Q1 2024 Himax Technologies Inc Earnings Call

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Mark Schwalenberg: Welcome, everyone, to the HIMAX First Quarter 2024 earnings call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer, Ms. Jessica Pan, Chief Financial Officer, and Mr. Eric Lee, Chief IRPR Officer.

Mark Schwalenberg: Welcome everyone.

Mark Schwalenberg: The IMAX first quarter 2024 earnings call joining us from the company are Mr. Jordan will President and Chief Executive Officer, Ms. Jessica Pan Chief Financial Officer, and Mr. Eric Lee Chief IR peer officer. After the company's prepared comments, we've allocated time for questions in a Q&A session. If you have not yet received a copy of.

Mark Schwalenberg: Today's.

Mark Schwalenberg: Results release, please email H I N that Zain group got U S access the press release on financial portals or download a copy from imax's website at Www Dot IMAX Dot com tw.

Mark Schwalenberg: After the company's prepared comments, we've allocated time for questions in a Q&A session. If you have not yet received a copy of today's results release, please email himx at mzgroup.us, access the press release on financial portals or download a copy from Himax's website at www.himax.com.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 and industry growth, are forward-looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this conference call. A list of these factors can be found in the company's SEC filings.

Mark Schwalenberg: Before we begin our formal remarks I'd like to remind everyone that some of the statements in 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 events or results to differ materially from those described in this conference call.

Mark Schwalenberg: A list of the factors can be found in the company's SEC filings form 20-F for the year ended December 31, 2023, and the section entitled risk factors as may be amended.

Mark Schwalenberg: Form 20-F for the year ended December 31st, 2023, in the section entitled Risk Factors, as may be amended, except for the company's full year 2023 financials which were provided in the company's 20-F and filed with the SEC on April 2, 2024. The financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFRS accounting. Such financial information is 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 statement, whether as a result of new information, future events, or otherwise.

Mark Schwalenberg: Except for the company's full year of 2023 financials, which were provided in the company's 20-F and filed with the SEC on April 2nd 2020 for the financial information included in this conference call is unaudited and consolidated and prepared in accordance with I F. R. S accounting.

Mark Schwalenberg: Such financial information is generated internally and has not been subjected to the same review scrutiny.

<unk> 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.

Mark Schwalenberg: 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.

Mark Schwalenberg: I would now like to turn the call over to Mr. Eric Lee. Eric, the floor is yours. Thank you.

Mark Schwalenberg: I would now like to turn the call over to Mr. Eric Lee Eric the floor is yours.

Eric Lee: Thank you, Mark, and thank you everyone for joining us. My name is Eric Li, Chief IRPR Officer at Himax.

Eric Lee: Thank you Mark and thank you everyone for joining us.

Eric Lee: My name is Eric can be cheap I Archaeology survey hi, Max on today's call I will first review consolidated financial performance for the first quarter of 2024, followed by our second quarter outlook.

Eric Lee: On today's call, I will first review IMAX's consolidated financial portfolio for the first quarter of 2024, followed by our second quarter 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 an ISI basis. We are pleased to report that Q1 revenue, gross margin, and profits all exceeded the guidance issued on February 6, 2024, despite the seasonal downturn, as well as ongoing macro headwinds.

Eric Lee: Jordan will then give an update on the status of our business after which we will take questions.

Jordan Wu: We will review our financials.

Jordan Wu: The ice vapor.

Jordan Wu: Yeah.

Jordan Wu: We are pleased to report that Q1 revenue gross margin and the profit all exceeded our guidance issued on February six 2024, despite the seasonal downturn as well as ongoing macro headwinds.

Eric Lee: The better than expected financial results primarily stem from strong order momentum in our automotive and the key comfort of life, coupled with code improvements and a favorable product name. First quarter revenues registered $207.6 million, a decrease of 8.8% sequentially, exceeding our guidance range of 9% to 16% decline. Gorsma Jin, Ken Ying, Ed, 29.3%, outperforming our guidance of around 28.5%.

