Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Himax technologies fourth quarter and full year 2019 earnings call. At this time all participants are in listen only mode. After the speaker presentation. There will be a question and answer session to actually question. During the session. Please press star one on.
Or telephone please be advised today's conference is being recorded if you require any further assistance. Please press star zero.
Now I'd like to hand, the conference over to your Speaker Miley Bergman managing director of MZ Group. Please go ahead.
Thank you felt much welcome everyone to Himaxs fourth quarter 2019 earnings call.
Joining us from the company, our Jordan, <unk>, President and Chief Executive Officer, and Mrs. Jackie Chang Chief Financial Officer. After the company's prepared remarks, we will have allocated time for questions going to Q. Many session. If you've not yet received a copy of today's results press release. Please email.
Each <unk> Nx X.M.D. group Dot U.S. or access the press release on financial portals or download a copy from Himaxs website at Www Himax dotcom dots tw.
Before I begin with the form work I'd like to remind everyone that some of the statements. In this conference call include statements regarding expected future results financial future results and industry grows and our forward looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ material.
<unk> from that described in this conference call.
Factors that could cause actual events or results could differ materially from that as described in this conference call may include but are not limited to general business and economic condition. The state of the semiconductor industry market acceptance and competitiveness of the driver and non driver products developed by now.
Demand for end use application products. The uncertainty of continued success and technological innovation as well see other operational and market challenges and other risks described from time to time in the Companys FCC filings, including those identified in his section entitled risk factors.
[laughter] form 20-F, 40 year ended December 31st 2018 filed with the FCC in March 2019.
Except for the company's full year of 2018 results, which were provided in the company's 20-F as filed with the FCC on March 20 929 team.
Financial information included in this conference call is on auditing and consolidated in prepared in accordance with I or asked a county.
Such financial information is generated internally and has not been subjected to the same movies scrutiny, including internal auditing procedures and external audits by an independent auditor to which we inject our annual consolidated financial statements and May vary materially from those audited consolidated financial information.
For the same period.
The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.
I'll now turn the call over to MRD, Jackie Chang CFO of.
The floor is yours yaki.
Thank you my line and thank you everybody for joining.
In today's call, we will first review <unk> consolidated financial performance for the fourth quarter.
Oh by the first quarter Twentytwenty all.
Jordan would then give an update on this data so far.
After a week, we would take crushing.
We will review our financial woes on both <unk> and now I buy it spaces.
The non its financial excludes share based compensation and acquisition related charges.
We pre announced preliminary financial results for the fourth quarter on January 720 countries.
<unk> revenue growth margin, if yes over the quarter Oh, we exceeded our guidance shoot on November seven 2019.
Revenue and gross margin working line, we pre announced these out why don't you guys were at high in the range.
For the fourth quarter, we recorded net revenues of 171.9 million increase of 6.5% sequentially and decreased 8.4% compared to the superior last year.
Revenues from what I've heard in Olive garden, Oh flat quarter over quarter.
Okay, Great driver and non driver businesses contributed to the best hurt in guided so.
Gross margin was 20.6 person exceeding the prior guidance open like increased compared to third quarter, 19.5%.
A more favorable product mix among more deeply cotter.
Bruce W. old factory utilization higher than expected engineering fees from new project engagement.
And the gross margin for the fourth quarter.
I will ask profit per diluted.
Yes.
Was 46 cents.
Beating our guidance all the law of three to 4.5 cents.
Longer so improved gross margin both contributed to the back or things like earning.
In addition, we book a rebound revaluation in all 3.8 million from investment we made Nate I thought during November 2017.
The revaluation gain was not included November guidance.
I will ask <unk> per diluted maybe it wasn't point nice thing.
Seating all guidance off a lot of 2.72 0.2 cents.
Revenue from large display drivers were 57.9 million up 15.6% sequentially and down 22% year over year. The sequential growth was driven by Chinese panel customers ramping up new LCD fat and they're building up inventory <unk> station a broker.
You mean in price hike 20 twond.
The revenue was however, lower Dan level off the last quarter of 2018.
When the production output Oh panel makers reached the peak.
And then they have cut back their production every quarter to address the overall, we shouldn't be man <unk> industry wide oversupply.
Large drive I see accounted for 33.1% of our total revenues for the quarter compared to 30.5% in the third quarter and 38.9% a year ago.
Revenue for small and medium sized display drivers was 81.1 million up 5.1 person sequentially and up 1.6% year over year. The segment accounted for 46.4% of total sales for the quarter.
Compared to 46.9% Inc. third quarter, and 41.8% a year ago.
The sales growth both sequentially and year over year was primarily driven by higher automotive and tablet sales offset by a decrease in keeping the I still sports smartphone, although the decrease was lifted previously expected.
We always into smartphone were down 22.5% sequentially and down 14.3% year over year.
