Q1 2021 Himax Technologies Inc Earnings Call
Hello, Ladies and gentlemen, welcome to the high <unk> technologies incorporated first quarter 2002 and.
And you want and earnings conference call at this time, all participants are in a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time.
A reminder, this conference call is being recorded I would now.
And I'd like to turn the conference over to your host Mr marched Wallenberg from N V Group Smart.
Welcome everyone to <unk> first quarter, 2021 and earnings call joining us from the company are Mr. Jordan will President and Chief Executive Officer, Ms. Jessica Pan Chief Financial Officer, Mr. Eric Lee Chief IR peer officer.
After the company's prepared comments.
We have allocated time for questions and a Q&A session. If you have not yet received a copy of today's results release. Please email H I am ex at MZ group's Dot U S access the press release or financial portals or download a copy from imax's website at www Dot IMAX dotcom.
GW.
Before we begin the formal remarks I'd like to remind everyone that some of the statements and this conference call, including statements regarding expected future financial results and industry growth are forward looking statements that involve a number of risks and uncertainties that could cause actual or resolve and actual events or results.
To differ materially from those described in this conference call.
Factors that could cause actual events and results to differ materially from those described in this conference call include but are not limited to the effects of the COVID-19 pandemic on the company's business.
General and business and economic conditions and the state of the semiconductor industry.
<unk> acceptance and competitiveness of the driver and non driver products developed by the company.
Demand for end use application products.
Reliance on a small group of principal customers the uncertainty of continued success and technological innovations.
Our ability to develop and protect our intellectual property pricing pressures, including declines in average selling prices.
Changes in customer order patterns.
<unk> and estimated full year effective tax rate.
<unk> and supply of key components.
And environmental laws and regulations changes and export license regulated by export administration regulations E. A R.
Exchange rate fluctuations regulatory approvals for further investments and our subsidiary.
Our ability to collect accounts receivable.
And manage inventory and other risks described from time to time and the company's SEC filings, including those risks identified and the section entitled risk factors and its form 20-F for the year ended December 31, 2020 filed with the SEC as may be amended.
Except for the Companys for year of 'twenty, and 'twenty financials, which were provided and the company's 20-F and filed with the SEC on March 31, 2021. The financial information included in this conference call is unaudited and consolidated and prepared in accordance with Ifr S. Counting.
Such financial information is generally generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and external audits by an independent auditor to which we subject our annual consolidated financial statements and May vary materially from the 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'd now like to turn the call over to Mr. Eric Lee Eric the floor is yours.
Thank you Mark and thank you everybody for joining US my name is Eric and.
And I am the Chief people officer.
Joining me Jordan policy and the <unk> our CFO.
Today's call I will first review the high net consolidated financial performance for the first quarter 'twenty to 'twenty one.
Followed by the second quarter 2021 outlook.
Jordan will then give an update on the status of our business after which we will take questions.
We will review our financials on both <unk> and <unk> basis.
And the financials and his schools and share based compensation and acquisition related charges.
We've seen and pre announce the preliminary key financial results for the first quarter of 'twenty or 'twenty one.
<unk> for seven plus revenue gross margin and the EPS or exceeded the guidance issued on February for 2021.
Today, our reported result for the revenue gross margin and EPS all in line with free and now that's a result.
Revenue gross margin and EPS, all reached all time highs and the first quarter after and detail do you want.
For the first quarter, we recorded net revenue of 300 and the $9 million.
And increase all the California, and 1% sequentially and <unk>.
Increase of 67, 4% compared to the same period last year.
The <unk>, 1% sequential increase of revenue exceeded our guidance off of and increase.
Around 5% to 10% quarter over quarter with strong demand across all our major business segments.
Gross margin was 42 per cent.
<unk> guidance of 37% to 38% and significantly improved from 31, two per cent of the fourth quarter 2020.
<unk> profit per diluted.
Was $38.03 exceeding.
Exceeding our guidance of 30 to 30 for thin.
Strong sales and improved gross margin contributed to the bachelor's day and expected earnings result.
Now <unk> profit per diluted and Ats.
138 for thin exceeding our guidance of 31 thing and to 34.1.
Revenue from large display driver was $69 9 million up eight 8% sequentially and up 13, 9% year over year.
Notebook revenue increased more than 70% sequentially.
Driven by an seething remote working and the distance education and demand.
Television revenue was also up by around 8% quarter over quarter.
More and more need for IC sales, however decreased sequentially due to foundry capacity shortage, because we predicted in the last earnings call.
Large panel driver IC accounted for 22, 6% of total revenue for this quarter compared to 23, 3% in the fourth quarter of 2020.
And the 33, 2% a year ago.
Small and medium sized display driver continue to grow and the first quarter and the cambium Badger and expected with revenue of $204 $1 million.
Up 14.7% sequentially and up 133, 3% year over year.
And <unk> for both smartphone and tablet.
Robust growth and Q1, a continuation for a high base in quarter four last year.
For year over year perspective sales.
And as of both smartphone and the tablet demonstrate its massive growth.
For automotive segment.
We delivered a day.
And mid teens and sequential growth and missed.
Severe capacity shortage in automotive market worldwide.
Small and medium size segment accounted for 66, 1% of total sales for the quarter.
Compared to 64, 5% and the first quarter of 2020, and the 47, 4% a year ago.
Smartphone sales continue growing in the first quarter.
Revenue, reaching $82 million.
96% sequentially and up 256, 4% year over year.
The smartphone segment represented 26% of our total sales in Q1.
Our smartphone and <unk> sales increased more than 30% sequentially and up five times compared to the same period of last year, indicating strong market demand and our market share gains.
Sales of traditional smartphone and PD Ics continue to decline.
And we expect it.
