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Ladies and gentlemen, thank you for standing by, and welcome to Hua Hong Semiconductor's First Quarter 2022 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 2022 summary slides are available to download at our company's 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 afternoon, everyone. Thank you all for joining our first quarter 2022 earnings conference. Today, we will first have Mr. Junjun Tang, our Executive Director and President, make some remarks on our first quarter performance. President Tang will address in Chinese, and Kathy Chien will be the translator. 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. The call will be conducted in English. So please ask your questions in English. I will now turn the call over to Mr. Tang.
[Interpreted] Good afternoon, everyone. Thank you for joining our earnings call. Facing a complex situation with pressure from COVID and the changing market, Hua Hong semiconductor is adhering to its Specialty IC + Power Discrete strategy and delivered encouraging results in the first quarter of 2022. Our differentiated platforms, such as embedded nonvolatile memory, power discrete, analog and power management IC, logic and radio frequency and CIS made steady progress and continued to produce revenue growth. The company's first quarter 2022 revenue reached a record high of $594.6 million, a year-on-year increase of 95.1% and a quarter-on-quarter increase of 12.6%. Revenue from the 12-inch fab accounted for 44.1% of the total revenue versus 17.9% in the first quarter of 2021 and 38.9% in Q4 2021. In the context of continued global chip shortages in fields such as automotive electronics and new energy, demand for specialty technologies has remained high, boosting the average selling price for all products. Demand continues to rise assuring rapid growth of the company. We are now facing the urgent task of COVID prevention and control, and the world's economic recovery will be bumpy. Difficulties often come with opportunities and challenges often lead to invention. The company has designed a pandemic prevention and control system, which is strictly implemented by all employees. As at today, the company has demonstrated effective pandemic prevention and control results, orderly production organization, and fully-utilized capacity with a highly motivated workforce. We have always believed the best way to deal with difficulties is to focus on development, overcoming challenges by innovation. As an indispensable part of the integrated circuit industry, we have opportunities in a vast market, including automotive electronics, industrial control, green energy, Internet of Things and new-generation communications. We will continue making greater marketing-focused R&D-oriented investments, providing Specialty IC + Power Discrete platform, delivering to our customers, differentiated product solutions with better performance, lower power consumption and enhanced reliability. In order to set a solid foundation for our development strategy, increase our influence in the global foundry space, expand our business scale and strengthen our Specialty IC + Power Discrete platform, we will expedite the next phase of construction for Hua Hong Wuxi's 12-inch production line at full speed and to fulfill the ever-growing demand. I would like to thank all of our shareholders, customers and vendors for their tremendous support. All employees will earnestly implement the 4 Protections COVID-related requirements, stick to their positions, dedicate themselves to the company's future and focus on high-quality development of our specialty technologies. I believe Hua Hong Semiconductor is bound to set a new record and create a higher level of achievement through our unremitting efforts. Now I would like to hand the call over to our CFO, Mr. Daniel Wang, for his comments.
