Q2 2020 Himax Technologies Inc Earnings Call
It's been so we're not listen only mode. Later, we look at that day question answer session and instructions will follow at that time, if any which require assistance during the call. Please press Star then she wrote under Touchtone telephone as a reminder, this conference is being recorded I would now like to turn the conference over to your Huh.
Mr., Mark Charles Lindbergh <unk> in secret.
Thank you welcome everyone to Imax's second quarter 2020 earnings call joining us from the company are Mr., Jordan, Wu, President and Chief Executive Officer, Ms., Jessica Pan Chief Financial Officer, Mr., Eric Lee Chief I, Our PR officer.
After the company's prepared remarks, we will we have allocated time for questions in queue anyway, you could have not yet received a copy of today's resolved.
So he's email each <unk> Amex MZ group Dot U.S. access the press release on financial portals or download a copy from imax's website at Www Dot Himax dotcom Dot tw.
Before we begin the formal remarks I'd like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results.
Industry growth are forward looking statements that involve a number of risks and uncertainties that could cause actual events or results could differ materially from those described in this conference call.
Factors that could cause actual events or results to differ materially from those described in this conference call include but are not limited to general business an economic conditions.
State of the semiconductor industry market acceptance and competitiveness of the driver and non driver products developed by high Mac.
Demand for end use application products. The uncertainty of continued success in technological innovation as well as other operational in market challenges and other risks described from time to time in the company's SBC filings, including those risks identified in the section entitled risk factors.
And its form 20-F for the year ended December 31st 2019 filed with the yes, you see in March 2020.
Except for the company's full year of 2019 financial which were provided in the company's 20-F and filed with yes, you see on March 26 2020.
The financial information included in this conference call is unaudited consolidated and prepared in accordance with FRS accounting.
Such financial information is generated internally has not been subjected to the same review scrutiny, including internal auditing procedures and external audit spine independent auditor to which we subject our annual consolidated financial statements and may vary materially from the audited consolidated financial information from the same.
Period.
The company undertakes no obligation to publicly under 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 Mr., Eric Lee Eric the floor is yours.
Thank you Mark and then thank you everybody for joining on my name.
Hi than you.
RPL feature.
Joining me on children.
And Jason.
Well I guess eventful.
Cool we were firstly you.
Good day, the financial performance.
The second quarter.
By the third quarter two fold in talking to all the.
Children will they get an uptake on the status of our business. After please.
Next question.
We will review all financial first on both <unk> and did not.
Facing.
They're not.
<unk> show.
Shared based compensation and acquisition.
<unk>.
We pre announced a preliminary chief financial result for the second quarter on July six since I've been talking its revenue gross margin and <unk> Oh exceeding the guidance issued on May seven two homes to southern funding.
To date, all reported result for the revenue gross margin yes.
On your line, we feel pre announced the result.
Well the second quarter, we recorded net revenue, although hundred 87.0 meeting an increase of 1.3% sequentially and increased 10.4 compared to the same period last year.
The 1.3 sequential increase of revenues.
Exceeded our guidance almost like decreased 5% quarter over quarter.
Men.
I'll watch display driver monitoring the greater than expected shipments balding for both small full end to traveler culture built it's true that bad everything by itself.
Gross margin was 21.0%.
Ceding good Paul your guidance between 20.2% to 20.6 cents due to a more favorable product mix among lost he's played for them.
Hi, <unk> coffee in print I won't give 80, yes, what your 0.8 cents exceeding our guidance awful lot of 1.5 cents to drill pipe.
Okay.
Sean sales.
Your 0.5 cents schoenfield, improving gross margin and the doors and safety operating and contributed to the bad or is that expected our news.
No I have all its profit per diluted yes.
One point, youre, saying exceeding our guidance.
A lot of 1.3 cents to 0.3 cents.
Revenue from locks.
However, what 15 might seem fine deanna.
3.1% sequentially and <unk> 0.2 year over year.
A sequential decline was driven by lower shipments into <unk> due to weakness in the global TV market, which are severely impacted by coffee locking Albrecht.
Second the revenue decreased 21.7% year over year offsetting the weakness you seem to keep the second then what's a search in the demand for whatever work and online education tool.
For the sales.