Let's preview previously mentioned traditional smartphone and PD Ics are quickly being replaced by <unk> and AML late.
And our temporary revenue reached another record high of $73 million in the first quarter.
Q1 sales of capillary drivers grew eight 3% sequentially and were up more than 150% year over year, a strong demand for Homeworking and online learning continued.
The tablet revenue accounted for more than 23% of our total sales in the first quarter.
The <unk> revenue increased 10% sequentially.
The fourth consecutive quarter of growth since its a niche or a mass production in the first quarter of 2020.
The sequential growth was due to the special great day at the penetration of our leading tablet PDI Inc.
<unk> market.
Where we are men or social supplier to major end customers.
Revenue of traditional discrete driver IC for tablet increased five 9% sequentially and grew 58, 9% year over year in the first quarter.
Our first quarter driver IC revenue for automotive <unk>.
Wanted to a $43 $7 million up 16, 4% sequentially and up 44, 3% year over year.
Automotive driver IC business.
Accounted for more than 14% of total revenue in this quarter.
Notwithstanding the decent growth.
We are still suffering from severe foundry capacity shortage for automotive applications.
Fire the shortage is expected to persist.
As indicated in the last earnings call we.
We do expect to enlarge our shipment quarter by quarter this year and beyond into next year.
Jordan.
Library on this and a few minutes.
First quarter revenue for all and non driver business was $35 million.
4% sequentially, but down 2% year over year.
The sequential increase was mainly due to the increase of WTO shipment, two and anchor customer for continuous legacy protocols and men.
Well, it's more telecom shipments.
The year over year decrease was due mainly to the decrease of W. O shipment.
However.
<unk> com and the Cmos image sensors segment.
Both registered and.
Impressive year over year growth.
Up by more than 50% and 70% respectively.
Non driver IC per Doc accounted for 11, 3% of total revenue.
<unk> two <unk>, 2% in the first quarter of 2020, and 19, 4% a year ago.
Gross margin for the first quarter was 42%.
Up nine percentage points sequentially and up 17, five percentage point from the same period of last year.
For the capacity shortage in.
In the semiconductor industry intensified across foundry and packaging and testing.
And we further optimized our per ton mix Spice strategical late February more higher margin product.
Pricing all towards the higher two reflecting rising cost among all product segments.
However.
On a year over year basis.
And the list of gross margin was somewhat offset by the decline in W. O shipment.
Lack of fee per Doc two and anchor customer gradually decreased.
Our <unk> operating expenses for <unk>.
Studying $9.5 million and the first quarter down nine 9% from preceding quarter, but up five 9% from a year ago.
The operating expenses decreased sequentially because of a onetime cash bonus.
Issued to the team in the first quarter of 2020.
The year over year increase was mainly a result of increased the salary.
Non <unk> operating expenses for the first quarter.
$39 2 million down nine 9% from the previous quarter and up six 9% from the same quarter in 2020.
Reflecting high sales and the path of gross margin.
Operating income was $84 $8 million for the first quarter with operating margin of 27, 4%.
And from 15, 3% in prior quarter and up from two 5% and the same quarter last year.
First quarter and non <unk>.
Operating income was $85 1 million or 27, 5% of sales.
Higher from 42.5.
Or 15, 4% of sales last quarter and.
And the up from $5 3 million or two 9% of sales for the same period last year.
Both operating income and operating margin reached record high.
<unk> after tax profit for the first quarter reached a historical high of $66 $9 million for.
For <unk>.
383 cents per diluted ads compared.
Compared to a $34 million or.
$19.05 per diluted ads in previous quarter and.
And the $3 $3 million or one nine cents per diluted EPS from a year ago.
First quarter and non <unk>.
This profit was $67 $1 million or 38, four cents per diluted EPS compared.
Compared to non <unk> profit of $34 two.
And $2 million or $19 seven per diluted EPS last quarter and.
And and the highest profit of $3 $8 million or 2.2 cents per diluted EPS for the same period last year.
Turning to the balance sheet.
We had $245 $8 million of cash cash equivalents and other financial assets at March 31, and 2021.
Compared to a $126 six meaning at the same time last year, and the 201 point for meaning a quarter ago.
The higher cash balance whats the derived mainly from $63 million of operating cash inflow during the quarter.
Restricted cash was the hungry for King point $8 million at the end of Q1.
Compared to a 100 and for Mena in a quarter ago and $164 million a year ago.
The restricted cash was mainly used to guarantee the short term secured borrowings for the same amount.
We had $57 million of long term unsecured loans.
And over Q1 of which $6 million.
<unk> current portion.
Our quarter and inventory plus mark.
At March 31, and 2021, we're hungry for $14 $9 million.
From a hungry and the $8 $7 million for last quarter and is down for $148 $4 million a year ago.
The year over year decrease was a reflection of the severe capacity severe supply demand imbalance.
To be more precise the vast majority of our inventory position and all your comprised of working progress goods.
Fire finished goods.
<unk> taken up by customers.
Available to meet the customers' immediate production.
As highlighted in the last earnings call.
Given the foundry and debate and capacity shortage.
Our inventory levels may feel stay as a relative low level in the quarter to come.
Accounts receivables at the end of March 2021 was $289.1 million up from $243 $6 million last quarter and up from $186 $7 million a year ago due to higher sales.
DSO was 84 days as accordingly and with.
And as compared to 92 days, a year ago and day 100 days at.
At the end of last quarter.
Net cash inflow from operating activities for the first quarter amounted to $63 million as compared to an inflow of $67 $7 million last quarter, and an inflow of $10 $6 million for the same period last year.
First quarter capital expenditure was $2 million versus zero point $8 million last quarter, and $3 $1 million a year ago.
The first quarter Capex was Manny for and the related equipment of our IC design business.
As of March.
31 2021.