Both the sequential and year over year decline, what caused mainly by lower TPG I shouldn't.
However, almost for your basis, our 2019 could be I should've been we're close to double compared to the prior year. That's all fulfillment was capped during 2018 due to capacity comes right.
Starting for Q 19, our business started.
We see a major tenant wrong, thanks to our penetration into more tier one smartphone Union <unk>.
The industry's record low all <unk> me too low in smartphone how aggressive move to develop new funky what could be I.
Jordan what elaborate on do you know few moments.
The fourth quarter sales of traditional get the I see declined by 20.2% sequentially, but increased 14.3% for last year.
Drivers what tablet in auto consumer products were up 26.5% sequentially better than our prior guidance all I can keep her thing.
This was due to customer inventory replenishment and strong men from certain brand customers.
The fourth quarter cellphone cabinet in consumer products were also up by 25.8% year over year.
Our drive IC revenue for the automotive application was up 23.2% sequentially better thing all guidance of more than 18% increase.
He was up 1.9% from the same period last year.
Revenues from our non driver businesses were 35.9 million down, 3% sequentially and 2.6% year over year.
Non driver products accounted for 20.5% <unk> total revenue, that's compared to 22.6% in the third quarter of 2019, 1920, 3% a year ago.
Gross margin for fourth quarter was 20.6% up 110 basis points sequentially, but down 370 basis points from the same period last year.
Gross margin outperformed our prior expectation Opus lies increase compared to the 19.5% off the third quarter.
A more favorable product mix, among small and medium sized display driver products improved that'd be the old factory utilization and higher engineering fees from project engagements word to factor behind the sequential increase.
Increased shipment of the W. O product, we incur customer led to higher capacity utilization of our W. O that and therefore, better gross margin compared to the since your last year.
The year over year decline was largely due to smartphone <unk>, it's Pete erosion arising from increased competition as well as more guy shipman, well lower end market.
Moreover, our large panel driver IC businesses based Halloween during 2019, when the cause of our C. O I packaging material went up well capacity shortage and the display industry sulphur from a severe capacity oversupply.
Oh I have a as operating expenses were 37.4 million in the fourth quarter down 5.6 person from the preceding quarter and down 8.8% from a year ago. The sequential decrease was caused by increased salary R&D expenses that year over year decreases.
We're also a resolved or decreased salary in R&D insys offset by increased depreciation I mean.
No I ever as Opregen Ben.
Fourth quarter was 36.8 million down 6.2% from the previous quadrant and down 9.5% from the same quarter in 2018.
I have I, it's operating margin for the fourth quarter was minus 1.8% up from minus 4.7 person in the prior pool with her and down from 2.8% since your last year.
The sequential improvement was primarily a result of higher skilled beds are both margin and lower operating leases.
The year over year decline was the result of lower sales and gross margin offset by lower operating expenses.
Fourth quarter non I hope its operating loss was 27 million or minus 24% themselves.
Versus non <unk>, five operating loss of 7.3 million or minus 4.4%.
So last quarter.
And down from 3% for the since your last year.
The sequential improvement year over year decline were for that same reasons stated above.
I have EIS process for the fourth quarter was 1 million 4.6 cents per diluted yes, compared to loss of 7.2 million or 4.2 cents per diluted eight years.
In the previous quarter and I bought at profit of 8.5 million or 4.9 cents per diluted eight years a year ago.
I buy earnings per diluted yes exceeded prior guidance on per diluted EPS loss offered wrong Street to 4.5 cents.
The better than expected earnings were due to stronger sales.
Proved gross margin lower operating expenses and a revaluation in all 3.8, meaning for 2.2 cents forgot Moody ideas from a previous that's making a I start up made during November of 2017.
This is what the second devaluation can we booked for the San investment with the first such demand of 2.9 million or 1.7 cents per diluted yes.
Booked in the same period last year.
The year over year decline was the result of lower sales and gross margin offset by lower operating expenses.
Excluding the revaluation in or out of our as loss for the quarter was 2.7 million or 1.6 cents per that Moody 80 is compared to loss of 7.2 million or 4.2 cents per diluted you did.
In the previous quarter and profit all 5.6 million or 3.2 cents per diluted ideas from the same pierrot last year.
Fourth quarter non I hope its profit was 1.5 million 4.9 cents per diluted eight years compared to non I ever as lost all 69 million or four cents per diluted yes last quarter and now I buy as profit all 8.7 million or five cents.
Per diluted ideas for the same period last year.
No its earnings per diluted share ideas exceeded prior guidance over loss per diluted he is wrong 27 to 4.2 cents.
The better they expect earnings was due to the reasons mentioned above.
Excluding the valuation gain or not I buy as loss for the quarter was 2.2 million or 1.3 cents per diluted eight years compared to non I had this loss of 6.9 million or four cents per diluted idiots last quarter in profit up 5.8 million.