Let me turn and that no books picked my should increase all by 160.0% year over year in Q2.
Watch panel driver IC accounted for 31.8% of total revenue for the quarter.
They are true 33.2 seem to first quarter since I've been talking and just or do you, 5.0% a year ago.
Run room for more into media five.
It's probably driver was 98.8, Indiana.
Sure I'll, 0.9% sequentially into talking 0.9% year over year.
Sequential growth.
Driven primarily by tablet and smartphone sales.
Oh satisfy a decrease.
Ulta Mobileye.
Good night.
What's wrong with year over year gross loss attributable to remarkable troubling sales, especially our T.D. I heard thoughtful capital light.
The second month accounted for 52.8% of total sales for the quarter compared to 47.4% fourth quarter two fold in 20, and the 48.3% a year ago.
Filter into smartphones were up 10.5% sequentially, but down 26.8% year over year.
Our smartphone T.D.D. I was 69.0% sequentially and Youre, probably 3% from this MPT real Lawson here.
In the smartphone PGTI secondaries reflected customers agreed this new product launch point, we all are TBD I solution.
We reported earlier that the launch of several called conducting smartphone we saw TBD I solution side working late because all the pandemic.
Many of those projects started mass production in Q2.
Returning to the strong sequential growth.
Sales all traditional <unk> full smartphone declined to 543.6% sequentially and it was down 58.2% fungus MP real off here.
Our traditional <unk>, which we present jumped 26.3 person on the small segment in Q2 declined significantly.
Right.
Factors that we'd have to be picked Italy report gets that to distribute traditional TV I see what's quickly be replaced by <unk> and the able lane for smartphone vacation.
We expect to see a short term spike or traditional TV I see can men for smartphone during the third quarter.
I didn't draw older sponsored them bring customers.
However, again borrowing short term fluctuations.
We expect to see continued decline in the traditional beauty I see smartphone.
I'm going in Colby Nike pandemic at Sidoti and worldwide smartphone market demand with a more than 10.0 expected decline during 2020.
According to its ever Research Institute.
Before I do so challenging called vision.
We expect to see small small smartphone TBD I see all in second half of 2020 mutual more diversified customer base thrown forgot romance and they reached the print outperformance.
Well its anticipated boosted by the strong momentum in both traditional discrete driver IC into PPD I personal lines.
Several like what's the best to perform you've heard about category or in Q2.
55.1% sequentially Santo hundred 74.8% year over year.
It represented a wrong funky of 3.0% horsepower total sales in Q2.
We expect this pergo segment to continue to grow into second half that's in the overall market for cable capital light look to remain robust same toward forks awful and online education.
In addition.
During this Neil good man for tablet PDP.
I'll switch the field worth.
83.2 sequentially in Q2.
Oh seems sale touch display is quickly becoming a new mainstream for Android tablet.
Jordan <unk> collaborate on the although its capillary <unk> being a few minutes.
What did by demand for remote word medication.
Revenue all traditional display driver IC heavily de lever of more than 40% sequential girls and the more Dan.
If he point do you over here in the second quarter.
Specifically, we should more of the higher AMC I see with high resolution and the call packaging for large sized bleeding babble tablets to a certain leading blame them.
That's expected.
Oh driver IC revenue for the automotive application was 15.2% sequentially.
Walled off global production and the car sales call me to fill that hole.
Most of the work.
However.
Year over year basis, automotive driver IC revenue was up 4.1%. Despite the fact [laughter].
Second quarter revenue Shaw, our non driver business was 28.7, meaning gone 19.5 sequentially, but off 1.7 year over year.
The sequential decrease was mainly due to significant shouldn't by reduction I'll stop you hold for dogs shoe and anchor customer and the low Andrew need in fee income.
Oh, all their non driver hurdle.
Offsetting the weakness in W. Oh.
Cmos image sensors has higher revenue contribution from notebook and IP camera application will be more work and online education purposes.
Non driver per dollar accounted for 54% of total revenue, that's compared to 19.4% into first quarter two fold in 20, and 16.7 a year ago.
Gross margin for the second quarter was 21.4%.
170 basis points sequentially, <unk> hundred 50 basis points on the computer last year.