<unk> has <unk> hundred $74, three meaning Ats outstanding.
Little changed from last quarter.
On a fully diluted basis, the total number of outstanding.
$174 seven meeting.
Now turning to our second quarter 2021 guidance.
For the second quarter, we expect further revenue growth from the already high level of Q1, 2021, and most of our business sectors.
Gross margin should see another uptick and it could reach another quarterly high.
For the second quarter, we expect revenue to increase by 15% to 20% sequentially.
Gross margin is expected to be 45, 5% to 47, 5% depending on the final per day mix.
With the increase of both revenue and the margin net profit.
Increased substantially in the second quarter.
<unk>.
<unk> attributable to shareholders.
And is expected to be in the range of 54 to 60 cents.
For fully diluted EPS.
Non <unk> profit attributable to shareholders.
<unk> two being the range of 50 for point to 260 point too thin for fully diluted EPS.
Okay.
And I'll turn the call over to Jordan Jordan the floor is yours.
Sure.
Thank you Eric.
We're seeing and seen a serious supply demand imbalance for demand far outpaces supply.
Despite volume three is running at more than 100% capacity.
The company the rapid growth of <unk> and hypo type of almost computing.
And there is a noticeable increase in demand for summit for semiconductor for advanced processes.
The trend towards and.
Haverhill connected digital World also drives higher needs for mature nodes, notably demands from display driver IC power management, Ics Cmos image sensor automotive industry and various LTE devices. The other already all around us and steel.
Increasing rapidly and number.
And in this all up what we have is a structural shift in demand and supply dynamics.
Actually for the mature nodes, which reflect meaningful capacity expansion for many years.
As I mentioned on our last earnings call. We have managed to secure more capacity for this year compared to last year with accessible capacity you expect it to grow quarter by quarter.
In 2021.
Looking further ahead, we are taking measures to work with our strategic foundry partners to further enlarge our long term capacity pool.
I'll give more details as they come about.
Separately to get advantage of the current favorable environment. We are also making efforts towards positioning ourselves towards higher and and higher value added products by working more directly and closely with select leading and customers.
We have made tremendous progress across various industries that we serve.
For large display areas. We are pleased with the results so far in switching our focus more.
For towards high resolution TV and high profile type of almost monitor and low power notebook.
And for smartphone wearable and tablet we are gearing up for the AMOLED driver IC development and partnership with strategic customers and foundry providers.
For automotive market, we are already the leader in display driver IC, we are deepening our working relationships with tier one players and and customers across all major markets.
Last but not least.
Non driver areas, we are pushing and Harald for the promotion and the Wi Fi Ultra low power sensing solution.
And have been.
<unk> seen a widespread adoption for NIM for numerous Iot applications.
I will see the cold icy yourselves or the ramp in volume.
And for at least in a few minutes.
Okay.
No.
I'll start that we said and update on the large panel driver IC business.
For the second quarter, we expect losses for driver IC revenue to increase by around 30% sequentially with the three major product lines all set for for the growth.
We expect decent increase in both small heater and notebook IC sales in Q2.
Thanks to persist and work from home and learn from home demands.
For the TV segment, we anticipated and impressive quarterly growth in Q2, mainly due to shipments of high end TV products going into it world EDI and end customer.
And the situation of the strategy towards high end products and leading and customers.
Just mentioned.
Nevertheless, our shipping quantities constrained by capacity shortage for the large panel.
Driver IC pieces Duvelisib.
During the second quarter.
Recently, we saw strong customer demand for higher and monitors unfolding post.
Pandemic.
When people work study and play games at home, which they do much more than before.
The demand and high resolution high frame rate ultra wide aspect close views and you have multiple and monitor sometimes.
<unk> continues to lead the high and volatile market by providing advanced driver Ics and T tons and partnerships with leading panel makers and and.
And customers.
Now, let's turn to the small and medium sized display IC business.
And the second quarter, we see continuous strong demand for all three segments led the smartphone tablet and automotive.
Again, we are unable to meet all customer demands due to tight foundry capacity.
As the leading supplier for the Android Android tablet market. We are strategic we are strategically allocating capacity in favor of tablet or smartphone to support those niche for home working and remote learning.
For the second quarter, we expect heavily sales to grow by mid teens and smartphone sales can be flattish compared to the previous quarter, reflecting our capacity and location decision.
We see large capacity as we are.
Indicated in the last earnings call auto.
Automotive driver IC business.
Started to grow by more than 40% the highest among the three segments and the small and medium sized driver IC pieces.
Tablet.
Already among our top sales contributors since.
2020.
Continues to grow.
Accelerated TDD penetration, among leading and Joyce names as well as strong demand driven by the stay at home economy.
For the second quarter, we expect typically TDI sales to grow by more than 20% and saw its heavily customers et cetera and adoption of <unk>.
Cdti for high and tablet enjoys particularly good momentum as people Craigs for more advanced features such as high frame rate high resolution larger screen size and active stylus for better quality and right in Australia.
All these trends benefit us for higher ASP and growth market share.
And then.
Tablet <unk> enjoys better margin and east rapid.
Growth helps and hence overall gross margin.
Finally for tablet product revenue of traditional DVR IC.
And is expected to remain flat sequentially during the second quarter.
Now a quick update on smartphone products.
For our customers are demanding more shipments and limited by severe capacity constrained.
Our smartphone and <unk> I expect to be flat from last quarter.
Discrete drivers for smartphone running at relatively low volume.
<unk> to grow strongly with seasonal demand.
For the second quarter.
As we have mentioned Dvi's, both smartphone and tablet.
And.
Our trend is the upbeat and replace by Cdti.
And.
Turning into the automotive sector.
It's been well reported.
But the automotive industry worldwide has recovered strongly and abruptly for.
It's earlier slumped studying.