Thank you, Mr. Tang for the inspiring comments. Now let me begin with a summary of our financial performance for the first quarter, followed by an outlook on revenue and margin for the second quarter 2022. Then we will move on to the question-and-answer session. First, let me summarize our financial performance as of the first quarter. Revenue reached an all-time high of $594.6 million, 95.1% over the prior year and 12.6% above the prior quarter. Cost of sales was $434.6 million, 86.8% over Q1 2021, largely due to increased wafer shipments and 21.8% above Q4 2021, mainly due to increased bonus and depreciation costs. Gross margin was 26.9%, 3.2 percentage points over Q1 2021, primarily due to improved average selling price, partially offset by increased depreciation costs and 5.6 percentage points below Q4 2021, which I will explain later, mainly due to audit adjustment on government grants, increased bonus and depreciation costs, partially offset by improved average selling price. Operating expenses were $75.3 million, 26.5% over Q1 2021, mainly due to increased bonus and 136.2% over Q4 2021, primarily due to an audit adjustment on government grants and increased bonus. Other income net was $10.5 million, 47.2% over Q1 2021, primarily due to foreign exchange gains versus foreign exchange losses in Q1 2021, partially offset by increased finance costs and 62.3% below Q4 2021, largely due to decreased foreign exchange gains. Income tax credit was $6.9 million, 498% over Q1 2021, primarily due to a reversal of increased dividend withholding tax accrued for the prior year, partially offset by tax expenses. Profit for the period was $102.1 million, nearly 4x over Q1 2021 and 25.6% below Q4 2021. Net profit attributable to shareholders of the parent company was $102.9 million, 211.4% over Q1 2021 and 22.9% below Q4 2021. Basic earnings per share was $0.079, 216% over Q1 2021 and 23.3% below Q4 2021. Annualized ROE was 14.1%, 8.9 percentage points over Q1 2021 and 5.1 percentage points below Q4 2021. Now I will discuss the operating results of both the 8-inch wafer fabs and Wuxi 12-inch fab. First, let's have a look at the 3 8-inch wafer fabs. Revenue was $332.6 million, 32.9% over Q1 2021 and 3.1% above Q4 2021. Gross margin was 38.6%, 11.3 percentage points over Q1 2021, mainly due to improved average selling price and product mix and 6.8 percentage points lower than Q4 2021, primarily due to a audit adjustment on government grants and increased bonus, partially offset by improved average selling price. Operating expenses were $40.6 million, 24.8% over Q1 2021, largely due to increased bonus and over 14x above Q4 2021, primarily due to a audit adjustment on government grants. Profit before tax was $94.6 million, 112.5% over Q1 2021 and 39.9% below Q4 2021. Now let's have a look at the performance of the Wuxi 12-inch wafer fab. Revenue was $262 million, 379.5% over Q1 2021 and 27.4% above Q4 2021. Gross margin was 12%, 4.7 percentage points over Q1 2021 and 0.1 percentage point below Q4 2021. Operating expenses were $34.7 million, 28.6% above Q1 2021, primarily due to increased bonus and engineering wafer costs. EBITDA was $88.4 million, 13% over Q4 2021. Now I will provide more details on our revenue from Q1 2022. From a geographical perspective, revenue from China was $451.6 million, contributing 76% of total revenue, an increase of 105.5% over Q1 2021, mainly due to increased demand for all technology platforms. Revenue from the United States was $58.1 million, an increase of 105.1% over Q1 2021, mainly due to increased demand for other power management IC products. Revenue from Asia was $54.9 million, an increase of 52.9% over Q1 2021, mainly due to increased demand for logic, general MOSFET and MCU products. Revenue from Europe was $22.1 million, an increase of 49.2% over Q1 2021, mainly due to increased demand for smart card ICs, general MOSFET and IGBT products. Revenue from Japan was $8 million, an increase of 30.7% over Q1 2021, primarily due to increased demand for MCU products. With respect to technology platforms, revenue from embedded nonvolatile memory was $142.3 million, an increase of 50.5% over Q1 2021, mainly due to increased demand for MCU and smart card ICs. Revenue from standalone nonvolatile memory was $58.5 million, an increase of 406.1% over Q1 2021, primarily due to increased demand for NOR flash products. Revenue from discrete was $181.3 million, an increase of 65.5% over Q1 2021, mainly due to increased demand for super junction, IGBT, general MOSFET products. Revenue from logic and RF was $95.3 million, an increase of 91.3% over Q1 2021, mainly due to increased demand for CIS and logic products. Revenue from analog and power management IC was $116.6 million, an