Or 3.3 cents per diluted share ideas for the same period last year.
Now, let's have a quick overview of the 2019 for your financial performance.
Revenue totaled 671.8 million in 2019, a 7.2 decline over 2018.
Revenue from large panel display drivers totaled 237.3 million a decrease of 8.9% year over year, representing 35, we sleep for some of our total revenues as compared to 36% in 2018.
Small and medium sized drivers so totaled 307.4 million a decrease of 5.6% year over year, representing 45.8 for some of our total revenues as compared to 45% in 2018.
Non driver products sales totaled 127.1 million, a decrease of 7.5% year over year, representing 18.9% of our total sales as compared to 19% a year ago.
Gross margin in 2019 was 90.5 person down from 23.3% in 2018, but year over year decline, Tim archery be attributed to smartphone <unk> is t. Rowe Ocean <unk> increased competition and significantly more shipments.
<unk> for lower end market.
Moreover, or large panel driver IC business was impacted by industry wide TV panel oversupply and higher material cost.
On the positive sign more W. O shipments in 2019 led to improved capacity utilization of our W. old fab and therefore better gross margin.
Hi bar as operating expenses were 156.2 million down 9.3 medium or 5.6% compared to last year. The decrease was primarily the result of lower salary R&D expenses and share based compensation despite higher depreciation.
Thanks, then all of our new building.
As highlighted earlier, we not an issue our shoes in 2019 like we did in previous years for granted stock option two important instead, the fourth quarter stock option related compensation expense was 23 three Mimi.
I have <unk> operating loss was 18.3 mean, a decline of 21.7 million from 2018 due to lower sales and lower gross margin offset by lower operating expenses.
Well the same these in Niobrara as operating loss was 16.4 million a decrease of 25.4 million from 2018.
Oh I have is loss for the year was 13.6 million for 7.9 cents per diluted yes versus a profit of 8.6 million or five cents per diluted yes.
No I buy as loss for 2019 was 12.1 million or seven cents per diluted ideas down.
95 million year over year.
Turning to the balance sheet, we have hunting Ptwo point 1 million of cash cash equivalents other financial assets. That's something that end of December 2019, compared 217.7 mean I just in time last year, and hungry and 28 million quarter ago, We made an offer.
Operating cash flow all hunky, Sri point Fourmillion during the fourth quarter the cash position with however, we do from last quarter, because we repaid 33.4 million of unsecured borrowings and made a capex all 27 million during the quarter.
On top of the cash position restricted cash was 164 million at the end of the quarter the fin us the preceding quarter in a year ago.
There will be shape to cash mendy used to guarantee to secure a short term borrowing for the same amount.
We have 57.3 median home Ong secure short term loan at the end of fourth quarter.
Thanks, Julie lower than the 90.6 media a quarter ago.
Our you're in inventory as of December 31st 2019 were 143.8 million down from 157.6 median last quarter <unk> hundred 62.6 meeting a year ago.
Accounts receivable at the end of December 2019, where hundred 54.9 million up from 157.3 million last quarter, but down from 189 point student media a year ago.
Days sales outstanding was 90 days at the end of the year, that's compared to 95 days a year ago and 86 days at the end of the last quarter.
As highlighted in the last earnings call, new responds to capacity shortage of foundry insert and packaging material, we had to keep the inventory level higher than usual in 2018, even the on favorable market conditions easing of funky capacity in 2019, we have started.
To control our inventory level seems the first quarter of 2019, we believe inventory has reached a healthy level and even the prevailing uncertain market conditions, we will monitor on inventory situation very carefully.
Net cash inflow from operating activities for the fourth quarter was 23.4 million, let's compare tweeting flow of 2.3 million for the since your last year and the inflow of 24 million not quarter.
Cash inflow from operation in 2019 was 7.7 million as compared to 4 million in 2018.
Fourth quarter capital expenditures amounted to 2.7 million versus 5.2 medium a year ago, and 31.2 million last quarter. The vast majority of the third quarter Capex was for the purchase of blend the contraction of a newbuilding and w. old capacity expansion.
The investment project has been concluded we some final payment of 1.5 million made in the fourth quarter.
And investment in design tools in our new relating equipment for our traditional IC design business was 1.2 million in Q4 versus Pumilia in Q3 total capital expenditure for the year was 45.9 million of which 7.3 medium was design tools in our.
You related equipment.
In comparison, the Capex for 2018 was 49.7 million of which 7.6 medium was for design tools, there aren't you related equipment.
Let's look at December 31st with all the 19 Himax had 172.2 media Adss outstanding no change from last quarter, almost 40 diluted basis. The total number over eight years outstanding is 172.6 million.
Historically due to the lunar new year holidays, the first quarter has seasonally being the slowest period of the year in terms of self.