Later last year.
But also suffer from severe shortage of semiconductor supply.
We have been experiencing the same for the display driver Ics, we provide for automotive applications, where we came and the world leading market share of more than 30%.
Okay.
The ongoing capacity shortage continues to intensify panel makers tier one suppliers and end customers seek of high mix for more supply.
Automotive display driver Ics.
Equipped with that's why and display technologies, such as T V D, a and the whole team and.
Is the market either in automotive Dispraise for all those pieces, we are leading the charge and I'm starting to such demands.
For instance, we dominate the design and design wins of automotive D V D I wished Iraq and our customers across the continent for technology that is essential for very lost size stylish and free form automotives displays.
[noise], we also leading in the up and coming local team and technology, which not only and provide effective policy saving critical for Eev's for.
I also enhances the spray contrast for pay per view and Underprice day light.
In addition, our high speed point to point breach and and OTB solutions, especially designed for very large panels up too and Peter computer display sites.
With this new demands unleashed for display technologies we.
Exponential growth exponential sales growth of automotive sector in the years to come.
Next and up their own M. All it.
And I am all it off for a spare display quality lower Paul consumption and plastic free form design the technology has scan traction.
And the higher market.
<unk> before highlights is highly committed to M older technology development.
Development studies from smartphone and has extended to wearable heavily and automotive.
And much we team up with B O very trunks for B O E V ex.
It worthy and supplier of automotive display products and succeeded in securing and they have all the display design and when he said he didn't E V maker for his upcoming flagship model.
<unk> global market share for AK TVT come with the adoption from literally all major TV brands.
Is better ASP and.
Margin and loss of display drivers telecom is expected to be and extensive long term growth area and contribute more to the top.
And bottom line growth going forward.
Similar to our display driver IC businesses. Our telecom volume is already capped is also is also capped by capacity shortage.
Those funds foundry and backend packaging.
Next is a quick update on <unk>.
<unk> revenue increased substantially and the first quarter. Thanks to resumed orders from an anchor customer for its legacy products.
In the second quarter of 2021, <unk> sales are expected to remain flat quarter over quarter, which will have sustained.
And <unk> factory utilization.
Meanwhile, we continue to collaborate with key customers and partners for new applications, such as top three D sensing.
AR VR catches biomedical devices, and others pocketing their future generation products.
Kim the control you show there I'll see him Oh, fussy, and bullshit technologies Calk or C. N V T.
Which is specialized and microstructure optical for him to be fine and and fracturing.
And he's a worthy either in this area.
C N V T offer is proprietary microstructure optical design expertise.
And then I'll scare mowing gravy and capability.
Worse relative row, and then it'll printing manufacturing capacity.
C N V and he's roller type and then I'll and printing can support the production of lost size theme with superior production and efficiency and competitive costs.
This is a complimentary technology towards I'd be all technology and.
And by.
Bye have impulse teams and walk together.
We cannot aviva cutting edge solutions for different applications, covering all sizes of upticks.
And the wife for him, which is C. O V. Ts microstructural optical theme is the best answer to various types of optical challenges such as gray level inversion color wash out and.
And a light leekish and the oblique view and angles for pay per view visual experience.
The omni oil fields solution can support different types of display and holding T V. A.
Types of <unk> C D displays and and all of these things.
These solutions all available to the market right now.
Next us on <unk>.
Update for a non smartphone segment.
That's reported and previous onions call our proprietary three digit code. The I C provides superior through the day of snap the Cody for passing and class secure face for commission and.
And has been widely adopted by deviant Chinese customers for payment device.
We start the volume shipments of the street, the colder and the fourth quarter of 2020.
And you expect continuous growth in 2021.
For many years.
We are also encouraged by the progress of customer engagements for the new applications, we launched covering automotive.
Panoramic videoconferencing utilities meter QR code reader.
<unk> and <unk>.
And these applications offer always zone, and or ultra low power and visual sensing.
Made possible.
By outside technology.
The list of applications for our WSI total solution will continue to expand as we continue to reach our two key players in various industries, who are working closely with our algorithm partners.
For the key component business model.
And we offer AI processor and always on Cmos image sensors, but with our AI algorithm.
And.
We continue to collaborate with global AI and cloud service.
Our partners by proactively participated in their ecosystems.
And infrastructures.
Following the successful adoption of our <unk>.
<unk> plus AI processor in the Google Tensorflow Lite for microcontroller framework.
In March.
2021.
And <unk> plus Iot platform was endorsed by Microsoft.
And was awarded the Azure Iot and.
PMT certificate.
For the <unk>, plus Iot platform brings reliable secure and long battery life.
And to the Iot connected cloud market.
W and plus Iot platform and conduct.
Person phase.
Our object detection computer vision and functions and then output only secured metadata over NB Iot protocol to the Azure Iot cloud for for the statistical Statistical data processing and analysis.
In most cases.
And plus AI platform.
Iot platform.
Can operate with just for double a batteries.
For more than one year lifetime.
W and plus is the best Ultra low power battery powered Hai OTT platform solution in the Azure Iot, which.
Target and will grow and cloud service markets and smart buildings manufacturing retail agriculture et cetera.
Implement and Evercore is made possible with our W and plus.
In the meantime, we continue to showcase our Wm plus enabled systems jointly with our ecosystem partners, such as smartphone and edgy and pulse.
And various webinar and marketing events to illustrate more AI use cases.
People from different industries and countries approach us and apply our solutions to many applications that never occurred to us before.
We are encouraged by the enthusiastic market feedback along with strength of and customers' inquiries.
And in return we provide AI.
Developers with comprehensive support and service.
Which they could easily access open source.
They can easily access open source coals from Google Tensorflow Lite makeup up microcontroller framework.
