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ChipMOS Technologies Ltd (NASDAQ:IMOS)
Q3 2020 Earnings Call
Nov 10, 2020, 7:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the ChipMOS Third Quarter 2020 Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. David Pasquale with Global IR Partners. Thank you. You may begin.

David Pasquale -- Investor Relations

Thank you, operator. Welcome everyone to ChipMOS' third quarter 2020 results conference call. Joining us today from the company are Mr. S.J. Cheng, Chairman and President; and Ms. Silvia Su, Vice President of Finance and Accounting Management Center. S.J. will review business highlights and provide color on the operating environment, Silvia will then review the company's key financial results.

We are also joined on the call today by Mr. Jesse Huang, Spokesperson and Vice President of Strategy and Investor Relations. All company executives will participate in the Q&A session after management's formal remarks. If you've not received a copy of today's results release, please email Global IR Partners at imos@globalirpartners or you can get a copy of the release off of ChipMOS' website, www.chipmos.com. We have also posted a PowerPoint presentation on the IR site to accompany today's conference call.

Before we begin the formal comments, we must make a disclaimer regarding forward-looking statements. During this call, management may make forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 as amended and Section 21E of the U.S. Securities Exchange Act of 1934 as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, including, but not limited to the potential impact of COVID-19, which may cause the actual performance, financial condition or results of operations of the company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the company's most recent annual report on Form 20-F filed with the U.S. Securities and Exchange Commission and in the company's other filings with the SEC.

At this time, I would like to now turn the call over to the company's Chairman and President, Mr. S.J. Cheng. Please go ahead, sir.

Shih-Jye Cheng -- Chairman and Director/President

Yeah. Thank you, David. We appreciate everyone joining our call today. We are pleased with our results for the third quarter 2020 and the continued progress. The quarter developed in line with our expectations. Demand in our end market remained strong with fastest utilization level. This was an important quarter for us as we drive Q3 revenue to the six years record high. Revenue was up 4.8% compared to Q2 and grew 5.3% compared to Q3 '19. Even more impressive is the 13% revenue growth we achieved for the first nine months of 2020 with the gross margin up 290 basis points to 20.9%.

Let me give some color on mix. Our Q3 assembly utilization level significantly increased to 80% as we benefit from demand in gaming, consumer electronic and the slightly rebounding auto and industrial and led the tighter utilization of assembly wire bonder. Our 8-inch COF utilization remained soft. This was more than offset by strong TDDI demand, which drove utilization of our middle-high-end wafer testing platform higher to full utilization.

We are also pleased to see DDIC utilization increased to 76% in Q3 out of the decline in Q2. We continue to benefit from higher bumping demand led by our 30-inch gold bumping and other in our driver business. Our overall utilization level was 79% in Q3, up from 74% in a year ago and higher than 76% in Q2. Regarding our manufacturing site, assembly represented 25% of Q3 revenue. Package testing and wafer sort represented around 22%. And wafer bumping represented around 23% of Q3 revenue, up from 19.1% in Q2.

On the product segment basis, our DDIC, including COG and COF segment was around 30% of revenue and gold bumping increased significantly to represent around 19.5% revenue. Revenue from DRAM and SRAM represent 19.2% and our flash segment grew significantly to represent 23% of Q3 revenue. Mixing in all segment, revenue increased and represent around 8.5% of Q3 revenue.

In terms of adding colors, our memory product revenue grew more than 3% and represent around 42% of total Q3 revenue. DRAM revenue was up 15% year-over-year, but declined 10% compared to the Q2. This reflect further inventory level adjustment in the channel. Total product revenue grew 18% compared to Q2. We benefit from significant growth of NOR and Mask ROM, thereby strong demand from gaming.

Lastly, our NAND flash business continue to grow and represent about 29.5% of total Q3 flash revenue. As for driver IC-related product, we continue to benefit from new 5G smartphone launch, particularly large HD-grade panel model. Driver IC-related product revenue increased around 10.7% compared to Q2 and represent around 49% of total Q3 revenue. Gold bumping revenue grew significantly around 26% compared to the Q2.