The sequential decrease was cost to find lower W.A., all the shipment and weak automotive sale to overall to all our higher gross margin per dollar.
Well take tightening the engineering, it's easy to.
It's also a factor behind the sequential decline year over year basis. She was.
1.5%, mainly due to a more favorable product mix with a more shipments of W. O and to T com for about.
Our bias why its operating expenses.
Were 37.6, meaning is the second quarter.
No I will 0.9% found that proceeding quarter, but down 3.3% follow you go.
There year over year decrease walk a result, if you treat salary and the Trebling defensive.
Now as far as operating expenses for the second quarter.
Were 37.2 million up 1.4% from the previous quarter, but down 3.2% from the same quarter Im sure. It's all done liking.
Hi, it's all ice operating margin for the second quarter was <unk>, 0.9% dolphin and <unk>, 0.5% in prior quarter off from minus 3.5% you didn't give me a lot from here.
The sequential decrease was mainly due to lower gross margin.
The year over year improvement was primarily a result higher sales that are both margin and the lower operating expenses.
Second quarter, non hi Fi its operating profit was 2.1 million or 1.1% Upsells lower strong not higher thoughts operating profit all 5.3 million in for 2.9% wholesale last quarter, but off wrong or minus 3.2%.
For the same period last year.
I have dogs profit for the second quarter was 1.4 million forward 0.8 cents per diluted EPS compared to the profit all 3.3 million in all one pulling night dance per diluted adx, he's a previous quarter and the loss of five.
Going to mean or three point, they were saying first I don't get Ats a year ago.
Second quarter, no high fives toss it was 1.7, meaning.
For 1.4 cents per diluted AIDEA compared to no high as far as profit all 3.8 million or 2.2 cents per diluted EPS last quarter and in the high its ARCT loss of 4.8 me on like for 2.8 cents per diluted EPS for the same period law.
Here.
Turning to their balance sheets.
He has 107.1 year, they'll cash cash equivalents and all their financial assets solve the end of June 2020.
Two.
I'm, sorry, Ponting 2.4 meeting at the same time last year, and 126.6 me a quarter ago.
Lower cash balance that's all the and.
All the second quarter, while managing a result offer repayment of unsecured borrowing of 9.4, meaning and on operating cash awful off 9.2 meetings during the quarter.
On top of all the cash position.
Restricted cash was 464 point there were meeting at the end of the quarter, the fan pests preceding quarter and a year ago.
We have restricted cash piecemealing you guaranteed.
Sure short term borrowing for defense among.
We have 58.4 meaningful unsecured short term loan.
That's the end all acute shoot compared to 67.9 million in a quarter ago and the 77.0, meaning at the same time last year.
Accounts receivable at the end over June 2020 were 200.
And the 6.1, meaning.
Oh from 186.7 meeting last quarter and 176.
Point to me I give go.
Dsos was 100 and the one day.
And over the quarter, that's compared to 96 days a year ago into Nike two days at the end of last quarter.
He wouldn't worry us to June 30, it's all been told you we're.
The hundred 51.5 units.
From 148.4, Muni last quarter sub Dong flung hundred 88.5, Muni a year ago.
In response to a industry a wide capacities shortage and in preparation for its strong Q3 forecasts.
We had to increase the inventory levels given Q2.
We can lead already inventory provision in healthy.
Healthy, giving fall into full cats and.
Her chase holders, we see if the phone customers.
Five we monitor all inventory carefully by working closely with all customers.
We're continuing to build up inventory position aggressively exist.
Foreseeable future, even the prevailing it'll be a foundry capacity shortage in the marketplace.
We expect the inventory level to be significantly low over the course of Q3 again, because theyre very tied the foundry capacity and the strong customer demand.
Net cash awful strong operating okay piece for the second quarter last night pulling to me I mean, let's compare to and outflow of 17.7 meeting of the same period last year.
And inflow of 10.6 meeting last quarter.
Net cash outflow loss many call by more equated inventory do though.
Second quarter capital expenditure among kids 2.0, Poinsettia Muni versus the 5.7 me a year ago, and a 3.1 me last quarter.
That's reported.
In the last earnings call the Cat path for both new building construction industries dancing capacity expansion for already concluded in the fourth quarter two fold in 19.