W and plus mek and sensor accessories from smartphone and development tools from edge impulse.
We are delighted to bridge and developers over the hurdles they encounter in developing AI solutions and move with other developers together towards and upcoming edge AI decade.
Now turning to our Cmos image sensor business update and our second quarter revenue is expected to be flattish sequentially or.
Shipment has been badly capped by the foundry capacity available to us despite sales being customer demands for Cmos image sensor.
For web camera and notebooks.
Nevertheless.
We expect a decent growth in the second half of 2021, thanks to a major engagement from a major existing customer.
Our industry first two in non Cmos image sensor supporting video conferencing, and AI and facial recognition and ultra low power has been designed into some of the most stylish and steam vessel net notebook models of certain.
Major novel plans.
Small volume production has started in the fourth quarter of last year.
And for ramp up volume is expected for the upcoming quarters.
Regarding ultra low power always on Cmos image sensor.
Target always on AI applications, we're getting growing feedback and design adoptions from customers globally for.
Various markets such as car recorders surveillance smart electric meters drones.
Smartphone applications and customer electronics.
<unk> were reported progress in due course.
Loss on the update of <unk> micro display.
In the first quarter of 2021.
Priority <unk> from these aircrafts micro display.
And integrated solution Currie.
Covering <unk> micro display lifetime and from the OLED.
And the successful design win with a world leading player for rocket.
Headset for industrial working environment.
It is and.
And assisted reality type Henry head mounted device.
Our from the rail cost micro display module provides and seven inch display view below line of sight to assist workers to access real time walking and information.
Our from these aircrafts metal display demonstrated a perfect match with the customer's application and compact.
Form factor low power consumption and higher prices.
We are collaborating closely with our customer for the strict industrial level qualification and <unk>.
Spec substantial volume shipments starting from the third quarter.
Of this year.
For non driver IC business, we expect revenue to increase around 40% sequentially in the second quarter.
That concludes my report for this quarter.
<unk> for your interest in Hi, Max we appreciate Youre, joining todays call and we are now ready to take questions.
Thank you and ladies and gentlemen, if you have a question and at this time simply press Star then the number one key on your Touchtone telephone line.
Please note to limit your questions to one primary and line follow up one moment. Please for our first question.
And our first question comes from the line of Tristan Daragh from Baird. Your line is open.
Hi, Thanks for letting me ask a question could.
Could you quantify the price increases net.
You've been able to implement so for.
And maybe on a year over year basis, and you expect to raise pricing further.
And is you or do you think you said basically with the earlier year price changes.
It's the.
For the Silicones is simple question and yet if I have to answer it.
And with.
With good.
Confidence than I think is a trickle tricky question because.
Different applications, the price increase, especially for asking about year over year actually varies by a lot.
So I am afraid and probably probably have to revert back to you.
After this about this question, but on your second part of the question, whether we think are.
And there will be further price increases from here I think the answer is most likely yes.
The.
On the supply side, the foundry and even the back and I think our costs still continue to on their own.
Continued growth to be on its way up so I think we certainly do have too.
Transfer the cost for our customers and I think the.
And the reception for such a proposed price increases from our customer.
<unk>.
Has been has been okay in a sense that customers right now actually they are hoping for more delivery and.
And as long as we can make the delivery price and OSB discussed so I think.
At least for the foreseeable future we have good confidence that we will be we should be able to transfer our costs into the customers and the fact is that cost I think for Q3 is there will still be.
And from somewhat from Q2.
Great that's very useful and then.
The macro and micro.
Michael a display design win that you've mentioned are you expanding your customer base.
And you had back from a few years ago is that a renewed program at an existing customer.
No. It is more of a new customer is is.
<unk> is the worlds leading customer in this area.
And it's a very.
That is pure industrial and business application.
And it's.
We talk about in our prepared remarks is kind of design for a very rocket.
Robust cash.
And a device.
To be used in cookies.
Rush in the harsh environment, so as a new program we are pleased that.
And our technology fit.
We have niche very well and.
And this will be a pretty sizeable.
Volume in and of its kind in this market I mean head count head.
Hi, Martin device.
Great. Thank you very much and.
Tristan.
And our next question comes from the line of Jerry Su of Credit Suisse. Your line is open.
Thank you for taking my question.
And I think my first question is regarding the guidance for the second quarter I think you guided and licensed driver IC to grow 20% and then overall smartphone is growing at.
About low teens sequentially. So can you quantify.
How much is coming from unit shipment growth and.
And how should we think about your.
Past the.
In the second half.
Of the year and other 2020 two.
Okay.
I'll be a little bit reluctant to give you.
A simple and straight answer because.
And we discussed earlier we.
We are limited by capacity.
So we have to work.
We have to allocate our products into areas that we think.
Most needed by the customer for.
For <unk> to supply and also.
R.
Ah represents.
A favorable product mix for us so.
We are actually shifting more towards <unk>.
And higher price.
Customers.
With some of those customers.
Free receptor.
Receptive to two Ohio prices so.
To give you.
Is that.
Ah quantity.
For this percentage increase versus revenue percentage increase I think it could be misleading in the sense that actually the product mix.
And this is different and.
We are more towards higher end.
<unk> products.
And.
For the customers' demands most needed and.
And therefore, we cannot in some cases charge higher for.
For those customers.
So we are.
And we only now prepared to discover and discuss revenue and increase rather than quantity because that could be rather misleading.
Quantity for bema, rather misleading.
Okay and then.
And how about your planning for the <unk>.
Capacity in second half and also next year.
Our capacity increase for.
For second half or even into next year.
Only be marginal because.
Guess, what there is simply no major addition of capacity.
Around in the industry.
So we.
We are happy that we will be able to keep out the capacity already available to us and also.
There will be some marginal increases here and there from even different foundry suppliers, but overall I would say.