8-inch COF for middle/large panel remained soft due to the foundry [Indecipherable] supply limitations. Overall, DDIC revenue grew in Q3 compared to Q2 as we benefit from strong demand for TDDI given the higher penetration of HD-grade panel. As a result, TDDI business represented 34.3% of Q3 DDIC revenue with middle to high end wafer testing platform fully utilization currently. When we look at our target end market, revenue increased in both smart mobile and consumer, while TV declined. And both computing and automobile and industrial [Indecipherable] compared to Q2.

As we look forward into the fourth quarter of 2020, we are encouraged by end market and inventory turn in our target market. Long-term opportunity like ongoing 5G build-out are positive for the industry and ChipMOS. New smartphones are likely to drive higher volume demand, while the global work from home trend has led an uptick in demand for consumer electronic and gaming. We expect revenue from two major product segments, memory and DDIC-related will continue to grow, and growth of the DDIC-related product will be better than memory segment as we benefit from increased demand, capacity addition and higher testing price in Q4.

In memory, we expect DRAM will remain at the similar momentum from Q3. And our flash business, including NOR flash and the NAND flash will continue to grow by global work from home trend. We are investing some wire bonder due to tightened wire bonder capacity. We expect that assembly utilization could be maintained at the healthy level because the new increased wire bonder are all booked by our customers.

In DDIC, we expect demand from middle/larger-size panel for TV will remain healthy in the four quarters. For the small-size panel, demand is being driven by increased demand for middle/low end new 5G smartphones and strong demand for TDDI from the higher penetration ratio of HD-grade panel. As I mentioned, the wafer test platform are fully utilized. We expect to maintain this level into 2021 based on the customer focus. We are carefully investing in the new test platform capacity to meet strategic customers' request.

Finally, given the tighter capacity utilization level, we raised related wafer testing price on October 1. This will benefit our DDIC revenue growth and profitability in the Q4 '20. We are working with our customer and committed to providing the capacity they need. Similar to the situation in second half 2018 and 2019, our new testing capacity additionally are all secured by customer contract guarantee to reduce the investment risk.

Before turning the call to Ms. Silvia Su, I would just like to highlight the comment we made in our Q3 result conference call notice last month. Starting in calendar year 2021, ChipMOS will be hosting only one call in Mandarin during the timing and resource issues to ensure transparency and to facilitate a better understanding of the financial results and operating environment of the company for English-speaking investors. We plan to provide an English translation audio following the Mandarin call on its website.

Silvia, please go ahead.

Silvia Su -- Director of Finance & Accounting Management

Thank you, S.J. All dollar amounts cited in our presentation are in NT dollars. The following numbers are based on exchange rate of TWD28.95 against US$1 as of September 30, 2020. All the figures were prepared in accordance with Taiwan International Financial Reporting Standards. We have provided a PowerPoint presentation on our Investor Relations website that will follow my comments on the call today.

Page 12, consolidated operating results summary. For the third quarter of 2020, total revenue was US$196.4 million. Net profit attributable to the company was US$14.6 million in Q3. Net earnings for the third quarter of 2020 were TWD0.02 basic common shares or TWD0.40 per basic ADS. EBITDA for Q3 was US$61.5 million. EBITDA was calculated by adding depreciation and amortization together with operating profit. Return on equity of Q3 was 8.5%.

Page 13, consolidated statement of comprehensive income. Compared to Q2, total revenue of Q3 increased 4.8%. Q3 gross profit was US$37.8 million with gross margin at 19.3% compared to 20.7% in Q2. Our operating expenses in Q3 were US$13.6 million or 6.9% of total revenue, which is about a 1% improvement compared to Q2. Operating profit for Q3 was US$24.8 million with Q3 operating margin at 12.6% compared to 14.5% in Q2.

Net non-operating expenses in Q3 were US$6.2 million. The difference between Q3 and Q2 is mainly due to the increase of the share of loss of associates accounted for using equity method of US$1.8 million, which was partially offset by a decrease of foreign exchange loss of US$0.3 million. Basic weighted average outstanding shares were 727 million shares. Compared to Q3 2019, total revenue for Q3 2020 was up 5.3%. Gross margin decreased 2.1% points compared to 21.4% in Q3 2019. Operating expenses were mostly flat compared to Q3 2019. Operating profit margin decreased 2% points compared to 14.6% in Q3 2019.

