com. Without further ado, I would like to introduce you to Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. Thank you.
Good morning, everyone, and thank you all for joining on our first quarter 2021 earnings conference. Today, we will first have Mr. Junjun Tang, our Executive Director and President, make his remarks on our fourth quarter performance. President Tang will address in Chinese, and Kathy Chien, our Deputy Director of Investor Relations, will be the translator. Again -- I mean after that, I will discuss our financial results and provide guidance for the next quarter. This will be followed by our question-and-answer session.
I now turn the call over to our Executive Director and President, Mr. Tang.
[Foreign Language]
[Interpreted] Good afternoon, everyone, thank you for joining our earnings call.
[Foreign Language]
[Interpreted] Our performance for the first quarter of 2021 was extraordinary, driven by strong demand for virtually all platforms, in particular NOR Flash, MCU, IGBT and CIS. Revenue reached USD 304.8 million, an increase of 50.3% compared to the same period last year and 8.8% above the previous quarter, well above our revenue guidance and Street consensus.
[Foreign Language]
[Interpreted] Growth margin was 23.7%, 2.6 percentage points above Q1 2020, largely attributable to improved capacity valuation, better product mix and increased overall selling price, and 2.1 percentage points below Q4 2020, primarily due to payout of a company-wide bonus prior to Chinese New Year. Net profit was USD 20.9 million.
[Foreign Language]
[Interpreted] Let me give you an update on the status of our 12-inch fab in Wuxi that has shown amazing progress. Revenue contribution from the new fab was USD 54.6 million in Q1 2021, representing 17.9% of total revenue and an increase of 53.1% quarter-over-quarter. Currently, monthly capacity in this new facility is 40,000-plus wafers and the fab has been fully loaded. Because of strong demand, we expect this fab will continue to perform in this fashion into the future. For this reason, last year, we accelerated our capacity expansion plan, we will reach 65,000 wafers per month by the end of this year and fully expect to reach 80,000-plus wafers per month by mid-2022.
[Foreign Language]
[Interpreted] Management is confident about our continued growth, mainly based by the following facts: first, our capacity is rapidly expanding; second, our research and development team continues to deliver competitive specialty technology platforms; and third, global semiconductor demand, particularly in China, will continue to expand.
[Foreign Language]
[Interpreted] Hua Hong Semiconductor continues to be very excited about our mission to be a leading special technology provider for the global semiconductor industry. We are in a very exciting time, and I believe 2021 will be a special year for the company. This will be a year of strong growth, and our team is committed to achieving another major milestone.
[Foreign Language]
[Interpreted] Now I would like to hand the call over to our CFO, Mr. Daniel Wang, for his comments.
Thank you, Mr. Tang for the very inspiring comments. Now let me begin with a summary of our financial performance for the first quarter, followed by our outlook on revenue and margin for the second quarter, and then we will move on to the question-and-answer session.
First, let me summarize financial performance as of the first quarter. Revenue reached an all-time high of $304.8 million, 50.3% over the prior year, primarily driven by the increased demand for CIS, MCU and discrete products; and 8.8% above the prior quarter, mainly driven by increased demand for NOR Flash and discrete products.
Cost of sales $232.7 million, 45.3% above Q1 2020 and 12% over Q4 mainly due to increased wafer shipments, depreciation and labor costs. Gross margin was 23.7%, 2.6 percentage points above Q1 2020, primarily driven by improved capacity utilization, better product mix and increased average selling price; and 2.1 percentage points lower than Q4 2020, mainly due to increased depreciation and labor costs, partially offset by improved capacity utilization and increased average selling price.
Operating expenses were $59.5 million, 16.7% below Q1 2020, mainly due to decreased research and development costs, and 2.7% below Q4 2020. Other income net was $7.1 million, 64.5% lower than Q1 2020, mainly due to decreased government subsidies and fair value gains on financial assets; and 70.9% lower than Q4 2020, primarily due to foreign exchange loss versus foreign exchange gain and the decreased share of the profit of associates.
Income tax credit was $1.1 million compared to $11.4 million in Q1 2020 due to decreased reversal of dividend, withholding tax accrued for the prior year and increased taxable profit. Profit for the period was $20.9 million versus $2.7 million in Q1 2020 and $28.2 million in Q4 2020.