Opens down by more than 10% sequentially at this time, however, based on our current pipeline we are experiencing strong cells in the first quarter washing aside the seasonal factor Jordan will elaborate later.
However, the Corona virus outbreak currently taking place in China over the World does represent a major uncertainty to our operations.
Especially for the short term, we're working extremely closely with both our customers and suppliers in our joint effort to meet today either.
We have started to see some downward adjustments of Q1 forecast over the past week or two mainly from certain China based customer for small size display drivers and Cmos image sensors.
You know scrambling to restore their operation into order.
Our Q1 guidance deal has taken into account those downward adjustment.
In comparison were seeing relative to some degree little impact or forecast from large display customers, who are demanding that our supply be interrupted by the incident.
We messed majority of operations located outside of China.
Our suppliers are largely unaffected by the Clearone on virus outbreak the full close you're still use primarily the logistic management, including the customs operation in various poured in China. It isn't worth pointing out that we have very little shortcomings vote.
Sure.
On both customers and suppliers buying it in terms of our own operation.
Hi, I'm in the Hebei province, the epicenter of outbreak.
The situation you still evolving on top of the downward adjustments of forecast we have seen we have deliberately widened and reduce the low end of the quarter's guidance to reflect the risk associated with the Corona virus outbreak.
Well the first quarter, we spec revenue to increase between one and 10% sequentially increase of 8.2% to 7.8% almost year over year basis.
Gross margin is expected to increase by 1% to 2% sequentially, depending on our final product mix.
I have why as profit attributable to shareholders are expected to beating the range.
A wrong minus 25 cents to positive 1.8 cents per 40 dilute it yet.
No I ever as profit attributable to shareholders are expected to beating the range all minus 8.2 cents to positive 2.1 cents per day.
Her 40 dilutes idiots.
I will now turn to for over two Jordan the CEO of the company.
Thank you Jackie.
What do we hosted also colder and it's called this past November will be seen trends.
I'm pleased to create headwinds for us.
See degree is on time performance and pull coast reflected charter countries. You say you know smartphone TBR business.
This was he says a break exacerbated by no one's apply okay.
C D industry does negatively impacted all people struggle I T cells launches.
As a result overall sales and all the wheat.
Since that time, we have started to see major couldn't ROE you did or the Olympics overall pieces.
The trends, we're seeing in Q1, [laughter] extension to Q2 and throughout the rest of to southern Plains.
No we spend the accident I read the songs Corona of ours.
Covington [noise].
We were seeing decent growth across the board for major pulled up typically 20 times.
Now let me take you through initial thought makeup business areas.
Let's start with the large panel.
I see business update.
Well the first quarter, we spent the last fees paid to our licensing revenue to increase <unk>, 10% sequentially.
Since his role finds a panel price recovery.
Panel makers can.
Replenished inventory increased pulp production.
Start engender Q4 2019.
Well, what do you need Chinese panel customers also because of the IXYS getting for the market share forget Lucky So Korean panel makers ongoing restructuring.
That's the reason I see supplier, hi, Matt well positioned to benefit from the increased demand come millstone, although maybe just trying to just flush spread players.
The smoking trends.
And to emerge during Q4 2019.
Oh, you expect people drive strong results into one below it so.
Well twentytwenty.
Well the supply side, we recorded during the last quarters earnings call that Hi, Matt.
Some of all major panel customers, we're already seeing foundry capacity shortage.
So you kind of Liberals, well dispersed otherwise cheese.
In anticipation of this we have strategically prepared to radio until each foundry that's worse associated they've taken page and that has.
The head of Oaks years.
To cover the potential age capacity shortfall.
Oh design project coverage cereal across all the Chinese panel makers, yes, 30 publicly on that business outlook for loss display driver for funding fun.
[laughter].
Looking ahead to cut technology development.
The upcoming probably trying to be Tokyo Olympics will be broadcast <unk> resolution.
Oh, the top tier TV brands have been trying to push sales for AK models.
I don't see event.
And to see US last month lineal this brunch showcase AK TV content high mix because she.
Although the kind of switching away free TV in low we expect these to be a strategic opportunity both for high mix. This acreage TV sales with post demands for not just ultra otherwise see but also coming control those houses.
No. The me turned to the small and medium sized display driver IC business did you mean that lease and update all lost muscle.
Oh, T.D. I product roadmap, that's worse, new design wins and customers and the foundry capacity events each have positioned high mix to Ken Lucky share studies, if they quoted it's true also lead times.
The smartphone market continues to embrace new technologies and not moving.
Towards higher friends Register plays to enable small to screen views and Debbie yours.
Just one truck the adoption, let's generation hydrants, Brett you need yes solutions for Wiech Himax is a leading technology provider.
Oh, so the demand for Fiveg in China, you expect people drive worldwide smartphone girls <unk> hundred 20.