The second quarter Capex walk for R&D related equipment for all IC design it isn't it.
Before concluding my report.
The second quarter results I would like to provide an update on TV done.
Typically make annual cash dividend payment at the middle of the year based on PPI IRSA possibility.
Our board of directors have slightly as I, we were not paid cash dividend into 2020.
The decision was made with for consideration all Himax with all the 19 financial results as well in 2020 operation and the capital requirement.
That's all June 32020.
It has to 472.3 me 80 past outstanding little change from last quarter.
On a fully diluted the basis. The total number of ABS outstanding What's 130 73.2 minutes.
Q3.
So with all their 20 guidance.
At this point.
We expect to de lever strong girls for the third quarter.
We feel very good momentum or small phone TDD I'd business against the backdrop, although depressed global smartphone market.
Arc heavily IC book, it's great driver and the T.D.D. I made remarkable contribution to all first half results into on track to carry a nice momentum into second half.
We also foresee some girls.
For the notebook TV and the T. comfort off for the next quarter.
However, third quarter gross well be constraint that due to an industry a wide perfunctory shortage.
In order to all you would your practice before 2019, we threatened by is huge.
They thought options on September 30, this year for employees a share based compensation.
That's a reminder, what do you not going I see last year, rather 2 million in 226.
It's all done and to see country Nike units of stock option granted to the team.
Had an exercise price of two point 27, plus the tender.
All through quarter aren't as ice earning per diluted EPS guide to Tetra tech come into a calling for they expected 2020 I to grant.
Rich subject to board approval, it's not assumed to be a wrong 3.0 meeting or 1.3 cents per diluted the idea.
Almost all of which will be basket and extend it fast you need that will be on September thirtyth. The grant date.
The grant or if you wouldn't be too high of sort of quarter I, if like operating expenses compared to all their quarter solve that year.
For the third quarter, we expect Remy, which we increased by a wrong 20% sequentially.
Gross margin is expected to be flat to slightly down from second quarter, depending on our and you've heard on mix.
Hi, as our profit attributable to shareholder is expected to be the range around two point there were sent to 2.8 cents per fully diluted adss.
Now I emphasized profit attributable to shareholders. He is expected to P.E. The range of 3.5 cents to 4.3 cents per fully diluted idea.
I wouldn't know tend to pull over to Jordan children. The floor is yours.
Thank you Eric.
Or other cultures 19 at this time this could be going away anytime soon.
Most countries has great to east.
As far as steel taken measures to contend to spread the virus.
Although the pandemic sprawl commensurately swaptions to the markets, we all protein.
Many of all kinds of customers at these fast to react to the changing environment, but quickly shifted their production to where the demand. So.
Well they were selected pieces, the very strong sales for notebooks and mobile markets.
Hi.
More than 10 ml solution to TV and small flow.
Well take like you said to favorable cost through all the whole year [laughter].
Wireless businesses have been velocity reopened a big part of the societies feel at this stage, mostly at home, we small she'll do TTP no pretty brutal line.
The stay at home economy has proven to spend if its civil customer that trial in these markets to we should we supply all products.
Ultimately the BTT itself will be much improved from the first half.
However.
As mentioned earlier the industry, just going through a severe foundry capacity shortage right now we should see between accruals almost all pieces, especially the spot vessel activity.
Swiss Cmos image sensor products.
Separately.
We are working towards capitalizing on all you recall charlot technologies, where we have existed heavy in the past few years North of 53 D. Sensing full smartphone. This smartphone look that's worse ultra low ultra low ultra low power smog image sensing full products such as slow book TV.
So bill and air condition.
I will elaborate a.
Later.
As indicated to you know cadence, we now expect strong Cup like girls full King Street.
Our goal is to your cools off course Marcia.
We'll be paying pulled and how good for Q4 and next year.
[laughter].
Now let me take you through each overall picture thesis areas.
Thus saw that we see loss a large panel driver IC.
Yes this uptick.
Whatever TV and mobile guy fees are picking up momentum in Q3.
The TV market or because a large display sector is experiencing a solid refile lately with panel prices rising and set makers rushing in for inventory replenish replenish replenishment after quite a few sluggish quarters.