Net profit attributable to shareholders of the parent company was $33.1 million compared to $20.3 million in Q1 2020 and $43.6 million in Q4 2020. Basic earnings per share was $0.025 versus $0.016 in Q1 2020 and $0.034 in Q4 2020. Annualized ROE was 5.2%, 1.6 percentage points over Q1 2020 and 2 percentage points lower than Q4 2020.
Now I will discuss the operating results for both Hua Hong 8-inch wafer fabs and Hua Hong Wuxi 12-inch wafer fabs. First, let's have a look at the Hua Hong 8-inch wafer fabs. Revenue was $250.2 million, 24.7% over Q1 2020 and 2.4% above Q4 2020. Gross margin was 27.3%, 6.2 percentage points over Q1 2020, primarily due to increased average selling price, improved capacity utilization and better product mix; and 1.3 percentage points lower than Q4 2020, mainly due to increased labor costs partially offset by increased average selling price.
Operating expenses were $32.5 million, 11.8% over Q1 2020, mainly due to increased depreciation and labor expenses; and 103.5% above Q4 2020, primarily due to the recognition of certain government grants in Q4 2020. Profit before tax was $44.5 million, 64% over Q1 2020 and 33.6% lower than Q4 2020.
Now let's have a look at the performance of Hua Hong Wuxi wafer fab. Revenue was $54.6 million versus $2.3 million in Q1 2020 and $35.7 million in Q4 2020. Operating expenses were $27 million, 36.3% lower than Q1 2020 and 40.3% below Q4 2020, mainly due to decreased development costs partially offset by decreased government grants for research and development. Most important of all, EBITDA was plus $9.7 million for the first time.
Now I will provide more details on our revenue from Q1 2021. From geographical perspective, revenue from China was $219.7 million, contributing 72% of the total revenue, an increase of 76.4% over Q1 2020, mainly driven by increased demand for CIS, MCU, IGBT, general MOSFET, NOR Flash, super junction and smart card ICs. Revenue from Asia was $35.9 million, an increase of 22.5% over Q1 2020, mainly driven by increased demand for MCU, general MOSFET and logic products.
Revenue from the United States was $28.3 million, an increase of 11.6% over Q1 2020, chiefly driven by increased demand for other PMICs, super junction and logic products. Revenue from Europe was $14.8 million, a decrease of 8.7%, compared to Q1 2020, mainly due to decreased demand for smart card ICs. Revenue from Japan was $6.1 million, a decrease of 18% compared to Q1 2020, mainly due to decreased demand for logic products and super junction.
With respect to technology platforms, revenue from embedded nonvolatile memory was $94.5 million, an increase of 28.8% over Q1 2020, mainly driven by increased demand for MCU and smart card ICs. Revenue from standalone nonvolatile memory was $11.6 million, an increase of 306.2% over Q1 2020, primarily driven by increased demand for NOR Flash products.
Revenue from discrete was $109.5 million an increase of 44.6% over Q1 2020, mainly driven by increased demand for IGBT, general MOSFET and super junction products. Revenue from logic and RF was $49.8 million, an increase of 153.2% and over Q1 2020, largely driven by increased demand for CIS products. Revenue from analog and power management IC was $38.8 million, an increase of 25% over Q1 2020, mainly driven by increased demand for other power management IC products.
Let's now take a look at the cash flow statement. Net cash flow generated from operating activities was $60.8 million compared to $6.6 million net cash flow used in operating activities in Q1 2020, largely due to stronger collection of trade and notes receivables and increased receipts of VAT return. Capital expenditures were $167.4 million in Q1 2021, including $143.1 million for the Wuxi fab and $24.3 million for the Hua Hong 8-inch fabs.
Other cash flow used in investing activities were $0.2 million in Q1 2021. Net cash flow generated from financing activities was $146.9 million, including $143.2 million proceeds from bank loans and $6.5 million proceeds from share option exercises, partially offset by $2.7 million of lease payments and $0.1 million of interest expenses for bank borrowings.
Now let's move to the balance sheet. Cash and cash equivalents was $961.5 million on March 31, 2021, compared to $922.8 million on December 31, 2020. Inventories increased from $226.5 million on December 31, 2020, to $389.9 million on March 31, 2021, primarily due to the acquisition of a piece of land used for real estate development and increased wafer demand from customers.