Which didn't trends.
Hi, Steve Me late the girl TV.
Oh, these trends within a bit higher mix.
However, if any have you heard the small displays pieces in long beach smartphone TDR just the major.
Well be the most impacted by the Corona virus outbreak in a short term.
Okay. We are working we saw customers it shouldn't be close the justino operations to support Nashville, Tenn needs in cutting back in the Carla 'cause or a virus outbreak.
Regardless of the Carrillo virus, we are confident no smartphone can you do you have pieces with girls show me.
Sure.
The price erosion, it'll P.D. I know, we've seen over the cost you're expecting to abate.
<unk>.
This is not only because the new high first grade products enjoy higher HP.
Also due to the industry wide heightened fostered because people TV.
As a reminder, doing 20 HM.
Oh, the highlights TDD mpcs well snack does he see you can keep most severe foundry capacity should teach that resulted.
BD team to meet customers' requirements.
Although the could this be couldn't strain was resolved toward the end of 2019, the delayed limited called BD team to participate in major design opportunities with Cleveland the pieces you called other 19.
The actions we took in 2018 to 19 periods to develop a label. In addition, though qualifies phones you partner.
So both years combined we sell should for your technology and customer proliferation.
Oh uniquely positioned high mix to benefit from a tied to name of overall TV has altered capacity.
<unk>.
Well, we're prepared to me TV do you have production trends.
And continued to move forward with plans to enable additional capacity this year to capitalize on the show opportunities for smartphone to media. It's worse other T.D.A.T.D. applications such as typically.
'cause it wasn't it.
I will elaborate.
If you later.
[laughter].
As expected Oh traditionally squid driver IC sales. He is responsible posted a sequential decline for the fourth quarter.
This was primarily due to the traditional just switch or why she's addressable spot home hockey he's quickly being replaced by two years old it.
As discussed previously submissions development, we see the Mckee please increase utilization both the old led.
Display for muscle.
This is due to expense. These OLED capacity, that's worth increased demand for under displacing the principles she's not only available.
Well it displays for that type of these.
We are encouraged by the progress we have made collaborating closely we see panel makers across China for example that product development.
We believe they molded driver IC will soon become one of the major growth engines for small panel driver pieces.
He is the automotive displays segment.
The number of displays for Veeco continued to continues to rise.
The overall multi display marquee sent to increase from Twentytwenty overworked.
Despite.
Does the global cost sales our focus to decline can you see here.
More importantly, boeheim mix.
The monkeys quickly shifting towards the number of new technologies, including higher resolution in cell touch Steven Boulder turn Peter Peter screen local dimming for higher called Trust and plus the M. older toll free form you sign.
Oh, which contributed to an increase in lucky size and demand for automotive displays our license.
Hi, Matt Command small then so the person over global multi display driver IC market.
The primary partner for most of the was automobile panel makers to enables the new technologies the books.
It's worth mentioning that hi makes you sold the thought midnight automotive TDR technology provider.
Looking at the school supplier on numerous three D. I design projects across different each panel makers.
Well, we spent only small volume should probably 20, we anticipate meaningful volume, okay, what commodity.
As we move into part D taught you want.
Turning to the correctly, because she monitronics basis.
We spent so typically ceases to be a major across every five minutes.
Doing plenty plenty.
So just because of all these type of the T.D.S. shipments starting from Q1.
The strong momentum that weren't said right into cheating that's true of Twentytwenty.
The fish the business gross square retrieve it primarily by de La where spreads are repeat adoption of the newly developed infill TV Diaz solutions.
You'll see on T.D. I, just quickly become even stream will type loose stools, just lower cost and the simply fight supply chains, pacewave faster and easier education full display manufacturers.
The same time customer demand.
She to accelerate for these shippers screamer lighter and more stylish type please.
Hi mix is the primary costner fall in Ohio, as Patrick said TD their products right now.
We already making sure letters Obagi incidentally I products will tend to lead to a number of beating and customers some of which includes active stylus.
Additionally, we continue shipping.
Oh traditional display driver IC, we see oil package.
For larger sized gently.
We saw stated that it'll be site to a leading Chinese brand customer.
At the moment tenfold East, Ohio designed to accelerate through all 20 times.
For the first quarter [laughter] revenue for the small and medium size try buys. It. This is expected to increase by around 10% to 20% sequentially.
So let me share some of the progress we made those and then try why she's pieces.
Last quarter.
First I don't know they'll be all pieces.
The fourth quarter, the fourth quarter shipments were very show up by over 30% compared to the same period last year.
Despite the modest decline from the previous quarter.
The momentum led to higher Timothy steel capacity utilization and together, we see improved production yields.
He has a corporate gross margin for the quarter.
According to all cost of those shipment forecast we spent another strong quarter, we secured shipping volumes to double compare your for 17 years last year.