increase of 200.6% over Q1 2021, mainly due to increased demand for other power management IC products. Let's now take a look at the cash flow statement. Net cash flows generated from operating activities was $195.6 million, 221.5% over Q1 2021, primarily due to increased revenue, partially offset by increased payments for payrolls and materials. Capital expenditures were $124.1 million in Q1 2022, including $107.5 million for the Wuxi fab and $16.6 million for the 3 8-inch fabs. Other cash flow generated from investing activities was $7.1 million in Q1 2022, including $4.4 million of receipts of government grants for equipment and $2.7 million of the interest income. Net cash flows generated from financing activities was $2.4 million, including $47.4 million proceeds from bank borrowings and $1.2 million proceeds from share option exercises, partially offset by $43.2 million of repayment of bank borrowings and $2.5 million of lease payments and $0.5 million of interest expense for bank borrowings. Now let's move to the balance sheet. Cash and cash equivalents was $1,694.9 million on March 31st, 2022, compared to $1,610.1 million on December 31st, 2021. Trade and notes receivables increased from $181 million on December 31st, 2021 to $243.4 million on March 31st, 2022, mainly due to increased revenue. Property, plants and equipment was $3,053.1 million on March 31st compared to $3,116.5 million on December 31st, 2021. Total assets increased from $6,202.1 million on December 31st, 2021 to $6,316.1 million on March 31st, 2022. Our total bank borrowings increased to $1,594.8 million on March 31st, 2022 from $1,590.3 million on December 31st, 2021. Total liabilities increased to $2,531.6 million on March 31st, 2022 from $2,517.6 million on December 31st, 2021, primarily due to increased trade payables. Debt ratio decreased to 40.1% on March 31st, 2022, from 40.6% on December 31st, 2021. Finally, let me give you a very high-level outlook for the second quarter 2022. We expect revenue to be approximately $615 million and our gross margin to be in the range of 28% to 29%. This concludes my financial remarks. Now we would like to start the question-and-answer session. Operator, please help. Thank you.
[Operator Instructions] The first question comes from the line of Randy Abrams from Credit Suisse.
Yes, and a good result, especially considering everything going on. I wanted to ask maybe just the first question, Daniel, if you could go through on the audit for the grants. Just explain what happened. It looked like the fourth quarter was restated higher. And then within that, if you could talk on the first quarter, gross margin was a little bit lower, and then looks like depreciation ramped faster. So if you could discuss first quarter, the impact and then what will drive the bounce back or rebound in second quarter.
Randy, I know you were going to ask that question. So as I said, a few things was the factors -- were really the factors, but mainly it's because of the audit adjustment, okay? So there were 3 large R&D projects that were subsidized with the government grants. These projects were substantially completed before Q4 2021, but pending for final clarification documentation, which were completed in early 2022. We agree with the auditors that the government grants should be recorded in Q4 2021. Total amount of the adjustment was $64.2 million, of which $46.6 million was recorded as R&D cost and $17.6 million was recorded as cost of sales. So I mean, there were 3 elements that brought the gross margin down. It was the accounting adjustment, the overage on the bonus and also depreciation expenses. They were offset by the improved average selling prices. So basically, the -- if we didn't have this audit adjustment, if we didn't do it, instead we did -- we'd make the Q4 actually better -- 2 or 3 points better. So we adjusted in Q4, we took down in Q1, okay? That was the right thing to do. We would -- the overall gross margin for the company will be at 30%, I think, for the 8-inch -- for the 3-inch fabs, the P&L for the 3-inch fabs would be at 44% gross margin. So it was purely an adjustment -- accounting adjustment. So the -- basically, you're up on Q4 2021 on gross margin and at the same time, you took an adjustment -- downward adjustment in Q1 2022. But overall, you didn't lose any margin, no, Randy?
No, I understand. And that's why second quarter coming back to the range that you're seeing. If I could ask on the Wuxi where, based on the shipments, the 486,000, it would imply you're already at about 72,000 12-inch a month, if I did it right. Are you now fully booked or can you squeeze out more before the next phase ramps up? And is the capacity higher because of the discrete mix?