Other current assets decreased from $135.7 million on December 31, 2020, to $36.5 million on March 31, 2021, primarily due to decrease of prepayments. Property, plant and equipment was $2,498.5 million on March 31, 2021, compared to $2,510.4 million on December 31, 2020. Total assets increased from $4,568.6 million on December 31, 2020, to $4,682.4 million on March 31, 2021.
Our total bank borrowings increased to $709.2 million on March 31, 2021, from $566.2 million on December 31, 2020. Total liabilities increased to $1,326.9 million on March 31, 2021, from $1,214.5 million on December 31, 2020, primarily due to increased bank borrowings. Debt ratio increased to 28.3% on March 31, 2021 from 26.6% on December 31, 2020.
Finally, let me give you a top level outlook for the second quarter 2021. We expect revenue to be approximately $335 million and our gross margin to be between 23% and 25%.
This concludes my financial remarks. Now we would like to start the question-and-answer session. Operator, please assist. Thank you.
[Operator Instructions] Your first question comes from Randy Abrams from Credit Suisse.
Good job on the ramp of the Wuxi fab. I wanted to ask a follow-up on the guidance for second quarter. I think with the 12-inch fab you're running or mentioned you're running pretty close to full utilization. Based on the shipment in first quarter, it seems like you could do even more revenue growth in second quarter if you ship that out. So I'm curious if you expect to get to pretty full run rate, like 40,000 wafer per month shipment? Or due to the timing, some of that would be more later in the year?
Randy, that was an excellent question. I always thought -- I expect that you guys -- whether the investors or analysts always want more, I can understand that. That's -- it's a very good question. I -- we -- this is a great guidance, okay? I mean quarter-to-quarter, it's virtually 10%, okay, growth. And compared to a year ago, it's going to be close to virtually 50%. So I think this is a good number.
Let's see, I mean, we are extremely strong, extremely strong. Let's see how it goes. We had a great Q1, the best Q1 and the best quarter ever. So we like to give out this number. I think it's a good -- it's a very good number. And I think let's see how we can improve based on that. Thank you, Randy.
Okay. Great. And could you clarify the utilization if like the 12-inch you expect to -- because it's showing a full utilization, but how we should update the capacity ramp that's kind of effective that you could ship to over the next few quarters? And then how you see the shipments ramping up against that capacity in the next few quarters?
Yes. That's very good. Very good. Let me just give you some idea. We were -- currently, we have 40,000 wafer capacity. We're going towards 48,000. That is virtually the mark, the first phase of the build-out for this fab. So -- and then our goal is to get to 65,000 capacity by end of this year. So I think the demand, as I said, has been extremely strong. I think we had 40,000 wafer capacity. We still have that right now, and we were running 40,000 -- we're basically low 40,000, wafer in was 40,000 -- more than 40,000 in March and more than 40,000 in April, okay?
So we're -- I mean, the capacity continued to grow. I think, as I said, get to about 48,000 by mid of this year and then get to about 65,000. We are expanding very, very quickly. We expect the 65,000 wafer capacity will be reached by end of this year. And we'll continue to ramp up very, very quickly towards that number. I'm not sure we can get to 65,000 by -- in terms of loading, but I can surely expect that ramp-up will be very fast and great.
Okay. And could you give an update on the ASP side, how you see the 8-inch and also the 12-inch progressing as you go through that ramp and also shift on the application mix?
Well, we start to adjust the ASP in -- for the 8-inch in Q4 last year, [ check ] that toward -- in Q4, beginning of Q4 I think, so -- because of strong demand. And I think we do it very cautiously, I think. We have to remember, we still have a 12-inch fab that is ramping up very, very fast. We need all the help we can from our -- whether existing or new customers, okay? But let me tell you this, the ASP is rising nicely. We're there like some other player fabs, whether globally, they just raised their ASP in a pretty fast fashion. Stock went up and the next -- after a while just dropped drastically. So we certainly don't want to be that kind of company. okay?
So I think we're going to see a very, very nice rise on ASP throughout this year, okay, every quarter. Think about it, if you can do 3% to 5% every quarter, hey, it's going to be very, very nice. We have certainly raised ASP on some of our customers started last year. And we also started to raise ASP for the 12-inch guys this year. So I mean you're going to see that every quarter very nicely, very nicely. We had a nice ASP rise, especially for the 8-inch in Q1, okay? With the 12-inch, I think we can definitely do a lot more in the future. But just wait and see, it's going to be a fantastic year for us.