Though the Q4 she was involved in this is expected to decline slightly.
From bundles, but last quarter.
We continue to make progress we sell off going on D. Krasik for next generation products Center, or Oh exception, though.
These I know how it must production capabilities.
Ill take knowledge.
The next you said up they opened three D. says if this is.
The smartphone six month.
That's right automobile optics solution to cover both socialite and tumble flights or Pos Treaty said.
Yes see increase in Pos assumption by smartphone makers for war facing Kinross two they borgatas photography. These things slashed I've mentioned measurement, it's really Betsy formation generation for a Uh huh.
In the past few months would it be exceeds the working with the industry. They didn't feel with Streety cambrex vendor to develops and meal and advanced fuel absolution hockey team Android smartphones.
Leveraging allow W. W old have balance sheet with many great progress, providing a partner we spoke to chip to for their reference design, which will be ready for the bit enjoy smilemakers evaluation as soon as Q, what probably twice.
[laughter].
Oh, no smartphones treaty surgeon education matters, I focus on smart, though a walk industrial collision centers, where we provide such Oh socialize based threed sensing pull those solution.
Looking collaborating closely Wendy we saw two types of publish those with industry, leading expertise in Fisher at Felicia I worry that the lows offering application processors shortly after the P. Beattie.
We have started design projects several small go look and customers.
Separately as we previously mentioned, we're working with partners, who wish to pay but each of us any sense, you know how to achieve efficiency improvements and cost reduction you traditional benefit true.
What about the opportunity we are pursuing shoe factory automation.
I'm pleased to report that prototypes of C D fencing equaled or commodity robotic submitted system.
Available right now for both production optimization testing.
Next on wise.
Oh Boy I'd based ultra low power smart sensor solution.
The demand for battery powered smart device with intelligence agency is rapid city grows.
Although total solution that you spiel, though as us uniquely I'd based agrees that phone couple of himaxs compared to Threeq compute the region processor.
Cmos image sensor for equipped with you so actual low power these drugs.
Currently the laptop just the bucket of focus.
Hi mix Whiteside 2.0, I'd be solution for advice is that top ready Street, one RGB establish I, especially solution respecting privacy already has is security for mobile usage.
And they see us to probably 20, the number of notebooks Oh, Yes, I know the has demonstrated Oh I say I'd be solution in the next generation a premier notebooks, which is positive feedback.
In addition to notebooks.
We've also made progress you know display and I'll be markets.
You know Alex.
The world's leading that picture is TFT LCD displays has integrated.
Oh, Hi makes it was a whiteside solution to these place to enable because you know privacy protection real time.
Oh, so she called me one of those that leading all the M.C. the worlds and there was a feeling to the or though the river. The design of the world's first battery powered through my sense is solution fly LT December clumsy right Tim.
Both either lawsuits are calling showcased their products and to see yes.
Previously we mentioned that in addition to total solution highlights the social able to offer the ultra low power small says it all the basis, Oh geez individual Pos so as to address the monkeys deferred lease it makes mines as potential opportunities for high mix.
Oh celebrity, though these Cmos image sensors discussion because though.
Oh Cmos image sensor business update Cmos image sensor is another critical part of the Whiteside 2.0 I'd be solution.
To support the lean camera, all design and high quality English needed full steam base or laptops.
He has made between one cents or the offers the fewer capabilities of high quality you wish the image picturing and ultra low power, though resolution video since he is one single since.
The industry's first.
So socially innovative design.
We see sensor that cover anchors could simplify their lead generation product design. It says costs by eliminating the need for an additional camera to provide context awareness for better user experience.
Our sensor 'cause social incorporated into August and RGB I'd be signed two years in April we built high low facial recognition.
These two in one Cmos image sensor is currently available for covers slashed customers.
[laughter] inhibition, we recently announced the commercial availability of industry first ultra low power at low latency backside illuminated Cmos image sensor solution with autonomous bowls of operations for always though intelligent video senses education.
Yes, just human presence pension and tracking.
These depiction behave Oh behavioral analysis and post estimation will grow in monkeys, such as smart homes, Smokey Hills kills smart phone and they are devices.
We have collaboration we see partners, we didn't ecosystem to reduce time to market potion collision hedged reagent solutions.
Notably we are working closely with Google.
And have become the reference design.
Fully swore lead intensive flow like yeah first book Poughkeepsie's, a low power device.
For.
The traditional human beaches segments, we see strong demands in notebooks, where we are one of the market leaders and heavy experience increased shipments for multimedia applications, such as Carl recorders developers, Oh, Thrones home appliances. It because you made a tronics among others.
Additionally, we have been we've seen increased shipments and new design wins in the automotive six month covering the full market solutions, such as surround view as a rearview cameras.
Lastly, oleo close we continued to focus on cargo devices and head up display or issue. These automotive.