For the third quarter, we expect to deliver low teens growth 40 display driver both sequentially and year over year.
[laughter].
For the monitor segment follow a demand.
Following a demand surge in the previous two quarters, we expect customers even story to correct.
Resulting in a sequential decrease in King Street.
In a notebook segment as we mentioned earlier, we see continuous demand fewer particularly by enterprises E learning as we approach the back to school season.
Our businesses in the high end monitor and new generation low power novel products, where we are the market leader in D., I see and T com what benefit significantly from this trend.
[laughter] now, let's turn to the small and medium sized display driver IC teasers, beginning with an update on our smartphone segment.
Our TV AD product Roadmaps as worsening design wins with end customers physician high Maxwell to gain market share throughout two 2020.
But pandemic has negative the weight on both smartphone production and consumer demand.
While 2020 remains a challenging year for the smartphone market, China is already in gradually recovering and other countries our movie in the same direction.
Based on the current pipeline, we expect to more than double our smartphone Dvds shipments during Q street compared to the previous quarter.
The smartphone market continues to embrace new technologies moving toward higher from rate displayed to enable better screen viewing and can experience.
Oh, hi for memory products have been adopted by several top tier customers and have begun must production in Q2.
As discussed previously.
Especially when I mean, we're seeing a marketplace is the increasing utilization of the OLED display for smartphones.
This is due to extended anvil their capacity that's worth increased demand for other display fingerprint technology that is only available in the emollient display currently.
We are encouraged by the progress we've made in our collect and are collaborating closely with the panel makers of course, China for him all the product development.
[laughter].
Additionally, we.
We have made good progress in or avoid them all the display driver IC with leading Chinese panel makers.
We believe them all the true I see will soon become one of the major growth engines for small panel driver IC pieces.
Turning to the Tetris business, we expect our Piddly I see is to be a major girls area throughout 2020 with a strong focus for both the scooter IC and T.D. a in the third quarter.
Tablet demand is picking up strongly.
In a way of the colonizing outbreak studies fueling remote walk and learning.
As mentioned in previous earnings calls TYRX pioneer the TTR solution for tablets and if the dominant supplier for literally all the Android dry vans.
Separately, the Guy just two quarters into mass production already accounted for around 37%, our hybrid IC sales and.
If I look at as a separate product category represented almost 10% over total revenues in Q2.
We expect to increase of more than 20% sequentially for Tetra G. The next quarter with the momentum to continue into Q4.
Typically sell TTR offers the benefits of lower cost and a simplified supply chain and represents an easy Emily fishing process for panel makers.
For consumers it offers a lighter weight screamer and more stylish design as far as improved cash accuracy, which added option for active stylus.
Similar to smartphone.
Demand for traditional.
Illustrates our IC for tablets is also being eroded by insensitivity.
But at a more moderate pace.
For the temporary segment, we expect to deliver another sequential growth of low teens with shippers to almost co trouble, but of the same time plus year [laughter].
Again. This is thanks to the southern social tablet demand arising from the pandemic and then NPD our revenue that did not exist last year.
It is worth highlighting that part of the tablet market is smaller than smartphone the HP a number of units for T.D. and each type of that apples higher than last for staff for.
[laughter] turn into the automotive sector. The global automotive sector has been badly hit by the comic 19.
In the market outlook remains uncertain during the second half of 2020.
I missed combatant commands small and so the percent of the global automotive DDAC market. It inevitably this business is impacted by the slow award demand.
However for the sequential revenue was down 15.2% in Q2 revenue for the first half was still up 3.3% year over year.
Our technology leadership in automotive display market has helped us continued to gain ground with customers.
We expect to deliver a mid single digit sequential increase in the third quarter.
We will remain leader in this market as the major developing trends.
Has not changed a mid short term challenges.
[noise] backed by our leading market position you mean in new technologies for help automotive display we are the strong and positive long term outlook for the automotive sector.
We are the primary partner for most of the worst over multi panel makers to enable new frequencies.
Specifically himax has been selected by many leading tier one Oems for the upcoming first launches of equals using this place, which TV AD technology.
While we only expect a small volume of shipments in 2020, we anticipate meaningful full production shipments of automotive T.D. as we move into 2021.