Okay. I get it, that's good. And if I could have one final one, I'll just put it into 2. Inventory, if you could split out the land piece versus how much was WIP? And would that land, like that property, stay in inventory? Or is that a short term? And what is -- if you could give a little more color on what that's tied to.
The land was virtually to build a sort of residential place for our employees there. It's mostly -- 60% of the property will be used for our employees there. And then the other -- that's the plan, 40% will be used for offices and that sort of things. It's -- the cost of the land is about 1.04 -- I mean $104 million out of that number. So out of that inventory number, $104 million is for the land, okay?
Okay. Great. And then the second part was just to follow up on the ASP. With that type of increase, you do have depreciation. Does it net out that the gross margin you kind of manage to pretty similar type of range? Or you could start to see a bit of improvement in the gross margin even with the depreciation ramping?
Talking about the 8-inch or 12-inch?
I guess we can talk about both, if you can give that color. Go ahead, sorry.
I mean we -- the 8-inch business was -- the gross margin was 27.3%. But you know what, it was largely because a new year bonus payoff, okay? Part of that was accrued last year. Part of this was come out -- it was coming out from Q1. So it was about $10 million within the overall cost of goods sold. So that itself, we take that out, you're virtually getting very close to 30%, okay? Our goal, the 3-inch fabs is going to get to 30%, okay? That is the goal for the year. It's going to be -- I think we're going to be seeing 30% even more in the -- hopefully, by end of this year for all of -- for the year.
And I think the 12-inch will also do well, because we're ramping very, very fast. But you have to remember, the depreciation expenses are huge, okay? As we continue to ramp, there's going to be more and more depreciation expenses. I think we -- I would not just -- it is gross profit positive this quarter. But you know what, don't take that too seriously because I would just do not get gross margin this year, okay? But I can tell you, hey, as I said in the last quarter, our EBITDA is positive, okay? It's a major, major achievement. I think the EBITDA will -- that will become negative again, that's what I predict.
Your next questions come from Andrew Lu from Sinolink.
[Foreign Language] First one, regarding your CapEx, what's the update for this year CapEx?
Andrew, let me answer that question, small financial question. The CapEx for this year, okay, including the expansion for -- to 65,000, okay, from 48,000 to 65,000, for the Wuxi fab, I think overall it's going to be about 1 point -- close to $1.2 billion, okay? It is $800 million for the expansion, new phase expansion, plus some of the -- this is on cash-out basis, some of the money we still have to pay for the first phase, to get 48,000. And then for the Wuxi Hua Hong 8-inch, I mean for the Hua Hong 8-inch, it's going to be around 1 point -- $126 million, $130 million. How is that? That would be a rough number. So overall it's about $1.3 billion, slightly over.
Yes. Earlier, you mentioned the 12-inch wafer fab capacity will reached 65,000 per month. How about 8-inch, will you add 8-inch capacity as well?
[Foreign Language]
[Interpreted] So from Q4 2020, we started some capacity optimization for the whole company. As for the 8-inch, we address the product mix and improve some capacity ability. So overall, for the whole fab, we improved about 10%.
[Foreign Language]
[Interpreted] So we're ramping up very fast on the 12-inch fab. At the beginning of this year, we have capacity around 20,000. In April, we already -- we will start about 40,000 wafers per month, and our utilization is above 100%.
[Foreign Language]
[Interpreted] So thanks to the shareholder support, we have already started the capacity expansion plan to 65,000. And we will release the capacity gradually. And hopefully, by the end of this year, we can achieve 65,000 wafer per month capacity.
[Foreign Language]
[Interpreted] And along with the capacity expansion, we also accelerated the R&D process on the specialty technology platforms. Up to now, all the platforms -- the R&D process for all the platforms are going very smoothly. We have many products ramping up going to the mass production.
[Foreign Language]
[Interpreted] We anticipate our utilization rate will remain at a very high level by the end of the year -- until the end of the year and almost close to 100%.
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
Got you. Got you. [Foreign Language]
[Foreign Language]
Andrew, let me talk about this. Andrew, you there?
Yes. Yes.
So we have -- I mean, have been upgraded and acquire necessary tools to replace some of old tools for the 3 8-inch fabs for many years. So through that effort, we'll continue to improve the product mix within discrete, within MCU, within some other things, okay? And at the same time, we're going to be raising -- because of strong demand, we're going to be raising price, okay? So that's going to happen very seamlessly, naturally, okay?