Meal for [laughter] industry, leading customers have demonstrated their steel door products, including Hello, aggressiveness you'd be.
Yeah, Glossies and like our system, which highlights the okaloosa Guernsey inside.
Thats, what you'd probably see is we supposedly lucky feedbacks.
Oh technology leadership, and proven and eventually expertise that made us a pretty good pubs and focus on their see this emerging monkeys.
And then go in Engineering project Guzzles issued the automotive applications.
Phone on driver IC business.
We.
We expect revenue to decrease by single digit sequentially the first quarter.
Aside from the W., all sales, which I just mentioned are expected to be fell slightly.
Cmos image sensor sales for mothers multimedia monkeys, the being affected by the Corona of I always insistent. It's the operations of many of the customers here I still have.
Totally but these older.
That concludes my report for the quarter.
Thank you for switching high mix.
We appreciate you joining todays call and no ready to take questions.
Thank you as a reminder to ask a question you want me to press Star one on your telephone to withdraw your question. Please press the pound tea.
Our first question comes from Jason Schmidt with Lake Street. Your line is open.
Hey, guys. Thanks for taking my questions I, just want to start on the T.D.D. I business. It sounds like you're seeing some nice traction given some pricing tailwinds this year, but outside of that Ed do you think some of the strings to certainly being driven by overall market growth for share gains as well.
It's definitely is Ah.
Sort of gotten peddler, the ball she'll guns, and a monkey momentum so to me fiveg is going to help.
And ER.
And the silicon to use that to get it always the current the that the the issue of capacity cuts trended over and also usually position.
Having said mature sizable and ready to offer.
Capacity. That's all these factors combined I think he's going to add to our solid momentum expected for this year multimedia.
Okay. That's helpful. And then just curious if you could comment your thoughts on what channel inventory looks like in the Chinese smartphone markets.
So it's a it's a tricky question [laughter] you you're talking about smartphone right am I correct.
Yes, okay.
Okay. Okay. So he's a tricky issue because Ah the current color virus situation I think it's a it's making a thin so pretty glaring for us.
Full time be although I think the into a good clarified.
So having said that though I mean does the situation is evolving.
I think though I would just like to you know you know.
Probably for that you'd agree on your question I think.
I I mentioned earlier in my read of you my prepared remarks that.
Oh, we have taken into account or let me rephrase, if we have a discounted already.
Oh, the the impact coming off of the virus.
Oh into our guidance right and on top so so why we've seen with a copy you know guidance and on top of stuck with off for the widen our guidance.
On the low end just in case, because as I said earlier, you know you still evolving.
And so if you asked me so exactly how much impact.
The corolla of ours is going to Ah, Hey, well helps you why themselves.
I would say around 1% or you have more.
There were only Brazil, even more of our total sales and nobody's time over the coming from small panel in particular, the smartphone and social smartphone PDP, yet you said.
Oh No I'm sure you all of your go to Wonder why smartphone and why not lost Kindle I think a long story short it is primarily because.
Oh, it's many of you know Oh.
The last year the panel size the legislatively.
The panel makers.
Go to outsource their module assembly to third parties and vice versa.
So so being in the case on TV highly unlikely actually d.. So we have I see that I thought that the panel makers are also seeing there.
Module assembly to all sizes.
Panel makers are making the up modules themselves.
And.
And smart home you know happens to be this modest in size and display display. So if you saw the most likely that the module Assembly is also school so policies.
Some of them actually designated by a in customers no. It is the molecule cycles, the operation, which pushes how I see another from inside so so right now where see stuff a lot of a small players.
Oh specialty module Assembly houses, who are primarily focusing on smartphones for the reasons I mentioned earlier.
Oh.
They are they up this is because they are smaller in size their businesses W. How the ER in older probably they are some of them even the boss all employees.
To the office because of all these constraint created by the virus Association.
And also it is.
Uh Huh [laughter].
A lot more likely to a full four four so small a smaller module houses to react quickly to any order changes because.
I see a four small panel size.
For a larger percentage of that's a local still there very sensitive tool to inventory cost horrible lost panel you, especially we write offs pvs I feel comfortable very small wholesale got close so they they there's a concern over there is that they need to make sure. They IC bus secure the otherwise you know if they continue to produce sale, which they are too.
Right. So regardless of the virus situation you know there will be a fewer shortage.
Ready to ship. So so that's the kind of explains why are the smartphones. The most severely impacted and look and I think Uh huh.
You know up 'cause, it's carlton above 10% or even more of the even pick that we saw over the last two weeks also oh the of the Corona virus a situation.
Yes, we have given the guidance and on public that we also why do although and just to accomplish for that children, having said that though Oh. We believe this is short term Jewish although I don't have the crystal ball, So I don't know.