For the third quarter revenue for the small and medium sized struggle I see is expected to increase by over 40% sequentially.
Now, let me share some of the progress we made on the non driver IC businesses.
Our fourth.
[laughter] first although not real business.
The second quarter that we all revenue declined sequentially due to lower shipment to an anchor customer.
Factory.
To wish we usually ship this product was order to shut down temporarily by the local government as part of their disease containment measures.
However, our shipment to the anchor customer recorded a nice gross compared to the to the same quarter last year.
We continue to engage several strategic customers and or partners to develop new projects for the OE diffuser and optical Lan solutions for future generation products hovering right away range of different applications.
[laughter].
Yes, it's enough they almost three D sensing business.
In smartphone application most customer inquiries and design projects are moving towards Pos Threed sensing for war facing camera that features long range and wider angle coverage for a our three d. model and they mean futures.
We still life, we provide optical components and all projectors, which are critical in the performance of the whole to your solution.
In this business, we have partnerships with Pos sensor providers laser when there's a smartphone makers and are engaged for various stages of product development for next generation smartphones.
[laughter].
For more smartphones release engagements, we focus on smart door lock and payment system applications, where we provide socialite based threed sensing total solutions.
To broaden our market reach we also offer our market leading street decoder basic ethane your video component for integration into others systems.
Through such partnerships, we are able to reach out to parties that we are not the familiar with such as industrial robotics and access control systems.
Three D sensing beat you remains all of the main growth drivers.
For us.
Now switching gears to the Whiteside smart sensing solution.
As I mentioned in the last earnings call in order for Wise, I think last sheet to reach its maximum potential.
We have adopted a flexible business model whereby in addition to a total solution for who will provide processa image sensor and they are going but we also offer a little should give you usually as key pause in order to address the market's different needs and widen our market coverage.
For customers, who only all algorithm and wish to develop their own applications. We can provide ultra low power air processor, Amy sensor with Dougherty.
The customers can piggyback on our technology and focus their efforts on Brean AI to edge devices by choice, forming a wide range of sensor data, including video so both plants gesture among others into actionable information.
Always extremely low power consumption.
For those consumers plush customers.
Who spent business is to provide here processors, who can offer our ultra low power, even sensors with our air processor and always.
For the total solution offering we launched.
Computer vision human detection and be solution.
Which has been working right and it's been incorporated incorporated into the next generation premium level of models of key Oems and audience.
Our total solutions are also being integrated into a wide range of other applications, such as TV gold belt, Wallach air Conditioner et cetera.
Engaging leading players in those industries.
For the other types of business model, where we only have a key Pos.
Our strategy is to actively participate in ecosystems that by the was the a and cloud service providers.
The reason illustration of this strategy is an announcement for the collaboration with Google.
So by blending or Google Tensorflow right for Microcontrollers kernel, we provided our air processor, we see a plan for convolution no neural network.
Based SDK for software development kit.
For developers to generate the learning differences, we see deal and voice commands data to boost overall system performers were consuming it shouldn't be low power.
BNN official partner, Google sends a flow we get to enjoy the enormous network Howie psychosis and participants.
No over a month after the announcement.
We already receiving inquiries from rush corporations and individual air developers like with education ideas covering a broad range of industries.
We're very encouraged by the Infusystem discussions about possible whiteside applications not taking place in there as you the groups for emerging AI.
Market ideas.
Last but not least.
We are working closely with other D.A. I in Costa Rica providers worldwide to incorporate twice I actually I solution into the ecosystems in an attempt to reach the broadest maki coverage possible.
We are extremely excited about these developments.
Now turning to our Cmos image sensor business update.
Due to the accelerated adoption of more home home and own education demand for Cmos image sensor for notebook and IP camera, we remained strong during the third quarter.
Oh industry first two in one Cmos image sensor has penetrated into the desktop ecosystem for the most stylish Super spleen bezel design with three types of popular application features lending.
RGB sensor for video conference RGB, IR sensor for Windows hurdle facial recognition and or partial low power computer vision for human presence detection.
We expect to see small modeling incident.
Premier notebook models, they twentytwenty with small volume is expected in coming years.
[laughter].
For the traditional humor vision segment, we also see strong demand the multimedia applications, such as cloud recorders surveillance drones, Homer, bringing home appliances and consumer electronics among others.