Jordan Wu: The better than expected financial result, primarily stemmed from strong order momentum in our automotive and the chicken product lines.

Jordan Wu: With coke improvements and a favorable product mix.

Jordan Wu: First quarter revenues registered $207 6 million.

Jordan Wu: A decrease of eight 8% sequentially.

In our guidance range of 9% to 16% decline.

Jordan Wu: Gross margin came in at 29, 3% outperforming our guidance of around 28, 5%.

Eric Lee: Q1 profit per diluted ADS was $0.071, surpassing the guidance range of $0.02 to $0.05. However, revenue from large district drivers decreased 7% sequentially to $31.3 million due to seasonally soft macroeconomic conditions, compounded by ongoing production and inventory control majors by our leading panel customers. Consequently, our sales of TV and monitor ICs declined sequentially.

Jordan Wu: Q1 profit per diluted ads was seven 1%.

Jordan Wu: Surpassing the guidance range of two to five.

Jordan Wu: Yeah.

Jordan Wu: Revenue from large display drivers decreased 7% sequentially to $31 $3 million due to exceeded on the softer Macquarie.

Jordan Wu: Macroeconomic conditions compounded by ongoing in production and inventory control majors by our leading customers.

Jordan Wu: Consequently, our sales of TV and monitor Ice's declined sequentially. However, notebook IC sales, so a nice double digit increase quarter over quarter.

Eric Lee: However, notebook IC sales saw a nice double-digit increase quarter over quarter as customers associated their purchases after several quarters of the stock. Sales of large-panel driver ICs accounted for 15.1% of total revenues for the quarter, compared to 14.8% last quarter and 21.7% a year ago. Small and medium-sized display driver segment revenue reached $144.3 million, a sequential decline of 11.5%. The better-than-guidance result was sealed by strong cells in DTIC for automotive and on-lay tablets.

Jordan Wu: Customers rated their purchases after several quarters of Destocking.

Jordan Wu: So our large panel driver Ics accounted for 15, 1% of total revenues for the quarter compared to 14, 8% last quarter and a 21, 7% a year ago.

Jordan Wu: Small and medium sized display drivers segmented revenue reached $144 3 million.

Jordan Wu: A sequential decline of 11, 5%.

Jordan Wu: Better than guidance result was fueled by strong sales in DD IC for automotive and <unk> tablets.

Eric Lee: Driven by rush orders for traditional DDI-C, Q1 automotive driver sales encompassing both traditional DDI-C and the TDDI experienced a single-digit decline, outperforming the guidance of a mid-team decline. Meanwhile, automotive TDDI sales continued to defy the industrial downturn and increased sequentially, thanks to our robust pipeline of design-win projects. The automotive business, including traditional DDIC, TDDI, TECOM, and Olay sales remained the largest revenue contributor in the first quarter, representing around 46% of total sales. 21 Smartphone IT sales declined sequentially but exceeded guidance, fueled by rush orders from leading customers. Convert ULEAP to HEAPS.

Jordan Wu: Driven by rush orders or traditional EDI I see Q1 automotive drivers.

Jordan Wu: Income passing both traditional <unk> and the TDI experienced a single digit decline.

Jordan Wu: Only the guidance.

Mid teens decline.

Jordan Wu: Meanwhile, automotive TDD ICL continued to define the industrial downturn and the increased sequentially. Thanks to our robust pipeline of design win projects.

Jordan Wu: The automotive business, including traditional DD IP TBD I T com and our late sales remained the largest revenue contributor in first quarter.

Jordan Wu: Representing around 46% of total sales.

Jordan Wu: Q1 smartphone IC sales declined sequentially, but exceed the guidance still to.

Jordan Wu: By rush orders from leading customers.

Eric Lee: Template driver sales declined as expected, during the typical low season characterized by sluggish demand. The small and medium-sized driver IC segment accounted for 69.5% of total sales for the quarter compared to 71.6% in the previous quarter and 63.3% a year ago. First Quarter Non-Driver Sales Exceeded Guidance, reaching 32 million dollars, an increase of 3.4% from the previous quarter. The better-than-expected performance is attributable to a resurgence in orders for large-sized disparity-con products.