You know what? I would -- let me just quickly give you a color on that. And I will let Mr. Tang give you a full detailed answer on that. Basically, the Wuxi fab is running at 100%. We have 65,000 wafer capacity at this point, okay? But the loading is actually at 67,000 and 68,000, okay? So it's extremely high. It's above 100% utilization rate. And this is going to be the case until we add more capacity. We're going to be adding more starting this quarter. And the new capacity expansion plan to 95,000 is going to start happening this quarter and next quarter. So you're going to -- especially in Q3, you're going to start to see new capacity start actually coming into play.
[Interpreted] Could you please repeat your question again? You mean the increase?
Okay. Yes. Okay. Sorry, I'll ask my next question. Yes, my next question then was going to be on the next phase of expansion. So you'll have 30,000. It sounds like you'll get a little bit of that, second half. Could you give an update actually on the new fab, where you now have the approval, the size of that and the time line to have the fab build, to do the tool move-in and when production would start for the fab beyond this next 30,000?
[Interpreted] Thank you for your question. The Phase 1 of Wuxi project has received all the -- have received support from all our investors and made tremendous achievement up to now. We have fulfilled all our target of the past, original set for the $250 million investment. The first step, the expansion of 65,000 project has been -- was fulfilled last October. The capacity was released with all our efforts and the output has already met our originally set target. We have implemented the Phase 2 project of the expansion -- of the capacity expansion, which is 94,500 monthly capacity. Up to now, we have moved in 4 tools. The capacity allocation has already met our existing platforms, which is Power Discrete, embedded flash, power management. And we have already started the -- we have already implemented a study of the new fab, which will extend with our Specialty IC strategy into the platform. We are now working on the related work. Once we have any news, we will announce it as soon as possible.
The final question I'll ask for now, the buyback. I think in April, there was a proposal for a buyback. If you could give an update and is the intention more signal on what you're seeing on share price? Or is it related at all to the new listing to offset dilution? So if you could go through the buyback, your plan and reason to move ahead with that?
Randy, at this point, we have no plan whatsoever to do any buybacks because basically, it is very unclear where the market is at this point as you know well. We have our -- overall, I think we have limited outstanding shares, okay, between the 3 major shareholders. Basically, we're talking about 1.3 billion shares, 40% of that is amongst the institutional investors. So I think people are still -- based on my understanding, people are still very excited about Hua Hong, okay? I think once the markets start to recover, I think the share price will definitely recover. So there's no plan to do any buybacks at this point.
The next question comes from the line of Andrew Lu from Sinolink Securities.
First one is regarding the customers. We kind of do the survey on many of the Chinese customers. The monthly inventory is over alarming level. So do you see any potential inventory correction in second half or next year?
I will answer first, and I will let Mr. Tang continue to elaborate. I think you can see the momentum continues with us. We're going to have a very, very strong year this year. I think overall, our revenue will continue to grow. It's a combination of taking advantage of the additional capacity from the 12-inch fab. And at the same time, we're able to basically raise prices on all customers. And we did that towards the end of last year in November, December. You see that basically got reflected in our Q1 results. And I expect throughout this year, every quarter, you're going to see a very stable rise on price, okay? So our customers still are very excited about Hua Hong Semiconductor. They want to continue to get more capacity from us. We expect this year, all major platforms will grow, okay, grow in a big way, okay? We had -- we basically had about 70% growth last year. We were virtually the top in terms of growth where we were #1 in 2021. We expect we'll continue to be a top player this year in terms of growth, okay? So Andrew, I think this is going to be a very, very exciting year. We will continue to have growth on revenue. At the same time, you're going to see continue a very strong ASP improvement as well.
[Interpreted] Thank you for your question. In regard to the inventory issue, we have the department of risk management to keep a close eye on the inventory issues. Since the year of 2020, we have already noticed the inventory issue, both in the customer side and ourselves. With the continuous release of our production capacity, I believe the inventory will be kept at a very reasonable level with a continuous and steady capacity growth. As Hua Hong has a very rich product mix, Hua Hong's product has a very good match with what the market demands. So we already see a very strong demand from the market side.