As I noted earlier, the difference of net non-operating expenses compared to Q3 2019 is mainly due to the increase of the share of loss of associates accounted for using equity method and the increase of the net foreign exchange loss. This was partially offset by a slight increase in the gain on valuation of financial assets at fair value through profit or loss.

Page 14, consolidated statement of financial position and key indices. Total assets at the end of Q3 2020 were US$1.18 billion. Total liabilities at the end of Q3 2020 were US$486 million. Total equity at the end of Q3 2020 was US$693 million. Accounts receivable turnover days in Q3 2020 were 74 days compared to 78 days in Q2. Inventory turnover days, 44 days in Q3 compared to 50 days in Q2.

Page 15, consolidated statements of cash flows. As of September 30, 2020, our balance of cash and cash equivalents was US$165.4 million increased US$2.9 million at the beginning of 2020. Free cash flow for the first three quarters was US$45.9 million compared to negative US$4 million for the same period of 2019. The difference is mainly due to US$29.4 million increase of the operating profit, US$28.3 million decrease of capex and partially offset by a US$15.1 million increase of cash dividend paid. Free cash flow was calculated by adding depreciation, amortization, interest income together with operating profit and then subtracting capex, interest expense, income tax expense and dividend from the sum.

Page 16, capital expenditures and depreciation. We invested US$14.6 million in capex in Q3. The breakdown of capex was; 10.6% for bumping, 43.4% for LCD driver, 30% for assembly and 16% for testing. Depreciation expenses were US$36.7 million in Q3. As of October 31, 2020, the company's ADS number was approximately 5 million units, which represents around 12.5% of company's outstanding common shares.

Operator, that concludes our formal remarks. We can now take questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Scott Bishins with Caffeine Holdings. Please proceed with your question.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Hi, S.J. and Silvia. Looks like a great quarter. Looks like a lot of things have been accomplished this year. Just a couple of things I want to go over. I saw the October revenues this month and there are TWD72 million approximately brand new high, up about 9% year-over-year or so, about 9% quarter-over-quarter. Do you see that sustainable going through the rest of the quarter?

Shih-Jye Cheng -- Chairman and Director/President

Scott, this is S.J. to answer your question. In the May 3 conference call I was asked the same question. Later, I will add Silvia to answer how come our gross margin will reduce 1.4% compared to Q2, OK? And...

Scott Bishins -- Caffeine Holdings LLC -- Analyst

That was my next question. So you will answer that too. Okay.

Shih-Jye Cheng -- Chairman and Director/President

Yeah.

Silvia Su -- Director of Finance & Accounting Management

I will answer you later.

Shih-Jye Cheng -- Chairman and Director/President

Yeah. I will let that lady to answer your question, OK?

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay.

Shih-Jye Cheng -- Chairman and Director/President

Let us give you the October -- starting from October -- October revenue which we already announced today, which was -- revenue was a growth, almost 9% compared to 2019. And November and December is the -- maintain the strong momentum. Silvia and I got October. Starting from October 1, we increased the pricing for DDIC due to the fully utilization rate. And so both revenue and gross margin were better than the Q3. And the whole year's -- in beginning of this year, we give the focus for whole year's growth. Revenue growth compared with last year was high-single-digit. But based on the October result and first nine months result and existing strong demand from customers side.

Our revenue growth for the whole year is not less than 10%. And whole gross margin will be higher than 20%. And earnings will be better than last year. So our cash dividends for next year will be better than this year because we are too much greater than last year. So it means our shareholders can enjoy the higher cash dividends compared to the last year. And right now...

Scott Bishins -- Caffeine Holdings LLC -- Analyst

That's incredible news.

Shih-Jye Cheng -- Chairman and Director/President

Yeah. But I will ask Silvia to answer your question.

Silvia Su -- Director of Finance & Accounting Management

Yes. Regarding the gross margin, the Q3 gross margin is around 19.3% and it decreased around 1.4 percent points as compared to Q2. And there are three major factors. The first one is for Q3, there was a higher electricity rate for summer season, and the impact will be around 0.9 to 1 percent points. That's the first one. And then the second one is U.S. dollar depreciation, and that impact around 0.5 to 0.7 percent points. And the last one is higher gold price, and that impacts around 0.1 to 0.2 percent points. That's the major three factors for the...