Jordan Wu: Conversely.

Jordan Wu: <unk> drivers sales declined as expected.

Jordan Wu: Just the typical low season characterized by sluggish demand.

Jordan Wu: The small and medium driver IC segment accounted for 69, 5% of total sales for the quarter compared to 71, 6% in the previous quarter and 63, 3% a year ago.

First quarter non driver sales exceeded guidance.

Jordan Wu: Reaching three $2 million, an increase of three 4% from the previous quarter.

Jordan Wu: The better than expected performance is attributable to a resurgence in order for a large site straight E com products.

Eric Lee: In the realm of automotive TECOM, the adoption of our automotive local dimming TECOM continues to rapidly expand, as evidenced by the increasing number of project awards from numerous Tier 1s for the new vehicle projects of their OEM customers around the world.

Jordan Wu: In the realm of automotive T com the adoption of all automotive local dimming E Commerce continues to rapidly expand.

Jordan Wu: Evidenced by increasing number of project awards, so on numerous tier ones.

Jordan Wu: The new vehicle project of their OEM customers around the world.

Eric Lee: This sets the stage for robust sales growth in the coming years. Non-driver products accounted for 15.4% of total revenues as compared to 13.6% in the previous quarter and 15% a year ago. First quarter operating expenses were $50.7 million, a decrease of 3.1% from the previous quarter and a decline of 0.6% from a year ago. Given the persistent macroeconomic headwinds, we continue to be diligent with strict budget and expense control measures.

This set the stage for robust sales growth in coming years.

Jordan Wu: Non driver products accounted for 15, 4% of total revenues.

Jordan Wu: Per day to 13, 6% in previous quarter, and a 15% a year ago.

Jordan Wu: First quarter operating expenses were $57 million, a decrease of three 1% from the previous quarter and a decline of 6% from a year ago.

Jordan Wu: Given the persistent macro.

Jordan Wu: Economic headwinds, we continue to be diligent with street budget and expense control of majors.

Eric Lee: First quarter operating income was $10 million, or 4.8% of sales, compared to 7.2% of sales for the same period last year and 7.3% of sales last quarter. The decreases in operating margin were primarily driven by lower sales. The sequential decrease was also attributed to lower growth margins. However, Q2 growth margin is on track to rebound from Q1. First quarter after-tax profit was $12.5 million, or 7.1 cents per diluted ADF, compared to $23.6 million, or 13.5 cents per diluted ADF last quarter, and $14.9 million, or $0.085 per diluted ADF, in the same period last year.

Jordan Wu: First quarter operating income was $10 million or four 8% of sales compared to seven 2% of sales for the same period of last year and seven 3% last quarter.

Jordan Wu: The decrease in operating margin were primarily driven by lower sales.

Jordan Wu: The sequential decrease was also attributable attributed to lower gross margin.

Jordan Wu: Q2 gross margin is on track to rebound from Q1.

Jordan Wu: First quarter after tax profit.

Jordan Wu: $12 5 million or seven one cents per diluted ads.

Compared to $23 $6 million or.

Jordan Wu: Or is 13 five cents per diluted ads last quarter, and $14 $9 million or 585 cents per diluted ads in the same period last year.

Eric Lee: Turning to the balance sheet, we have $277.4 million of cash, cash equivalents, and other financial assets at the end of March 2024, compared to $223.8 million at the same time last year and $206.4 million a quarter ago. The increase in the cash balance stemmed primarily from continuous debugging efforts across all major profile lines.

Jordan Wu: Turning to the balance sheet, we had 277 $4 million of cash cash equivalents and other financial assets at the end of March 2024.

Jordan Wu: Compared to $223 $8 million at the same time last year, and a two 200 and a $6 4 million or.

Jordan Wu: Quarter ago.