My second question is regarding the CapEx numbers because GlobalFoundries just announced early that they are adjusting year 2022 CapEx from $4.5 billion to $4 billion and many of the equipment company talking about like semiconductor, also some components missing. So they are delaying their product to the customer. And based on our first quarter, CapEx number seems a little bit low compared to the full year basis. So are we also adjusting our CapEx or remaining our CapEx the same?
Andrew, our CapEx plan has not changed at all, okay? So for the year, the plan is to -- for the 12-inch fab is going to be about $1.2 billion. This is the new CapEx that would take us from 65,000 to 95,000, but there was also some left -- basically some remaining balance from the last phase of capacity expansion, which is to get to 65,000. It was about -- I think it was about $140 million. So overall, for the 12-inch fab, we're going to be spending about $1.4 billion, okay? And for the 3-inch fabs there will be some upgrades, some efficiency improvement, it will be around $180 million. So overall, I think the company is going to be spending about close to $1.5 billion, okay, slightly over, okay, around that number on cash flow basis. Okay? So that is the plan. We have to continue. There's no -- I mean our expansion plan has no change at all. We want this first 12-inch fab, we want to get to 95,000 by end of this year or early next year. And then we are moving out with the second phase, as Mr. Tang said earlier.
My last question is, TSMC recently sent a letter to their -- almost all their customers, plan to raise the wafer price for next year, about 6%. And we confirmed with some TSMC customers, kind of, that's true. It's not a big news and based on which TSMC raise next year based on the labor cost increase, electricity cost increase and the material and also equipment price increase because of currency devaluation. Are we going to do anything about it to reflect the same thing for next year?
You're making a very good point. TSMC absolutely is doing the right thing, okay? I mean you know, for the entire industry, the cost has gone up pretty dramatically this year, okay? We experienced the same thing, okay, on raw materials, indirect materials, gas, spare parts, virtually everything, especially on labor, okay? So it is important we have to keep up with the -- in order to make sure our margins continue to be stable and will continue to improve over time, okay? As I said earlier, that our gross margin, our goal is to move for the 8-inch business, we want to move from 40%, in about 2 years, we want to get close to 50%. Now it takes some effort to do it. Price increase is a very important part of that. I mean we have done a lot of work in that. I mean last year, I think overall, the company ASP rose about 11%. But I think this year, I expect that the ASP improvement will be much greater. I mean what we did in 2021 is virtually what we did in Q1, okay? So I would expect throughout this year, every quarter, we're going to be moving up with the trend in that fashion. So yes, absolutely, we have to do that in order to make sure that we -- our gross margin will continue to be able to improve.
The next question comes from the line of Leping Huang from Huatai.
So the first question is about the impact of the COVID-19 control policy. It seems to be -- I'm quite surprised that you delivered a very strong first quarter result and you still delivered very good second quarter guidance, considering that most of your fabs in Shanghai and Wuxi are both facing very strict COVID-19 controlling states. So what's your -- what's the impact of this policy on your daily operation and your -- especially your customer and your -- I think you need to buy a lot of equipment to expand your capacity.