Scott Bishins -- Caffeine Holdings LLC -- Analyst

What was the first one again? I missed the 1%, the first one.

Silvia Su -- Director of Finance & Accounting Management

Yes. The first one is higher electricity rate for summer season.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay, OK. So in other words, you would have come in assuming that there would have been normal charges you would have come in with a higher gross margin than the second quarter?

Shih-Jye Cheng -- Chairman and Director/President

The answer is yes.

Silvia Su -- Director of Finance & Accounting Management

Yes, you can say that.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Yes. Okay.

Shih-Jye Cheng -- Chairman and Director/President

If you got to the Q4, it's going through the winter time. So not this factor and gold price are already higher and usage there is also higher. So these three negative factors can be eliminated. And we also are already having continuous growth in Q4. We also increased the pricing. So you can forecast year 2020 will be a good year for the company, and November and December was also stronger, yeah.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. Don't put up the heat too high. We don't want spend a lot of money on heat in the fourth quarter. Try to keep it down.

Shih-Jye Cheng -- Chairman and Director/President

But all the wafer just highlighted in front of my office.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Right. Let me see, just a couple of other questions. Any news on the negotiations with the China factory?

Shih-Jye Cheng -- Chairman and Director/President

We are in a good progress. But once everything is clear, then we will let everybody know.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. Do you think there is any chance we might know that before the end of the year? Is there a possibility?

Shih-Jye Cheng -- Chairman and Director/President

I think coming Q1, maybe we'll say it, yeah.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. Let's do -- just a couple of things here. Now that you're going to be not doing the New York time conference call going forward will there be any times during the year that maybe you could do an update for the IMOS investors through a little question-and-answer? Maybe not a full conference call, but something where maybe we could just dial-in, anybody that's interested?

Shih-Jye Cheng -- Chairman and Director/President

I will let our IR Head and Spokesman, Jesse Huang answer your question, yeah.

Jesse Huang -- Vice President, Strategy & Investor Relations and Spokesperson

Okay. We really have the need for our investors in USA. I think we can go through David Pasquale, our IR representative in USA to arrange that one or such kind of conference call. However, right after -- as S.J. just mentioned, right after our formal Mandarin conference call, we will make sure that all the information will be provided. Make sure all USA investors can get an equal base information during the Mandarin conference call.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Is there any chance if we have some questions prior to your first call in Taiwan that we could email in to David or directly to Taiwan that possibly could be asked by somebody during the conference call?

Jesse Huang -- Vice President, Strategy & Investor Relations and Spokesperson

Okay. We'll take your request into consideration and work with David to see how we can work it off.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. I'm sure between myself and David and a couple of other investors we could come up with some questions, maybe just even after we read the report, the quarterly report and maybe just a couple of questions that could be asked on that call. This way when you translate it into English, we'll be able to see your question and what the answer was. So that would be very helpful, I believe.

Let me just see anything else. Have you seen the Taiwan dollar strength, it's been coming down dramatically over the last four quarters, I guess, which also has been incurring a foreign exchange loss has been pretty -- it's been pretty substantial throughout the year. How do you see that going forward? Do you feel now maybe with the U.S. with the change in government in the U.S. do you think that there'll be a change in maybe how the Taiwan dollar acts?

Shih-Jye Cheng -- Chairman and Director/President

Actually, Scott, to answer your questions, we use a very conservative foreign exchange based on the Central Bank announcement for next year's positive. So as far as our understanding right now, the gold price is more than TWD1,950 per ounce and foreign exchange is 28 point something. So I think that will be there high tides. So we used this one as an assumption for budgeting. So I don't think -- that's why we are pretty conservative.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. Let's see. Just one more question. I guess the change in the value of the facility -- I imagine the charge for lowering the value of the equity loss. Was that attributed to the China factory or was that attributed to something else?

Silvia Su -- Director of Finance & Accounting Management

Yes, that's related to the China factory.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. Is that also -- was that affected also by JMC, the last 10 million shares we have? I'm not sure how...

Silvia Su -- Director of Finance & Accounting Management

As for JMP, it's gain for JMC investment.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

JMC was a gain?