The increase in cash balance stemmed primarily from continuous.

Jordan Wu: Banking app or across all major product lines.

Eric Lee: In Q2, however, Cash, Cash Equivalent, and other financial assets are set to decline, primarily due to decreasing sales in the previous two quarters, resulting in lower Q1 receivables. In addition, accounts payable are expected to increase as a result of the rising Q1 wafer orders placed in preparation for higher shipment volumes starting in Q2. Other significant Q2 cash outflows include annual income tax payments, as well as refunds to certain customers for deposits made during the industry-wide capacity supply shortage.

Jordan Wu: In Q2 however.

Jordan Wu: Cash cash equivalents and other financial assets offset to decline primarily due to decreasing sales in the previous two quarters, resulting in lower Q1 receivables.

Jordan Wu: In addition.

Jordan Wu: Payables is expected to increase as a result of the rising Q1 wafer orders placed in preparation for higher shipments volume starting in Q2.

Jordan Wu: Other significant Q2 cash outflows include annual income tax payments.

Jordan Wu: Well as refunds to certain customers for deposit made during the industry wide capacity supply shortage.

Eric Lee: As of the end of the first quarter, we had $39 million in long-term unsecured loans, of which $6 million was the recurring portion. Our quarter-end inventory of March 31st, 2024 was $201.9 million, lower than $217.3 million last quarter, yet another illustration of our successful demolition effort. Accounts receivables at the end of March 2024 were $212.3 million, down from $235.8 million last quarter and down from $252.2 million a year ago. DSO was 93 days at the quarter end, as compared to 91 days last quarter and 93 days a year ago.

Jordan Wu: As of the end of the first quarter, we had $39 million in long term unsecured loan of which $6 million.

Jordan Wu: What's the current portion.

Jordan Wu: Our quarter end inventory as of March 31.

Jordan Wu: One 2000, and tasteful walk towards 200, and a $1 $9 million lower than $217 3 million last quarter, yet another illustration of.

Our successful Destocking effort.

Jordan Wu: Accounts receivables at the end of March 2024 was $212 $3 million down from $235 $8 million last quarter and down from $252.2 million a year ago.

Jordan Wu: DSO was 93 days at quarter end as compared to 91 days last quarter and 93 days a year ago.

Eric Lee: First quarter capital expenditures were $2.7 million versus $15.1 million last quarter and $2.8 million a year. The first quarter CAPEX was mainly for R&D-related equipment and in-house testers of our IC design business. Prior to today's call, we announced an annual cash dividend of $0.29 per ADS, totaling $51 million in the current year payable on July 12, 2024, with a payout ratio of 100% of the previous year's profit. The high payout ratio is supported by our positive business outlook as we pursue business objectives and strive for sustainable long-term growth and shareholder value while maintaining a healthy balance sheet.

Jordan Wu: First quarter capital expenditures were $2 $7 million.

Jordan Wu: $15 1 million last quarter, and a $2 $8 million a year ago.

Jordan Wu: The first quarter Capex was mainly for R&D R&D related equipment and the in house testers of our IC design business.

Jordan Wu: Prior to today's call, we announced an annual cash dividend of <unk> nine per ads.

Jordan Wu: In total the $51 million and the payable on July 12 2024.

Jordan Wu: With a payout ratio of 100% of the previous year's profit. The high payout ratio is supported by our positive business outlook as we pursue business objectives and to strive for sustainable long term growth and shareholder value, while maintaining inc.

Jordan Wu: Healthy balance sheets.

Eric Lee: As of March 31, 2024, Himax had 174.7 million ADS outstanding, unchanged from last quarter. On a fully diluted basis, the total number of ADS outstanding for the first quarter was 175 million. Now, turning to our second quarter 2024 guidance, we expect second quarter revenues to increase 8% to 13% sequentially, and gross margin is expected to be around 31.5% to 33.5%, a notable increase from 29.3% of the previous quarter, primarily because of a higher sale from the automotive and the T-Com business, both of which enjoyed better gross margin than the corporate average.