[Interpreted] Thank you for your question. Since January of this year, we have experienced a lot due to the COVID pandemic, especially since the month -- since March after Shanghai announced implementation of static management. We have seen some problems in the operations, especially in logistics. With the strong support we have received from the government departments of all levels, I mean, the central government and the municipal government, we have resolved these issues with better results. So I think logistics is on one hand, on the other hand, we have to keep an eye on the steadiness of our workforce. So after Shanghai's announcement, we immediately -- the company immediately launched an emergency plan to convert the 3 8-inch fabs in Shanghai into closed-loop operations. On the eve of static management, we have 1,600 employees rushed to the site. Nearly 3,000 employees occupied the fab as a home and stayed in the field for nearly 8 weeks, making hard efforts to ensure normal operation of the production lines. So in the 8 weeks, we have nearly 3,000 workforce working, resting and delivering fast. They have made great contributions to the daily operations. The management board are deeply moved by all the contribution that staff has made during their stay in the fabs. I believe we will see a very good quarterly results for the second quarter of this year. So far, during the closed-loop production, our utilization rate has been around 95%. So I would like to take this opportunity to pay a high respect for all the efforts our staff has made during their stay in the fabs. And also, I would like to send my gratitude to all the vendors, our partners in upstream and downstream industrial chain. Also, I would like to thank you all, our investors and shareholders.
The second question is that we're noticing news reports about the possibility that U.S. may tighten the equipment export to Chinese companies. So can you comment on the status of the equipment procurement status from the U.S.? And I think you have a very aggressive capacity expansion plan, including the 30,000 wafer per month this year. So what's the latest plan? Do you still stick on this plan considering these recent change on the macro environment?
[Interpreted] Thank you for your question. We have focused on the news. We have noticed the news and keeping an eye on its development. As a registered enterprise, Hua Hong Semiconductor has a very complete operation, regulation and policies. In regard to the export and import, Hua Hong Semiconductor has a very strong and robust export compliance control system, and it is also a VEU holder certified by the U.S. Department of Commerce. After 20 years of development, Hua Hong Semiconductor's specialty process technology has been well recognized by the market. Our products cover all markets from North America, Europe and Asia continents. In the first quarter, we have revenues generated in the North American market, which recorded a year-on-year growth of 105%, also a quarter-on-quarter growth of 8.5%. We will spare no efforts to have a continuous development in our specialty IC strategy. I also strongly believe that we will see, as usual, strong support from our vendors, which have over 20 years of cooperation with Hua Hong Semiconductor.
Leping, just to add, there is going to be no impact on equipment procurement, okay? There will be zero impact. As Mr. Tang just said, we are a certified VEU holder by the Department of Commerce. Hua Hong Semiconductor has had and continue to have approval from the U.S. government to receive exports and the rumors, if they're true, would not impact the company, would not affect the company. It was unfortunate, our share price fell as a result of the rumor of more sanction, but it's -- in our view, it is completely inaccurate and baseless. Investors should trust and have confidence in the company.
The next question comes from the line of Szeho Ng from China Renaissance.
I have 2 questions. The first one on Q1, the revenue upside is actually pretty big, right? I just want to know where that upside was coming from. I believe it's coming from 12-inch mostly, but what products actually drove the huge upside?
Szeho, so when you're looking at -- I mean when we look at the quarter versus quarter compared to Q4, virtually, I mean, virtually all segments were up, okay? I mean, smart cards was up more than 21%. MCU stayed virtually flat, flat but slightly up. And NOR flash was up 50%, okay? We're talking about NOR flash. And then you're up on IGBT. Super junction was about close to 15%, okay, even for logic and RF, in particular, CIS was also up close to 33%. And overall analog and power management IC, particularly power management IC was up about 31%. So virtually, when you look at -- all the segments were up. We expect that, that trend will continue, particularly for MCU and power discrete and RF.
All right. Okay. Yes, I got you. Let me say that we are still conservative for our Q2 guidance. It seems to be the company practice where it's trying to be conservative in keeping our guidance.
Well, we're, in general, conservative. We're, in general, conservative. We normally give something we will always reach, okay? So let's see how it all goes.
Okay. All right, yes. And then in March, the company -- and then second question regarding the Asia listing. Anything you can share with us on updates like the milestones and the time lines, things like that?