You will only be marginal increase.
And.
Until we see.
And more.
And our structure addition of foundry capacity from cases for actually foundry partners.
Building, new Fabs and.
In fact.
There will be such additional foundry capacity, meaning building building and construction of new for us but.
And if you take that into our already available foundry capacity pool, you only still be.
And of a module and increase only.
Okay got it and then.
Next question is regarding the.
And demand environment can you give us some.
Some of things and how do you see it and demand for for.
And for.
Monitor.
Uh huh.
Notebook TV and also.
Are you seeing any impact coming from smartphones tablets and given the rising.
Issue or a pandemic in some emerging markets like India or.
And other other regions. Thank you.
Actually I will start with automotive, which I believe you for capo mentioned another do you intend to acknowledge I think.
COVID-19 certainly change the dynamics altogether, and how COVID-19 is going to and I mean is really nobody knows right, but we all know COVID-19 certain has driven has triggered.
The.
The surgery and demands and therefore, the embedded the current imbalance imbalance of supply and demand that the industry is suffering from.
Sure.
So when COVID-19 and whenever the.
Other.
Kind of.
And.
Certainly we believe.
There'll be some implications for.
For the monitor and notebook et cetera right.
And given cell phone and tablet.
Now having said that I think we also have to recognize the fact that.
After these non Purion stayed the same staying at home people are kind of getting more used to working at home and and.
Being educated homes right so <unk>.
And when COVID-19 is over is not going to be like people were just forget about that.
Demand.
And by by staying at home I think this will continue but how this is going to change and how.
And how this is going to evolve I think.
Certainly we don't know we don't have a very good and so we just have to watch very closely but our customers are telling us that.
This COVID-19 situation and buy for Bai sales staying at home for solar and people are getting used to it and net.
Drive.
Sure.
The behavior.
And some behavior change of behavior may be here to stay for long or even for growth for example, and our monitors.
People used to demand only like people used to preferred novel, rather and monitor but now they have to.
I think.
No. This this new demand of automotive true and bye.
First and.
And the autumn months autonomous driving in the future I think.
Is here to stay for a very very long time and all this new.
New trends.
Go into et cetera.
Other demand for display and displays right right and not just the volume also the Fisher.
People will be demanding higher and vicious and and that is very very good and your new for US right. So like PDD and the ultimate.
As we.
Highlights prepare remarks, so we have for.
So if you look at the so in summary, my my point is that.
We are simple combatant about the upside potential for automotive.
And way before the Kobe situation unfolds.
And that is why we were actually.
And cash very early on and we were very prepared and if you look at the the revenue upside if you look at the first half.
And.
You pick out mid point for free and quarter guidance and you could compare.
Year over year is you are talking about 80 per cent of 90 per cent kind of girls and I think you'll probably see even higher growth for the second half. So for the whole year. We are we have we are shooting for like double the revenue.
Over a year for this year and I.
I think it is.
Good confidence that the growth is going to continue.
Very my I mean for example, smartphone is not increasing in size totally slightly but not very by very much detail for television and local correct, but a commodity Sweden growing and sites and also grow and number.
And growing and Fisher.
If you look at the the TDD and a modest contribution for the space or otherwise industry overall over the past few years for TVT for smartphone and tablet right and.
And you.
Kind of apply that to the potential upside for automotive by the Doctor Intermedia and.
And advanced features like.
Like a local team and I think the upside true per potential for us will be tremendous so we're very excited about.
Automotive.
And then for other applications certainly how.
Okay.
And in the past month or is there anything changed in terms of our foundry capacity plane.
And also another frequently asked question if that.
As you know foundry. They are also racing day away for a price for different kinds of I see.
I think five for Ics price has been a race and a lot. So they are radically speaking foundries try for icy way for price has been raised a lot as well.
But it seems like for some foundries theater type person if I away from driver I see two other products such as like maybe power or memory products. So just wondering and some self foundries called structure Ah.
Ah wives driver icy has been always the one.
Who cannot get get enough capacity. This is the first question.
Okay. So shall I start with your first question.
Your understanding and from management and the last months of all months ago about the over the the the industries sick and.
Oh look for a type of capacity versus our remarks about our.
Aw.
True.
Octopus, Yeah, Yeah, Yeah, yeah, yeah, yeah, because previously felt like.
Yeah. Please.
Okay. Okay. Thank you I.
And my guess is there could be I understand actually if you look at our last quarter's.
And it's cool.
If he very Moss, we actually have already announced that we feel confident that are accessible capacity.
Over this year.
Would increase quarter over quarter and we are.
Into that for you so we actually repeating that English.
Cortes prepared remarks, I guess the management is for for this for it tighter capacity situations for a second and stuff I think I guess that that probably.
That properties is if other situationally industry overall I think.
Across different segments.
For funds free you know, okay, and if I lost paino and suddenly smartphone and automotive all pretty serious it's actually we I see.
Purposes, Shortish all across you know deep red and all major applications and in some cases even package.
Especially for a lawsuit.
Is such a salty come so I think and we just stay and we saw view that.
Let's see I'll put those predictions and he's he's.
Access for foundry capacity to increase caught a little over a quarter and there was no surprise.
No ticket place over last month's or something you know we.
Have always feel free pay for that and the high speed and our view since last quarter.
And your second question about.
Foundries capacity.
Tightness resolved and price hikes and yet they are still diversifying away from drive I see and how he started policy and vacation I think unfortunately that is probably true and if you lost me I would say.
That is because we strive ic's, we're all using quite a cold material and those right and.
And mature and those over the years.
And have like eating out application to fill up their demand and drive I see happens to be an application, which.
Greens are very big quality, and also very pretty predictable and stayed the volume two two phones free for them to read I will call and so very saw the fever for a long time.