Jordan Wu: As of March 31, 2000 ton you for IMAX has 174.7, meaning atheists outstanding unchanged from last quarter.

Jordan Wu: On a fully diluted basis.

Jordan Wu: Total number of outstanding for the first quarter was 175 meeting.

Jordan Wu: Yeah.

Jordan Wu: Now turning to our second quarter 2020 full guidance.

Jordan Wu: We expect second quarter revenues to increase 8% to 13% sequentially.

Jordan Wu: Gross margin is expected to be around 31, 5% to 33, 5% a notable increase from 29, 3% of the previous quarter, primarily because of our highest sales strong automotive and the telecom business.

Jordan Wu: <unk>, which enjoyed better gross margin than corporate average.

Eric Lee: The final number may vary depending on product. The second quarter profit attributable to shareholders is estimated to be in the range of $0.13 to $0.17 per fully diluted share. I will now turn the call over to Jordan to discuss our Q2 Outlook. Jordan, the floor is yours.

Jordan Wu: The final number may vary depending on product mix.

Jordan Wu: The second quarter profit attributable to shareholders is estimated to be in the range of 13% to 17%.

Jordan Wu: Fully diluted.

Jordan Wu: I would now turn the call over to Joe <unk> to discuss our Q2 outlook Jordan the floor is yours.

Jordan Wu: Okay.

Jordan Wu: to meet ongoing macroeconomic activities. Customer behavior in a displaced market remains conservative, with panel makers continuing to implement strict output control measures amidst the cautious and blunt panel procurement environment. Given the limited visibility, customers tend to maintain lean inventory levels and underestimate demand, thereby providing us with a conservative forecast, accompanied by last minute ordering. This trend has persisted over the last seven consecutive quarters, including Q1, with our actual sales consistently at the upper end of or exceeding our guidance range.

Joe: Thank you Eric.

Joe: Amit ongoing macro economic uncertainty.

Joe: Customer behavior in the display market remains conservative with panel makers continuing to implement strict pulpwood controlled measures of missed the cautious and Brian panel procurement environment.

Joe: Given the limited visibility customers tend to maintain lean inventory levels.

Joe: Matt.

Joe: Thereby providing us with conservative forecast.

Joe: Accompanied by less made all the increases.

Joe: This trend has persisted over the last seven.

Joe: Consecutive quarters, including Q1.

Joe: We saw actual sales consistently at the upper end.

Joe: Or exceeding our guidance range.

Jordan Wu: As we look ahead to the second half, even with lean inventory levels, we anticipate this conservative market sentiment will persist, causing customers to continue to prioritize agility in response to market dynamics. With that being said, we believe Q1 will be the low point for this year and see sales starting to pick up in Q2, especially in the automotive sector, with several other upcoming demand catalysts on the horizon, including major sporting events and festival shopping seasons.

Joe: Okay.

Joe: As we look ahead to.

Joe: So the second half even with leaner inventory levels, we anticipate this concern with the market sentiment where persist.

Joe: Causing customers to continue to prioritize agility.

Joe: Jump to market dynamics.

Joe: With that being said, we believe Q1 will be the low point for this year.

Joe: <unk> sales starting to pick up in Q2, especially in the automotive sector.

Joe: We have several other upcoming demand kind of it's on the horizon, including major.

Joe: These events.

Jordan Wu: Business momentum is expected to continue to steadily improve throughout the second half. Now, let me elaborate a bit on the near-term outlook for the automotive business. Our life is full of revenue. While many semiconductor vendors and their customers are still going through painstaking destructing processes, our inventory position for the automotive sector has become healthy since the end of last year, with our panel customers also maintaining low stock levels at present. This is best illustrated by the large quantities of rush orders we have received from panel customers over the last two months, for which we also had to place thrush orders with our hungry vendors.

Joe: First of all shopping seasons.

Joe: Business momentum is expected to continue to steadily improve throughout the second half.

Joe: Okay.