So I expect that we're going to have a great -- get some great performance out of these 3 old fabs this year, okay? They're doing very, very well. Just look at our Q1 number, okay, $250 million from the 12-inch -- I mean 8-inch fabs. So I expect it will get better and better this year, okay? I always talk about $1 billion revenue from that the 3 old 8-inch fabs, but I think, you know what? This is a year, we can make it happen.
Yes. And then my last question is regarding your gross margin. You already mentioned the 8-inch wafer fab, you are targeting for 30% gross margin this year. And the 12-inch, it seems you are not that comfortable with the current 7% margin. So if we mix together, can we say for the rest of the year, your second quarter guidance already out, can you -- can we say the second half of this year margin will be quite similar or below or above the first half 24% gross margin, combine both 8-inch and 12-inch?
You're talking about second half? You mean like second half gross margin...
Second half this year.
Between first half and second half, right?
Yes. yes.
I think we'll continue to ramp very, very quickly. I think even the product mix for the 12-inch fab will get better. But you have to remember, It is brand-new fab. We're managing the depreciation expenses very, very carefully, okay? It is a lot of depreciation expenses. But you know what, Andrew, don't worry about it. You're always dwelling on gross margin for the 12-inch fab, forget it. Just think about -- look at the revenue, look at the revenue growth and then look at the cash EBITDA. How quickly we turned that number, okay? It was negative. It's positive now, okay?
So the gross -- the depreciation expense is good. You have to have that. That's part of the process. It will affect gross margin, but the important thing is focus on revenue, okay? The 3 8-inch fabs will have great gross margin. They're going to be quickly get to 30% or even above. But the 12-inch fab, you know it's going to take a while. It's $2.5 billion initially, the first phase. This time is another $800 million. But you know what, our ASP is getting better and better, okay? I mean I can't predict how the gross margin is going to go over the 12-inch because the in and out [ flex ] is going to be -- really, it's going to be a pretty -- it's hard to just predict. But I think overall, it's going to get better and better.
Your next question comes from [ Huang, Lu Ping ] from Huatai.
I have 2 questions. One is about your Wuxi fab? So since you will reach 65,000 wafer per month by end of this year. I think you may also -- you must also consider to -- the further expansion ahead. So -- but what's the idea -- what's the new application you plan to introduce to this Wuxi fab? Or you are basically expanding the existing platform? And currently, my feeling of the Wuxi fab is that the ASP is much relatively lower versus your peer. It's below USD 500, if you use that. And EBITDA margin seems to be not so ideal. So when you introduce the new application, do you expect any change on this -- your profitability of the Wuxi fab?
I don't know where you get the number, $500 for the 12-inch fab. That is completely wrong.
8-inch equipment. 8-inch equipment.
Well, that's a different story. Let's make that very clear. I mean if it's $550, so $550 x by 2.25, it should be getting to $1,200, $1,300. That's a very respectable price for the 12-inch business initially, okay? Let me tell you, we're not -- I mean, just overall, we're not there yet. I think there are 2 parts. One is the discrete, the other one is the IC, like the NOR, the NAND, larger high RF, BCD. But the discrete part just goes anywhere from -- at this point $400 to -- $400, $500 to up to $800 or $900. So the idea is to continue to improve, okay?
Out of 40,000 wafers, the 18,000 wafer capacity is dedicated for the discrete. The idea is to get into -- get them into the high-end stuff like IGBT, okay? So their ASP could be higher. The IGBT is, in 8-inch, it's about $400, $450. So hopefully get to close to $1,000. The idea is to get all of the capacity for IGBT and high-end stuff, the high-voltage discrete products. That is the plan.
And then for the IC part, hey, we're getting things from about $1,200 to $1,500, okay? So you have to realize, things will get better and better. CIS is initially run around $1,000 at 90-nanometer, it's already improving even within that technology node, at that technology node. But I think going forward, it would be at -- 55-nanometer, it will be $1,200, $1,300 or even more. And some of the new applications we're doing, it is all at around $1,500. okay? So it's going to be -- where this fab is doing, what it's doing in its most efficient way. I mean nobody else can deliver a 12-inch fab at the rate that Hua Hong is doing, okay? So I mean -- okay, I mean, I hope -- I don't want to answer some of your questions. But maybe I'll let Junjun answer the initial part that you have.
Was your question about...