So in return and we asked for very demanding price because that's what our customers us for now.
Oh and all the time over the Sears.
Okay, and there was a significant and lack of investment for companies capacities expansion for sure and those because I think almost slow and so we all know and.
People in this when people and they invested and advanced notes so for mature and those.
And there's a there's a level of investment and yet.
They are connected more and multimap so.
So to start with probably are Marcia historically has been low for them, but we provide the volume.
And and and this time around is good opportunity for them to resolve all market by knowing their their relocation tools throw icy and right and second to the.
Guess, what is always a good thing for them to diversify anyway, and given that drove icy really historically as a colony for a very big chunk of their total output. So it's a good timing good opportunity for them to diversify right. So we actually tried to convince.
Sure Fonzie partners for support a small because.
The characteristics of the space, where I've icy or the demand for panel.
Has it changed we are very steady and the demand is always there and and we can provide the volume and certainly when the industry. So tight.
Puts us in terms of.
And Ah disadvantageous situation, but overall and a long term I think drug icy will still be.
Needed to be to be the fever.
So it's a double edged sword for us right on the one hand, the tightness enable us to.
Two eight okay they'll capacity in a way that is full favorable to us and and our products becomes more soft after and therefore our price in.
Power is and test on the other hand, and we are suffering from a shortage and I'm just afraid.
And as hard as we tried to have resolved laundry partners too and lost their support for his face driver I think this.
And if indeed.
Admitted to the other mutation so in the foreseeable future. We asked for you seen mature and those especially for drivers and see.
B and type situation.
I hope so thank you for sure Tony.
Thank you for <unk> and and the last one is.
When entering into the second half based on two rooms disability wondering if you could just a rink.
The PA type and spies different kind of a driver and I see this as well as different card and also a tech not your nose and like both enjoy it and each for your perspective. Thank you.
For a question.
I think.
Eight inch.
Long term will be more severe than toby each other.
I'm not sure well well firstly I will have to admit there's gotta be some over per kid from our customers right. However, I mean, and it's it's very difficult for them to gauge how much is their effective for the so horrible book impulsion, while we know.
Even if we take that or take all of that old book and the way they are called and called extra day man, we sto thoughtful.
Be able to meet them all price. So so and it is therefore, the customer and those you know even if they give us just they're actually met and we cannot be that the men and and therefore, the kind of encourage them to you know to give us more volka. So sofa and we talk about the degree of shortage lived to be slightly careful because.
And different sectors people to behave society different.
Ah lubricated here May play a part by think of whether it's the second half or longer term I think age or are you more serious day until beach because.
I mean, who is really building a new age tours and it's very difficult to even get the new tools and is equally difficult to get the second hand tools and.
And people have no incentive to build new age tools right. So I think this is <unk>.
Sure and fundamental issue here and for that reason I think automotive.
<unk> for traditional Dvi's.
Is entirely age and I've, just hi, Max but the whole across the whole industry price. So I think the association's previous severe over there.
And that is why we are encouraging our customers, including and customers to accelerate and accelerate the adoption and mass production of television.
Because guess what for commedia with sushi too mature and they'll they'll tell beach and.
And we're going to replace.
All coupon some of those capacities are these been occupied right now by smartphone, which is going through my credit further into a more advanced notes price. So for example, you know a day nanometer and and 215 and they want me to win.
The T V D I for small for right now is primary and 55 and will be migrating from 40.
And and so on right and there'll be a bigger chunk of and.
All that for smartphone, which is primarily for right now.
Will be margaretville towards the eight et cetera price. So so there'll be a southern portion of TVT I push out and that will be used by a smartphone and type.
Type of it.
Being left behind so I think this is a good idea for automotive to go and pick it up so we have actually.
Secure a very good long term capacity and commitment for TVT at 12 each.
For the next few years, although TDI to pay for smartphones already so for but we have got a very good strong commitment from a few problems for flourish and now I just tried to explain right.
So.
And therefore, we can.
Offer which could come at us to our customers that if you switch to Pvp I.
And that is going to help alleviate the series shortage of each EIC for the multi pushes really bad witty and Shortish right now.
And then if you talk about this.
We are.
We associate and suffering from a very big a shortage gap for smartphones slash type of it full of two of Ah talk to those areas and we share the same capacity poor and and sort of you repeat it again and again and we are and locating.
Our capacity in favor of type of it because that is how strong holes and and also we feel that is where people need the device to work and and get educated right with a smartphone which is probably like this urgent so we kind of and.
And make that decision, but our our our shortage for smartphones very very severe and.
And also shortage for television as well.
I would say.
Probably less so for last panel although.
I have to say.
I mean, you might cost and my last panel customers here of all these there'll be upset right because.
Is also for the past shortage as well so it's.
It's slightly difficult to quantify but I would say automotive long term looks.
Difficult to resolve.
Unless people switch faster for D V D and.
And for smart for them and interpret.
<unk>.
You know foundries outbuilding, new 28, and narrow meters, but that is not going to come along and <unk>, probably two or three years later and they will help resolve some of the pressure.
And before then.
And will seat and this fundamental structure shortage COPD and it's very difficult to get it resolved.
Oh. Thank you toured and just just one for me.
Can be our next question comes from the line and John Locke. That's your line is hoping.
Mhm.
Hi, Good morning, and can you hear me all right.
Yes, yes, Jonathan how very good Oh, great. Thanks, Thanks, so much I really appreciate it and.
And my first question is I, I guess I want to come back to the calendar cute too guidance and and perhaps ask it this way [noise] excuse me.
Across the board most semi could not all but most semiconductor companies are guiding kind of flattish and those companies have pretty reasonable exposure to market like T V's and P C's and automotive.