Speaker Change: Now, let me elaborate a bit older.

Near term outlook for automotive business.

Speaker Change: Our largest source of revenue.

Speaker Change: Many semiconductor vendors and their customers as vehicle and through Penn State is stuck in processes.

Speaker Change: Our inventory position.

Speaker Change: Full automotive sector.

Speaker Change: Has it become healthy since the end of last year we.

Speaker Change: With our panel customers also maintained a low stock levels.

Speaker Change: Present.

Speaker Change: This is best illustrated by the large quantities of rush orders, we received from our panel customers over the last two months for.

Speaker Change: For which we also had to place rush orders 12 under your vendors.

Jordan Wu: [inaudible] Now we stand in the recent headwinds faced by the global automotive industry. All of them, for the automotive display IC business, remain positive for the second half of the year. The automotive display market is experiencing the mega-trend of expanding quantities, sizes, and sophistication of displays within vehicles. Expensive displays are increasingly becoming a major selling point for car makers, as the leader in the automotive display IT business. Himex is poised to benefit from this trend, which implies higher content value per vehicle for display semiconductor vendors such as us, leading to sustainable growth over the next few years.

Speaker Change: Therefore.

Speaker Change: No we still in the reset headwinds faced by the global automotive industry.

Speaker Change: Outlook.

Speaker Change: For the automotive display IC business remains positive for the second half of the year.

Speaker Change: The automotive display market.

Speaker Change: <unk> seen that makeup trend.

Speaker Change: Pending quantities sizes.

Speaker Change: Patient of displays we do vehicles as fancy displays are increasingly becoming a major selling point for carmakers.

Speaker Change: As the leader in the automotive display IC business high mix is poised to benefit from this trend.

Speaker Change: Pushing price.

Speaker Change: Higher content per vehicle for display semiconductor vendors such as us.

Speaker Change: Leading to.

Speaker Change: So Senate both gross slated for the next few years.

Jordan Wu: Our confidence stems from our dominant design wing pipeline in TD-TEI and Lobodymium-T-Con, both relatively new and cutting-edge technologies for automotive displays, with accelerating volume, a momentum which is expected to carry on over the next few years.

Speaker Change: I'll cover this stems from our dominant design win pipeline in PBT.

Speaker Change: And local community.

It's relatively new and cutting edge technologies for automotive displays.

Speaker Change: Accelerating volume.

Speaker Change: And momentum, which is expected to carry home over the next few years.

Jordan Wu: This will further solidify our position in the market, where we are already the leader in the traditional DBIC. Moreover, more customers are adopting Himax's local dimming T-con along with TDDI or LTDI as an integral part of their development platform for crafting new automotive displays, reflecting strong customer loyalty for our technology and services. Additionally, we are implementing cost optimization and supplier diversification strategies to enhance supply flexibility and cost-effectiveness, as exemplified by our recent strategic partnership announced with NextShip for the automotive market. As Eric mentioned earlier, we just declared our annual cash dividend with a payout ratio of 100% of last year's profit.

Speaker Change: This will further solidify our position in the market.

Speaker Change: We are already the leader in the traditional DPI.

Speaker Change: Moreover, more customers adopting highlights as local dimming T come alone TBD on OTT.

Speaker Change: As an integral part of the development platform full crop team new automotive displays.

Speaker Change: Reflecting this strong customer loyalty for our technology and service.

Speaker Change: Additionally, we are implementing cost optimization and supplier diversification strategies.

Speaker Change: To enhance supply flexibility and cost effectiveness.

Extend qualified by our recent strategic partnership announced with next chip for the automotive market.

Speaker Change: As Eric mentioned earlier, we just declared our annual cash dividend with a payout ratio of one 2% of last year's profit.