Yes. Yes, absolutely, absolutely. We'd love to give you guys an update from time to time. I think this is a good point. We've been working on that for the past several weeks. So on March 21st, 2022, the company convened a Board meeting to approve the preliminary proposal of the issue of RMB shares and listing on the starboard okay? I mean, you guys all know about that. Since March -- since that point, the preparatory work-related IPO on the starboard has been carried out in an orderly fashion. The company has engaged intermediaries such as sponsors, lawyers and accountants to conduct due diligence comprehensively and complete acceptance of the so-called tutoring filing in the Shanghai Security Regulatory Bureau on March 29. Because of the epidemic situation in Shanghai, the progress of ongoing work, especially the audit part, has been affected to a certain degree, okay? But the company has actively promoted progress. We're basically moving forward with the cooperation of these intermediaries and strive to complete the preparation for the application as fast as we can and submit the application document to the stock exchange. The company will disclose the progress of the preparatory work to the market in a timely fashion in accordance with the requirements of the information disclosure going forward. This is our plan.
I see. Got you. Yes. And maybe one last question from me. Definitely for us, right, Hua Hong Semiconductor is a validated end user. But how about our sister company, Huali? Are they also on the VEU list?
I think Huali is getting equipment through IVL, individual validated license. So for any critical tool to get, the IVL -- using the IVL, getting approval from the U.S. government. That has been the way they're getting their critical tools. So far there are no issues at this point. We're getting everything we want from various vendors.
Okay. Sounds great. Yes. Congratulations on very strong results.
Thank you.
The last question comes from the line of Sunny Lin from UBS.
So my first question is on pricing. So good to see your 12-inch continue to make good progress on pricing improvement. So Q1, it's reached, I think, over $1,200. And now with your capacity reaching 95,000 with performance by second half of the year with better mix, how should we think about the 12-inch pricing going to second half?
I will start first. I'll let Mr. Tang to add later. I think we're making great progress on pricing. As you said, we're already at that number, $1,200. As I said, we want quickly on the 12-inch facility, I think we want to move to $1,300. I think that would be a good point where we can reach profitability, okay, even at the current capacity. So that is something we're working very hard towards. I think that is something achievable within the next several quarters. I think the price improvement process will continue throughout this year. But whatever we're going to be doing, I think even with $1,300, that is not the goal. I think we can even do better than that, okay? Because there's only one reason, demand is very, very strong for us. And we have many different technology platforms to offer to our customers.
[Interpreted] With the expansion of our capacity, we have also seen a development of our process technologies. As people have been keeping a close eye on the specialty IC development of Hua Hong Semiconductor, our company's products has been adhering to the orientation of high-performance, low power consumption and high reliability. With the expansion of 12-inch capacity and the moving of more advanced tools, we will see the advancement -- the obvious advancement in the process technologies. In addition to the growth of our sales volume, we have also seen a wider range of the product application. We have been supplying continuously the IC products for the applications, including Internet of Things, into new energy, automobile electronics. Based on the continuous advancement of specialty IC, we are very confident in our selling prices.
That's very helpful. My second question is on end demand situation. Through this earnings season, several semi companies have mentioned some slowdown, especially in consumer applications and also China market. So I wonder if you have picked up any deceleration on the end markets that you are facing? And how is your book-to-bill ratio trending year-to-date?
[Interpreted] In the end market, we have noticed some change in the consumer electronics application, but I think it hasn't caused a shadow on our future market since we have a very wide product mix to meet all kinds of demand of the market applications. As I just mentioned, we have products that can be applied in all the applications, including the new energy, the green energy and the carbon neutral and Internet of Things and so on. So you can see the Hua Hong specialty IC meets closely with the market demand. So we have a strong confidence in the future market.
Ladies and gentlemen, that's all the time we have for questions. I will now hand back to the management for closing remarks.
Well, again, I want to thank you all for joining us today and asking all the insightful questions. We hope you will join us again next quarter. Please continue to stay safe and healthy. Wish we could meet in person very, very soon. Thank you.
Ladies and gentlemen, thank you for your attendance. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]