Silvia Su -- Director of Finance & Accounting Management

Yes.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. Let's see. Do you have any plans on -- I guess at this point you've already renegotiated all your loans with longer term payouts. Do you see that that's going to be enough at this point that you don't need to do anything else on a financial side as far as any kind of raise of capital or anything else that might be needed or do you feel that we have enough cash and we're able to pay down the debt that won't cause us any shortage of cash? And what the capex might be going forward for next year?

Silvia Su -- Director of Finance & Accounting Management

Okay. Regarding the -- actually, I think we had a position, cash position. And actually, we also have a sufficient short-term loan and long-term loan, especially in syndicating loans, credit lines. So I think for the future investment, there should be no problem for the company. And regarding the capex for 2020, actually, we try to control it under 20% of our total revenue of 2020. That's the best thing of...

Scott Bishins -- Caffeine Holdings LLC -- Analyst

That's the plan for 2021 also?

Silvia Su -- Director of Finance & Accounting Management

For 2021, our target -- I think the target given by the board is 20% to 25%, but we will try to keep it lower. Trying to under -- like this year, to under 20%, but it's still hard to say, it depends on the business. Yes.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay.

Shih-Jye Cheng -- Chairman and Director/President

Scott, let me just answer your question. The big difference is if business is too good then we need to view the new building or buy a new building in order to expand our capacity. But if you have enough space, that's not needed for the facility increase just by the capex increment only that can maintain around 17% to 18% of total revenue for next year.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. Well, that sounds great. Do you have a building in mind right now that you're negotiating on?

Shih-Jye Cheng -- Chairman and Director/President

Answering right now is not a good timing since the building and land prices continue to increase.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. And just the last question, just to verify what I think this is. The GAAP earnings came in at TWD0.58 for 8150, correct?

Silvia Su -- Director of Finance & Accounting Management

You mean the share price?

Scott Bishins -- Caffeine Holdings LLC -- Analyst

No, the GAAP earnings, the earnings per share.

Silvia Su -- Director of Finance & Accounting Management

Earnings?

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Earnings per share on a GAAP basis was TWD0.58.

Silvia Su -- Director of Finance & Accounting Management

Non-GAAP? Sorry, can you say again?

Shih-Jye Cheng -- Chairman and Director/President

You mean starting from first nine months?

Scott Bishins -- Caffeine Holdings LLC -- Analyst

No, no. For the quarter, I saw that the earnings per share was TWD0.58. Is that correct?

Shih-Jye Cheng -- Chairman and Director/President

Yeah.

Silvia Su -- Director of Finance & Accounting Management

Yes.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. And then also, if I just do a little non-GAAP number, just so that we could see what it looks like with maybe some one-time non-expenses -- non-operating expenses, it looks like the TWD6.2 million would reference another TWD0.24 in earnings, which would have brought us on a non-GAAP basis to TWD0.82. Does that sound correct?

Silvia Su -- Director of Finance & Accounting Management

You mean non-GAAP? What do you mean non-GAAP? Can you explain?

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Well, you said there were about TWD6.2 million in charges that were associated with the third quarter. A part of it was the writedown in the equity value and also some foreign exchange losses. So -- which I think you mentioned was -- I think it was TWD6.2 million. So if you add the TWD6.2 million back into Taiwan dollars and then per share, it would be about TWD0.24, which would have brought earnings up to TWD0.82.

Shih-Jye Cheng -- Chairman and Director/President

[Foreign Speech]

Silvia Su -- Director of Finance & Accounting Management

Do you mind that you just give me your calculation and then I'll double check that for you?

Shih-Jye Cheng -- Chairman and Director/President

Okay. The earnings that you posted that I saw on the MOPS was TWD0.58 per share for 8150, correct? For the third quarter?

Silvia Su -- Director of Finance & Accounting Management

Yes.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Yes?

Silvia Su -- Director of Finance & Accounting Management

Yes.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. And then you also mentioned that there was a US$6.2 million loss on foreign exchange loss and also the value of the equity -- using the equity method of the assets that we hold that are non-operating that totaled US$6.2 million. So if you take the US$6.2 million, convert it back into Taiwan dollars and then divide it by the amount of shares outstanding, I see it should be about another TWD0.24.

Silvia Su -- Director of Finance & Accounting Management

Yes, yes.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

That would bring us -- that would have brought us up basically on a non-GAAP basis of the TWD0.82?