Jordan Wu: Our decision to pay a high dividend payout ratio this year underscores our unwavering commitment to shareholder value, even in the face of uncertain macroeconomic conditions. This not only recognizes the ongoing support of our shareholders but also demonstrates our confidence in our financial stability. With that, I will now begin with an update on the last panel from ICPSR. In Q2 2024, we anticipate a mid-teens sequential increase in large display drive I0 and V0, primarily bolstered by customer restocking following several quarters of muted demand, as well as increasing orders from customers preparing for the upcoming shopping festival. Q2 TV and monitor ID sales are expected to increase single digit and nice double digit, respectively, quarter over quarter. In contrast, notebook IT sales are poised for a decline following strong restocking in the previous quarter.

Speaker Change: Our decision for the high dividend payout ratio this year underscores our unwavering commitment to shareholder value.

Speaker Change: Even in the face of macro economic.

Speaker Change: Additions.

Speaker Change: Yes.

Speaker Change: This not only authorizes the ongoing support of our shareholders, but also demonstrates our confidence in our financial stability.

Speaker Change: With that I will.

Speaker Change: Now I'll begin with an update.

Speaker Change: The loss.

Speaker Change: Panel driver IC business.

Speaker Change: In Q2 2010, before we anticipate that mid teens sequential increase you lost is.

Speaker Change: Display driver IC revenue.

Speaker Change: Primarily bolstered.

Speaker Change: By customer restocking following several quarters of muted demand.

Speaker Change: As far as the increase in orders from customers preparing for the upcoming shopping festivals.

Speaker Change: Q2, TV and monetize these sales are expected to increase single digit double digit respectively.

Speaker Change: Over the quarter.

Speaker Change: In contrast, notebook IC sales are poised for a decline followed strong.

Speaker Change: We spoke to in the previous quarter.

Jordan Wu: In the notebook market, a personal trend of AIPC is aversion, prompting demands for display upgrades to include touch-enabled features and or the adoption of OLED displays. Himax offers comprehensive offerings in both LCD and OLED technology, in composing DDIC, T-con, and touch-related products. As we look ahead to 2025, the anticipated beginning of the replacement cycle,

Speaker Change: In the notebook market.

Speaker Change: The trend of the IPC operation.

Speaker Change: Tenant demand for the display upgrades to include touch enabled features and or adoption of OLED displays.

Speaker Change: Hi, Max offers comprehensive offerings in both the LCD and OLED technologies.

Speaker Change: In comparison, DPI C T con and touch related products.

Speaker Change: As we look ahead to 2025.

Speaker Change: Anticipated beginning of fleet replacement cycles.

Jordan Wu: We are well-positioned to capitalize on this opportunity with numerous in-sale TDI projects for mainstream LCD notebooks and DDIC and touch controller for OLED notebooks, some of which Paul is to enter mass production for leading brands in the second half of this year. We believe this will serve as an important growth catalyst for us in notebooks and elevate our presence in the market, turning to small and medium-sized display driver IC. We anticipate second quarter revenue to increase single digit sequentially.

Speaker Change: We are well positioned to capitalize on this opportunity, which numerous sales epi projects for mainstream LCD notebooks at DD IC touch controller for OLED notebooks.

Speaker Change: Bleach poised to enter mass production for leading brands in the second half of this year.

Speaker Change: We believe.

Speaker Change: This will serve as a important growth catalyst for us in notebooks and elevate our presence.

Speaker Change: Market.

Speaker Change: Okay.

Speaker Change: Turning to the small and medium sized display driver IC business, we anticipate second quarter revenue to increase single digit sequentially.

Jordan Wu: Automotive IC revenue is expected to grow in the high teens sequentially, with sales for both DDIC and TDDI poised for sequential growth, despite recent reports of softening electronic vehicle demand. Our leadership position in Automotive TDDI remains solid, underscored by the rapidly expanding adoption, as demonstrated by more than 450 secured design-wink projects and a continuous influx of new pipeline and design wins across the board. It's also important to note that only approximately 30% of awarded projects are currently in mass production, as an indication of the potential lucrative growth opportunity we believe is yet to be realized.

Speaker Change: Automotive IC revenue is expected to grow high teens sequentially, we sales for both the IC and Cdti Police force.