And you guys are guiding your display driver icy sales if we take the other category out your guide and your T. D. I C sales up about 15 per cent, roughly give or take quarter to quarter.
<unk>.
Is that mostly price I I know you don't Wanna get into specifics and it sounds like there's some complication, but is that most sleep price or are you also growing units at a time when it doesn't appear like others are.
I think Jonathan Ah, yes.
You're right I don't want to get into specifics, but to give you a sense of I mean, it's simple mathematics right. If you look at our gross margin right. We are getting for increased from 40 per cent 244 for these 647 per cent right. This.
Six seven percentage points you know.
Inquiries and yet for our revenue is 15 to 20 per cent and the cost increase I can assure is not that much.
And the closest primarily driven by quantity, rather and price, but yes definitely there is an element of price but.
But if you I mean, you Miss all about price than that and you would expect a macho will grow accordingly right.
Gotcha, Okay that that helps and and actually you are hitting on the second topic I I want to try and get out a little bit which is.
If we look at the last couple of quarters, let's say from the middle of last year till right now and you guys have talked and others you've talked about this very cute tightness and the ability or the requirement for found your price to go up.
And so over these last couple of quarters. The foundries have increased their gross margins and buy foundries I mean 200 millimeter heavy foundries by maybe five six percentage points.
Your gross margin is up by 2000 and basis points. So what how do we think about the difference between those two in other words why is your gross margin.
Increasing so much faster than say the rate of change of the supplier.
I I.
I really can't.
Talk on behalf of my suppliers.
And I think that is just the reality and and certainly I mean there is.
You know from.
And from all taken the the goods from funds free to our output. There's a difference that's probably partially splendid, but I don't know honestly I don't know, but it's just the effect.
Inc.
We.
I think I think.
I think certainly per industry is also enjoying and.
Good margin expansion and probably expansion and they are in desperate need for.
For Dispraise wherever I see who wishes really their major a major bottleneck.
For them to to to produce small panels right and if you look at the other day spray drive icy notwithstanding the recent price hikes.
Total icy and still represent arrears for the small portion of the appeal material.
[noise] alone if you take into account day, or depreciation costs and utilities and overheads right that is a lot I mean.
And then for.
For is relative these small portion of their cost.
If they don't get the icy support they can make the shipment so many and they are.
They are probably more eager and then the other one.
Other industries, because they have their overhead bins, and so heavy right and hockey steel pretty healthy to quote unquote beat up the price of icy price.
I understand.
Yeah. So so I think there's a there's a difference.
Fundamental difference and a sense that you know foundries and the pharmacy, sorry, Penn homemakers, when they make a new new Faq. These days you were talking about.
I don't know close to $10 billion price, so they're not going to.
Two two with and and sit around empty you know.
Idaho, which day at 10 billion dollar investment because they are not willing to pay 20 per cent or 10 per se law for drive I see I think that is probably a good explanation.
Sure no that makes sense and sorry, just one last one if I could.
I wanted to talk about automotive for a second.
And maybe I want and frame. It this way if we forget last year, if we forget COVID-19 2020, and and go back to 2019 at.
At that point your automotive of phone numbers and write your automotive revenue was around $115 million give or take and actually had declined debate and.
And my recollection of that time was there was and discussion about maturity.
And you sort of maturity of other automotive industry, and and maybe some penetration thresholds. So and so now if we kind of fast forward to this year. It sounds like you're gonna I don't know, maybe not double but current company close to doubling so so you're gonna be about double versus what you were in 2019.
Can you just help us understand the factors there is it is it.
Sort of a resurgence of demand or what or maybe the other variables like maybe Britain British from 2019 for today.
I think I think is primarily because in especially the first half of total 2019, the Kobe Association and really drove the auto industry wait down and they are actually the end of their workers and shutting down there and factories and.
And Ah suspended they are purchase orders for semiconductor pause and then towards the end of last year, they kind of of southern wake up and day.
And ever since they've been playing catch up price so.
So.
Over a year basis.
You you are talking about a particular the past year last year, which was actually unusual. So if you if you extend the time and time for it.
It'll be longer to cover the the few years earlier than last year. Then you will see our despite driver business for multiple have been growing.
You know very very steady it nicely almost quarter after quarter.
And and that is simply because and everybody's caused the new models and wall panels and larger panel.
And and older model and the other.
For the simple fact, and he's a very very long growing trend and I would see last for you, especially for the last three quarters of the first three quarters of nausea as exception.
True and buy COVID-19.
Now.
From here and going for this I mentioned right with the EV really coming into mainstream.
And when you know your credit in your room becomes last year and people demand for beta quality spread larger display even more displays I think.
In terms of all day and.
And complexity of display and display demanding you know higher and features I think this is a very very long term growth operating.
And he for us.
So but.
So this year I think two factors.
This is kind of a a turning point right what is the COVID-19 and.
Is a recovering and catches up in terms of all the men to the adoption of E V.
And.
And and therefore, you know more and.
And hire more advanced panels and more panels, I think they're kind of see that and said point.
You know.
Pretty much for starting from this year B and attending point. So that is why we are very excited about automotive and that is why we actually we prepare for the earliest I mentioned earlier before you and Colby and we didn't know Kobe is going to have.
Is such a big impact for the auto money to the other one.
And what the industry, but we will gear up pretty aggressively in terms of getting all sales ready for more capacity.
Understood that thank you very much.
Thank you Jonathan.
And that's a sign and I would like to turn it back yard Precedency L and and I can't Mister Jordan credit Lindsey and like.
It's a fine line, though.
Eric Lee our Chief Pier office, So, we're maintaining you Mister market and.
Activities and couldn't into a tiny Vista conferences.
So we were announced the details as they come about thank you and have a nice day.
And maybe send you and and and thank you for participating in today's country. Please can Phd program, you may not and scheme.
[music].