Yes. Maybe I say it again in Mandarin. So [Foreign Language]?
[Foreign Language]
[Interpreted] So we are progressing the overall Wuxi fab according to the original target from last year, and we have 5 major specialty technology platforms. We achieved all the targets we set 2 years ago, and we have engaged in many new customers and existing customers, so we can achieve 40,000-plus wafers. We will start in April.
[Foreign Language]
[Interpreted] So thank you for your question just now. So for the next step expansion plan from the history of our platform, we are developing based on the specialty IC and advanced discretes.
[Foreign Language]
[Interpreted] So from the IC perspective, we have MCU embedded nonvolative memory and the PMIC, the -- and structural technology platforms, we will reserve -- we will research on the more advanced technology nodes and we can introduce more applications according to customers' demand to satisfy our requirement for capacity expansion.
[Foreign Language]
[Interpreted] So we have already achieved decent performance in the 12-inch power discrete as that we have many customers, strong demand in all 4 platforms.
[Foreign Language]
[Interpreted] So on one hand, we will continue to enhance our existing technology platforms to satisfy our customers' demand. On the other hand, we will focus on the new energy vehicles.
[Foreign Language]
[Interpreted] We are very confident along with our capacity expansion to 65,000, we will ensure our capacity utilization rate around 100%.
[Foreign Language]
[Foreign Language]
[Interpreted] So from our business structure, we have around 1/3 business in the communications field.
[Foreign Language]
[Interpreted] So according to our communication with our customers, the market demand for the second half is still very strong, except -- not only in the communications, also the new energy vehicles and BCD, MCU, industrial and et cetera.
[Foreign Language]
[Interpreted] And in particular, for the power discrete.
Your next questions come from Ng Szeho from China Renaissance.
My first question is regarding the Wuxi fab. Given the very rapid ramp of the factory, is it fair to assume that the company is getting a high level of customer commitment? Or is there any take-or-pay arrangement in place for the customers?
[Foreign Language]
[Interpreted] So we have such high utilization rate at Hua Hong Wuxi, thanks to our specialty technologies, the acceptance of the customers and the market.
[Foreign Language]
[Interpreted] So our embedded technology support some demand from domestic design companies.
[Foreign Language]
[Interpreted] So BCD and power management platforms are well accepted by some North America and Europe customers.
[Foreign Language]
[Interpreted] So for more capacity at our Wuxi 12-inch fab, our customers are also accelerating their R&D process.
[Foreign Language]
[Interpreted] So we are facing strong pressure in tape-out.
[Foreign Language]
[Interpreted] And we are very confident our R&D team will deliver the technologies, satisfying customers' demand and -- for the market requirement.
Okay. And second question, maybe for Daniel. Can you share with us the capital injection timing or amount from your JV partner because you are now embarking on the second phase of expansion?
Okay. Okay. Very good question. Good question. So the first phase was a $2.5 billion investment. It includes land, the shell for the first the fab and also clean room facility and all that, and also the 48,000 wafer capacity. So for the second phase, that was $2.5 billion. So out of that $1.8 billion was equity from various -- the 3 major shareholders. So we own 51%, the IC Fund own 29% and then Wuxi government owns 20%, okay?
Now for the second phase, as you look at debt-to-equity ratio for the first phase, we actually had $1.8 billion equity, only borrowed $700 million. So we had enough -- the debt -- basically, the debt ratio was very low. So we discussed for the second phase, it's about $800 million for the expansion to 65,000, okay? So that we basically didn't bother the shareholders at this point. I think we basically we're going to be doing -- raise another -- put together a syndicated loan group. It's going to be basically $800 million loan. We're going to be doing that. So that's what we've done.
Okay. All right. Very clear, yes. And lastly and for that fab, what's the maximum capacity that you can achieve? I think especially beyond the 80,000 waiver?
Probably 80,000 to 90,000.
That's the max, right?
Yes. So I mean -- so after this, we go from 65,000 to 80,000 to 90,000. It's going to be a little bit more, but it's going to be also -- we're thinking about 40-nanometer, a small mini line maybe. So it's going to be a little bit more, but we're going to get there.
Okay. But basically, the 90,000 is the maximum, right?
Yes.
Your next questions come from [indiscernible] from Tianfeng Securities.
First is a follow-up question about the Wuxi fab. Looking into the product mix when the capacity reach 80,000 per month in the mid of 2020 -- 2022.