Silvia Su -- Director of Finance & Accounting Management

Yes, yes.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Okay. I just want to confirm that. The only reason why I'm saying that is because I just looked at in some of the, I guess, reports that just came out, and it's saying that IMOS missed on the price per share, the earnings per share. But if you factor in the US$6.2 million, which was taken -- which was deducted from the GAAP earnings, actually you would have had a gain -- I think the street was looking for TWD0.71. So now coming at TWD0.82, actually, you did better even with a lower third quarter gross margin percentage, which means that if -- without some of those one-time charges in the third quarter, assuming that we had another 1% or 2% in gross margin percentage, we could have even done much better.

Silvia Su -- Director of Finance & Accounting Management

Yes. You just want to exclude the -- you can say, one-time expenses like foreign exchange loss or the investment loss, right, trying to calculate?

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Yes.

Silvia Su -- Director of Finance & Accounting Management

Okay.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

That's probably something that's good to do also just to reference it so people understand when they take a look and they see headlines. Sometimes it's misleading when it says you missed for the quarter, when actually most companies, most technology companies always give GAAP and non-GAAP earnings. They're usually on the non-GAAP, they take out the one-time charges and add it back to the GAAP earnings.

Silvia Su -- Director of Finance & Accounting Management

All right. Understood.

Shih-Jye Cheng -- Chairman and Director/President

Yes. Thank you for your question. We have the capability, yes.

Scott Bishins -- Caffeine Holdings LLC -- Analyst

It's not too high, if you need a help, just let me know. But again, thank you very much. And look, it's been great. The last 15 years for me anyhow. I've been an investor since 2004. So for me, it's been a great ride. I'm very happy to see how things are going. I love waking up and seeing all brand new highs on revenues and gross margins and profitability and also raising of dividends. So keep up the great work. And yeah, again, I would love to be able to, if possible, sometimes send some questions into David and maybe some other investors that maybe could be asked on that on the Mandarin call, and then we'd be able to actually see the translation the same day and have our questions answered.

Shih-Jye Cheng -- Chairman and Director/President

Okay, OK. We take your message. Thank you.

Silvia Su -- Director of Finance & Accounting Management

Thank you. Thanks.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Vipul Sagar with Blash Capital. Please proceed with your questions.

Vipul Sagar -- Blash Capital LLC -- Analyst

Thank you. Good evening, S.J. and Silvia. The first question I have is about free cash flow. It seems like you had a negative free cash flow on Q3. Is that right?

Silvia Su -- Director of Finance & Accounting Management

Yes. Because of -- we pay our dividend in Q3.

Vipul Sagar -- Blash Capital LLC -- Analyst

Perfect. And then Q4 -- go ahead.

Silvia Su -- Director of Finance & Accounting Management

I mean the dividend payout for Q3 is around US$45 million. That's the reason why we have negative free cash flow in Q3.

Vipul Sagar -- Blash Capital LLC -- Analyst

Okay. So then my next question is, for Q4, you go back positive free cash flow?

Silvia Su -- Director of Finance & Accounting Management

It depends on the capex, but I think -- yes, that maybe around -- yes, I think there is a chance, but it still depends on the capex, how much the capex we spend in Q4.

Vipul Sagar -- Blash Capital LLC -- Analyst

Okay, OK. But right now, the Q3 was down because of dividend and then Q4 is going to be based on how much you spend on capex in Q4, correct?

Silvia Su -- Director of Finance & Accounting Management

Yes, yes.

Vipul Sagar -- Blash Capital LLC -- Analyst

Okay. You said your Q4 revenue is going to be sequentially higher than Q3, what about Q1 2021? Do you see above seasonal better than seasonality on Q1 2021?

Shih-Jye Cheng -- Chairman and Director/President

To answer your question, since everybody ask how come our Q3 gross margin is not as good as Q2. So I think Scott's question already had all the investment in a clear picture, OK.

Vipul Sagar -- Blash Capital LLC -- Analyst

Yes.

Shih-Jye Cheng -- Chairman and Director/President

And Q4 is pretty strong. We also increased the unit price. And all the negative one-time event was disappeared. So revenue will be higher and margin will be significantly improved. Not only for price increase, but also the negative one-time event will be disappeared. And for the first half of next year, based on the current order, we're still very optimistic, but only speaking for the second half, still a lot of uncertainty. But all our investors for the new capex was secured by two years contract, which can significantly reduce our investment risk and also guarantee our revenue growth. Does that answers your questions?