How long is social Tony is going to lives, but I I, we believe the market still there at the faced by GE vehicles to take off and the small for you know, okay do allow or you know good.
By you know our capacity or Oh, a alfonso capacity of NVS Oh design win situation said show I think.
Most likely we got good to see explosive.
Oh grills.
In a in ER in in the south into too.
So.
So the studies already on couple of Oh, we indicated throughout 2000 tons tend to 30% sequentially increase for Q1 expected.
The study.
I think that extended as the who your question Jason.
No. That's a that's very helpful. Appreciate that color and then just last one for me and I'll jump back into queue, and you're expecting some pretty nice gross margin expansion here in Q1, sorry, 22% at the midpoint of guidance should we assume that that is the low water mark for the year do you still expect.
Gross margin to expand as we progress throughout 2020.
I certainly believe so.
I suppose I believe so.
[laughter].
We expect in probably 20, there's the gross much into for the true because boasts of a smartphone small size ER and the overall our size foundry capacity all the apples facing constraint I I mean should look at his opinion earlier.
My prepared remarks.
So that is going to provide good the price support and no silvergrass specific because he for example, p. the new products.
We're going to enjoy a bit as Pete.
Oh, no drivers such as age Econ. For example, you know who are actually it's a we would you say the penetration is still boy TV, but we do have Ah the major.
A major market position.
So really going to take off right. So okay that these hires p. as high margin.
So other non driver products this will.
Going to enjoy.
So there's fewer losses. So I think we would have a certain level coming to and stuff. So 2019 gross margin. So.
It's a is extraordinarily excited I suppose if children or the though and we certainly expect or a good a rebound from that.
For the time.
Alright, Thanks, a lot guys.
Thank you Jason.
Thank you and once again, ladies and gentlemen, Navistar wanting to ask a question. Our next question comes from Suji de Silva with Roth Capital. Your line is open.
Hi, Jordan and Jackie Congratulations good progress here TDR market. It seems like it's a tight supply and from pricing how many quarters, you think that situation can persist before pricing competition presumes a competitively.
Well I think oh with C., so the customers and customers equally.
Oh, sorry.
Just the bulk of it.
Yes.
So I like this is a very very different situation from none of us. So you know.
I mean, there's no we do a this virus situation by saying Oh, okay.
We believe the total Mckee side I would not go into law.
There could be some you know small haircut, although TD I'd love to shield was cause you to grow or within a year. So I wouldnt. We don't think [laughter], we think our TV I told them Lucky is going to further grow this year and.
And that is going to make the situation type of situation.
A real issue fall for both our direct customers and customer so I think.
The price erosion that we saw last year, you saw pretty unlikely to repeat this year.
Okay. That's helpful. Jordan and then on the large panel.
Really the China panel makers are gaining some share from Greg can you get a sense and know how much of the market is transitioning over and then how much is himaxs share ago Chinahr panel makers.
We are for loss display driver Pcs [laughter] vast majority off or I don't have good you fix ship break so right now.
Huh.
Oh.
I mean.
I will say, probably not moly not really not be to set up or do I see for large families coming from Chinese customers and by the way. We are I think we're pretty we are.
We are number one or you know equal number one a in China, we so pretty.
Beat the market share.
And didn't come so far.
Uh huh.
Oh, how much.
China, it's good to get from the Korean restructuring.
Oh, okay.
I guess, it's harder to predict this year, even though I feel in deep I think you view, but issues I mean size.
Oh from a 2019, okay 2018.
If you look at the.
Oh, let's go off output.
Oh gosh area output got the every output distribution into the over the 18 Korea.
And to have also they took a said well China has 35% right. So you. So they took into the five in 2018.
So far in 2019, the the margin or the widen to 28% goods. So these are for these trio only 4%.
And I think that carries is expected to continue the why the.
For the two full 2019 so.
I think it's safe to say that are in 2019 in China, it's going to command.
Hot or more than half of the global cost ALC was pulled us panel.
So that's pretty significant.
Yes, quite a bit okay, great and then my last question is on non driver and W. allow it to lead customer here is there an opportunity for content gain given to better capacity challenges or is that something where that's still expect to be phased out overtime.
I think I cannot read too much on these you know given the obvious reason I can only say, though.
Oh, no you know.
We Oh, we have provided a two hour and good customer we are the sole source.
ER and also we are working all for the projects.
You know some of that maybe you know will be bigger in size compared to current project and.
I cannot indicates a precise exactly when the new policies going to sum up but the question I think that doesn't have to.
Opinion updating you guys saw in due course.
Understood all right. Thanks, Thanks Darren.
Thank you Suji.
Thank you and I'm not showing any further questions at this time.
Any more questions from the floor.
Oh, we no more questions as a final note Cherokee our CFO will maintain vista monkeys activities and can.
Turning to attend investor conferences, well enough the details as they come above thank you and have it I'd say.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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