On the product mix?
Yes.
Well, right now, we're looking at it 40,000, it's like -- the CIS is about 10,000 to 15,000 when you look at 40,000. So the power discrete would be 18,000. And then 15,000 will be CIS, logic and RF 5,000, and embedded is 5,000 to 10,000, I think 5,000 for now. But the rest would be logic and some NOR Flash. NOR Flash is easily 5,000 to 10,000. That's for 40,000. You can think about, basically, this is going to continue to expand based on the need of our customers.
Okay. And the second question about your 8-inch fab ASP increase. Can you break them by product, which product contributes to ASP increase mostly in the first quarter? And how the 8-inch product mix change in the first quarter?
Virtually across all platforms, we're seeing strong demand. But we really look at that. We have -- ASP increase our MSUs. All the power discrete products from low voltage to high voltage has all gone up. I think you're going to see more in the second quarter, okay? Because we started in Q4 last year, so only part of that thing would reflect in Q1. But I think in Q2, you're going to see a lot more, a lot more. So I think it will have more impact on the ASP.
Your next questions come from Chi Tsai from Jefferies.
Daniel, so when I look at the 12-inch depreciation, I think it was around like -- I think decreased in first quarter versus fourth quarter last year. So I'm just wondering as you expand capacity in first quarter, why the depreciation of 12-inch Wuxi fab will decrease? And how [indiscernible] for 12-inch and 8-inch this year?
I didn't understand your first part, okay? The depreciation expense for the 12-inch fab decreased compared to what?
Yes. So we did some math on your 12-inch P&L and we found that the depreciation in 12-inch actually decreased in the first quarter.
Compared to Q4?
Yes.
Last year, Q4 was -- that is not true. That is not true. Last year, overall depreciation expense for the 12-inch fab for Q4 was 25 -- $26 million, and this time was around $33 million. So let me just give you the overall depreciation forecast for depreciation expenses. I think for the Wuxi fab for the whole year, it's going to be around 100 -- slightly under $180 million, probably $170 million to $180 million, okay? And then for the 8-inch business, it's going to be around $144 million for the whole year. So overall, we're talking about $320 million.
I see. I see. So my next question is regarding on your product mix, when you expand your capacity from 65,000, like what's the driver of those 25,000? And so can you share what will be the main drivers when you expand from 65,000 to 80,000?
Hey, we're looking at many things. CIS moving from 90-nanometer to 55. Standard NOR Flash, it's ramping up very, very quickly. There are also strong demand for BCD. BCD, that's the new thing. We have a few other things that are still under R&D work. I can't really share with you at this point because confidentiality that we made -- commit to our customers. Very, very high ASP, high-margin products, so -- in some of the very interesting areas. So yes, I mean it's going to be very, very, I would say, high-demand, higher-margin products.
Got it. Also just a follow-up, can you share a little bit outlook on what's the current stage of your 55 and 90 nanometers like allocation? And how do you expect it to migrate, let's say, in the following quarters?
I'm sorry, I didn't get you. The what?
I mean the what's the [ outlook ], like what's your breakdown or allocation between 55-nanometer and 90-nanometer from your 12-inch fab? And how do you -- how fast can you expect it to migrate?
Well, at this point, it's more 90, less 55. But 55 is moving very, very quickly, especially for CIS or NOR and some other stuff, okay? So -- and even BCD. But eventually, the goal is to move all of them at that to 55, because they are more better ASP and high margins.
Your next questions come from [indiscernible] Fund.
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[Interpreted] So the current breakdown will be 18,000 for power, around 10,000 for eFlash and BCD, 10,000 for CIS and some other products. And for the -- from 40,000 to 65,000, we will add some 55-nanometer ICs like CIS, MCU and eFlash.
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[Interpreted] So from the current point of view, I don't see any change for the market demand. We are very confident that our utilization rate will keep at a very high level. So we will do better and better.
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[Interpreted] Yes, that's correct.
Ladies and gentlemen, that's all the time we have for questions. I will now hand back to Mr. Daniel Wang for closing remarks.
Well, again, thank you all for joining us today, and the valuable questions and input. We look forward to seeing you again in the next call. I wish you all continue to stay safe and healthy. Believe me, I sincerely hope we're able -- we'll be able to meet you in person very, very soon. Thank you.
Ladies and gentlemen, thank you for your attendance. You may now disconnect.