Vipul Sagar -- Blash Capital LLC -- Analyst

Yes, yes. It does. It does. Thank you. Yeah, you did say why the gross margin was down. You explained that very well. Thank you. You did say the guidance for revenue, EPS, gross margin and even cash dividend for next year is going to be better than 2020. I appreciate that. And then I had a question about the price hike that you started in October was that like a 5%, 10% or somewhere around there or even more? What was the price hike you started?

Shih-Jye Cheng -- Chairman and Director/President

For the testing, wafer testing for driver is around 5% to 10%. For assembly wise, it means that we are going to refrain the gold price increase to the customer's side. That will be around like 1% to 3%.

Vipul Sagar -- Blash Capital LLC -- Analyst

Okay. There was a fire at AKM recently.

Shih-Jye Cheng -- Chairman and Director/President

Yes.

Vipul Sagar -- Blash Capital LLC -- Analyst

And does that help ChipMOS bringing more business?

Shih-Jye Cheng -- Chairman and Director/President

Yeah. Actually, we try our best to help them to pass this critical time period. And we will do our best to support the extra capacity needs, but we don't make any comment for the single customer until AKM's statement.

Vipul Sagar -- Blash Capital LLC -- Analyst

Okay. Now, here's the thing that your revenue is growing. Your free cash flow will be better than the previous year. And I know you're going to pay a little better dividend than in 2021. Here's my question about the value of your company. It's close to book and it's barely about one-time revenue. And I see Chipbond has about a 1.4 book. It's trading above at least almost two times its revenue. What is management going to do about something like, let's say, share buyback? Because if your growth is coming and the stock is near the lows, what -- I mean is 8150 has been listed in Taiwan for seven years, and it's pretty much where it was. So my question is, any thought about buyback? And especially once you settle the sale of Unimos in China and you bring back cash, what is management thinking about that cash that comes down the road or what is management thinking about buyback?

Shih-Jye Cheng -- Chairman and Director/President

Actually, we don't do any possibility. We are also talking about just kind of a subject. How can we reprice our fair market value and share price. And first one is, I think we will continue to delivery our performance and then stable cash dividends and then the shareholder can enjoy the higher premiums. I think once we are going to be recognized, our share price will be increased. And you're not -- and we don't do any possibility to increase in order to portray the best benefits for the shareholder.

Vipul Sagar -- Blash Capital LLC -- Analyst

What do you mean by repricing? I didn't understand that.

Shih-Jye Cheng -- Chairman and Director/President

It means if we are going to continue the delivery that could resolve by quarterly basis and a stable cash dividends policy, which is higher 6% to 7% per year, I think that will be recognized by shareholder our stock price should be improve. And if it's still not improved, then we had enough cash. We don't do any possibilities to do something else.

Vipul Sagar -- Blash Capital LLC -- Analyst

Okay, OK. Thank you, S.J. Thank you, Silvia. You answered all my questions. Let me see if I have any more questions saved up. Let me see. Okay. So seasonality Q4 and Q1 2021 is going to be better. There's a possibility of a higher dividend next year. Q4, everything is going to be up from revenue to margin to free cash flow. Yeah, that answers all my questions. Thank you so much.

Shih-Jye Cheng -- Chairman and Director/President

Yeah. Thank you.

Silvia Su -- Director of Finance & Accounting Management

Thank you.

Operator

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. At this time, I'll turn the floor back to Mr. S.J. Cheng, the company's Chairman and President for any final comments.

Shih-Jye Cheng -- Chairman and Director/President

Yeah. Thank you everyone to join our Q3 conference call. If you have any question, you can direct contact with IR channel. Thank you very much. Bye, Bye.

Silvia Su -- Director of Finance & Accounting Management

Thank you. Bye, Bye.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

David Pasquale -- Investor Relations

Shih-Jye Cheng -- Chairman and Director/President

Silvia Su -- Director of Finance & Accounting Management

Jesse Huang -- Vice President, Strategy & Investor Relations and Spokesperson

Scott Bishins -- Caffeine Holdings LLC -- Analyst

Vipul Sagar -- Blash Capital LLC -- Analyst

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