Lastly, only ocaw's.
We continue to focus on layout, our devices and head up display automotive.
Many of our industry, leading customers have demonstrated their scale they are products, including holographic issue.
Glasses and love our system with high message across the technology inside.
Ill technology leadership improvement richer expertise has made us a preferred partner for customers in this emerging markets and the ongoing engineering projects. They are cargoes and issue before automotive applications.
For non driver IC business, we stepped revenue for the increased by low teens sequentially in the third quarter.
That concludes my report for this quarter. Thank you for your interest in her comments. We appreciate you joining today's call and we're now ready to take questions.
Hi, Thanks, Tom If you had a question. Please press Star then apparel line under telephone keypad. If you will die twice to your question press the pound key we ask that you. Please limit your questions did you questions.
And your first question comes from Tristan Gerra with Baird.
Hi.
Great Great code would you be able to quantify the weather impacted the foundry shortages on your Q3 guidance.
Foundry shortage.
It's almost across the board actually are covering large and small display for human Cmos image sensor.
Our happens is.
For mature technologies.
Very severely for eight inch but even for 12 inch.
We still fiveg smartphones and other things coming up.
Following a foundry 'cause capacity, we believe will be a long term phenomena.
Foundry capacity shortage will be of lumber phenomena.
So we are.
We made the right decision to ER.
To develop a.
Neil and major foundry partner being TSMC.
In taking people in an eight.
Our 2018 for RG the lowest.
The modification, we met at a time because without that we wouldn't have been able to see the gross but I think our foundry capacity shortage.
Fortunately or unfortunately in fact, if here to stay and.
It's not going away anytime soon we're busy.
I don't know if there any more specifics if you want to know about.
Okay that helps so just wondering if maybe what percentage.
Higher your revenue guidance would be if you were able to access you know all the capacity that you need.
Last higher.
Okay. Okay.
Great.
Good news or revenue by the fact is this is going to you much higher especially for smartphone and.
And pay TV.
So then the need of is.
Probably pick me up perimeter pertaining to the letter it just a little bit again, the most especially impacted areas of smartphones and tablets in India.
Our full both we use the same for apparel inch foundry.
For Q3, the shortages severe into more of those very very that now are we still limited.
Our capacity you know.
Available to us we have to make a very difficult relocation choice. So what's happened so one of of out of our.
In principle for such I look again choice is.
We will give prefer a location to wear.
We are the main source or even to sole source.
And Oh.
If you follow this guidance they inevitably quite location will favor TDR tapering.
On a smartphone because weve hopefully we have a very large multi share and.
We mentioned in our prepared remarks.
We are the sole dominant or major a vendor to lead to reorder launched don't enjoy.
Heavily names so.
If you look at or choose Q3, we are we expect to see a very strong growth for small and medium size market together.
Butter, but temporary growth is higher than our smartphone and if you look at Q4, where.
Uh huh.
Oh, I location, where people will be will be skewed more even more towards parity because the shortages just for this year. So our Q4 in all likelihood we'll see very very strong temporary growth again, we'll have easier, but probably some decline in smartphone because of location choices.
Oh War however, our.
Located.
Total foundry capacity for T.D. I 12 inch for Q4 will be higher than that for Q3.
But certainly not enough for us to pick up all the orders.
Okay.
Income is helpful.
Yes, definitely very very useful and then just to last question on the same topic is.
Do you feel that your competition is facing any shoes and as such you you don't expect market share shift because if you being impacted more funny capacity access standpoint than your competitors.
Yes look at least though and the peso my customers and some of the key vendors will get we'll see many of my competitors or.
Reduction a hole in processes are spaces.
We are probably one of the.
Players.
Well positioned this is better off compared to some of our peers. So yes, I think he's a if the industry wide filomena a his everybody.
Pretty badly.
Got it.
Okay. Thanks, again very useful.
Thank you Tristan.
And again for any questions. Please press Star then number one and the telephone keypad.
And your next question comes from Jerry see this credit Suisse.
Yeah, Hi, Thanks for taking my question I'm, just curious I mean for the past a quick guidance it seems to be pretty strong.
But the gross margin still Oh, we may add.
Similar range for.
Versus the previous quarter I'm just wondering.
Yes, when we look at the gross margin profile of Himax.
In the past it could go to run at.
Lisa low to mid Twentys I'm, just wondering why aren't you know in the next.
Quarter, even with the.
You know the T.D. the grossing D topline gross margin.
I'm not able to steal more meaningful uplift.
That's a very good cushion Terry.
Firstly, our silicon he has everything to do with the product mix right and if you look at our gross margin of course, some or major segments.
Right now or the the sectors enjoy the product segments enjoying enjoying the higher the higher gross margins are.
Automotive driver IC automobile display driver IC.
And we will.
The real however, depending on.
Our currency that Asia right.
And ER.
And among the lower gross margin segment include.
Smartphones.
And.
Smartphone because of the rather severe company competitive situation out there so.
Our.
Q O Q3, compared to Q2, we are not growing because.
Our Q3 similar to Q2.
The smartphone.
Percentish, especially for TV, the or it's a has grown remarkably from Q1 and that is actually the main reason to explain why the gross margin for both quarters are lower than that of Q1 also in Q1, if you recall our automobile ship that was very very strong.
And a decline rather significantly in Q2 in Q3 and again as I said earlier W. all enjoy higher gross margins, especially when the the shipping is high and therefore, the company's utilization although heart.
And ER and also the reason I think is or is the is the rather sluggish automotive segment overall and again automotive historically and see is now and see or in any foreseeable future Kirby.
You know among the highest gross margin sectors.
For us.
So I I saw that kind of explains the low growth satisfactory growth Roger for Q2 and over Q3.
All right.
In Asia in my prepared remarks that.
Raising gross margin.
Ah, yes, or no shot on goal.
And that covers Q4 and certainly the whole next year and I think we'd have a.
Fairly good or the grille confidence that the across much of we cover I think the in general foundry tightness as you pointed out is in general are good for design House.
Gross margin. So I think we're going to take advantage of that precisely and.
Also as I mentioned earlier.
Because the way location decisions in Q4 technical or growth strong require a smartphone even suffer decline so.
For that reason I think Q4 gross module also grill among other reasons and if you look at next year, we do have some.
Some a new products in the pipeline, which upon must reduction will enjoy very very strong gross margin much much higher than our corporate average stuff like.
Whitesides, especially and so thats really a threed sensors as well.
Okay got it and then my follow up on top Euro.
[laughter] so wondering.
Customers activities you know.
Rightly or wrongly sprycel and I I I'm not going to do that.
I think.
What we are working very hard to was used to diversify our customer base and education.
And ER.
And so to me it feels a little might be and customer engagement. So the lead time.
It will be required.
But.
Oh, we talked about Rpos locations, where we are engaged by or.
You know the but the the smartphone and customers.
Towards the end says the vendors and some of the world's leading a laser vendors. So we had to work into kind of trying to.
Put together some of the solutions, especially people enjoy market right.
So you know exactly that it's going to happen.
I kind of really say, because it's up to the lower end customer, meaning the smartphone makers, who decides but that I can tell you.
We are making exciting progress.
Can we.
See somebody production next year, possibly but.
Nothing is certain pipe that youd have to say.
But I can also say the.
The development and also the performance, thereby is it's a it's a is looking very excited.
And we also expanding our coverage to other applications into including very notably automotive.
We switch.
Okay, and where we are working we saw some of the leading say those drivers among others watercolor tried to penetrate.
To start with for example in automotive in Kevin.
Finfet in helping Kevin's three D sensing so we're making good progress there as well so.
And also we say the customer we had for quite a number of our exciting by challenging a joint give them projects. So if you look.
Slightly longer time horizon I think this is a very very exciting area, where we can instruments enjoyed tremendous growth, but I just can't comment.
Much of the very short term.
Okay. Okay. That's good.
Let me thank you.
Thank you Terry.
There are no further questions at this time I will now have the kinda back to Jordan ways for closing remarks.
As a final note they would lead our chief people officer Rubin maintain Mr marketing activities, including into account continued to attend investor conferences, well enough. The details as they come a bulk thank you and have a nice day.
That concludes today's conference. Thank you for your participation you may now disconnect.
[noise].