Speaker Change: <unk> sequential growth.

Speaker Change: We've been reports of softening electronic vehicles event.

Speaker Change: Our leadership position in automotive TDI remains solid underscored by the rapidly expanding adoption.

Speaker Change: Demonstrated by more than 450 secured design win projects.

Speaker Change: And they are continuous influx of new pipeline and design wins across the board.

Speaker Change: It's also important to note that only approximately 30%.

Speaker Change: The awarded projects currently in mass production.

Speaker Change: As an indication of the potential lucrative growth opportunity we believe it.

Speaker Change: Yet to be realized.

Jordan Wu: Automotive TDDI sales are anticipated to represent more than 40% of automotive driver sales in Q2. In contrast, both smartphone and tablet sales are projected to decline quarter over quarter, as consumers prolong their replacement cycle in response to the challenging economic environment.

Speaker Change: Sure.

Speaker Change: Automotive <unk> sales.

Speaker Change: These spaces to represent more than 40% of automotive driver sales in Q2.

Speaker Change: In contrast.

Speaker Change: Smartphone and tablet sales are projected to decline quarter over quarter.

Speaker Change: Consumers.

Speaker Change: Prolong their replacement cycles.

Speaker Change: Jump to the challenging economic environment.

Jordan Wu: To mitigate these sluggish conditions, we have taken steps to improve our cost structure by diversifying our supplier base to position Himax for a resurgence in demand. To elaborate further on our automotive business, where we have more than 40% market share, Himax offers the industry's most comprehensive LCD product line-up, which includes traditional DDIC and TDDi Technologies, alongside Cutting Edge LTDI and Lower Dimension T-Con Solution. Moreover, we are actively expanding and bolstering our footprint in OLED, with a comprehensive range of products covering DDIC, T-CON, and on-sale touch controller, while forming strategic alliances with top panel manufacturers in Korea and China.

Speaker Change: To mitigate this sluggish conditions, we have taken steps to improve our cost structure, but the diversified supplier base to push us to position the high mix Hello, Richard resurgence in demand.

Speaker Change: To elaborate further on our automotive IC pieces, where we have more than 40% market share.

Speaker Change: Yes.

Speaker Change: Hi, Mitch offers the industry's most comprehensive LCD.

Speaker Change: The product.

Speaker Change: Which includes traditional PD IC.

Speaker Change: And TVT apologies alongside <unk>, LTE and <unk> solutions.

Speaker Change: Moreover, we are actively expanding and bolstering our footprint in OLED.

Speaker Change: With a comprehensive range of products covering DD IC T com and wholesale touch controller.

Speaker Change: So forming strategic alliances with top panel manufacturers.

Speaker Change: Korea and China.

Jordan Wu: This proactive approach aligns us with the dynamic transformation of the industry towards increasing adoption of OLED displays for high-viz; the inherent flexibility of all the displays to cater to foldable or curved shapes, along with their outstanding visual performance and low power consumption opens new horizons for automotive interior displays. Normally, or meticulously engineered OLED on-sale touch controller sets a new standard as it boasts an industry-leading touch-to-noise ratio Our comprehensive solutions in automotive LCD and OLED displays address the broad spectrum of customer preferences and requirements. Nurturing robust customer loyalty and fostering collaboration with global panel makers, T1 suppliers, and automotive manufacturers. We anticipate that our automotive business will remain a significant catalyst for our growth moving forward.

Speaker Change: This proactive approach aligns us with the dynamic transformation of the industry towards increasing adoption of OLED displays.

Speaker Change: Hi, Lee.

Lee: We inherit.

Lee: Inherent.

Lee: Inherent versatility of OLED displays to cater to affordable or curve shapes.

Lee: Hello.

Lee: The outstanding visual performance.

Lee: And low power consumption opens new horizons for automotive interior displays.

Lee: Notably all of them.

Lee: In particular, it's the engineered OLED wholesale customer controller.

Lee: Set a new standard.

Lee: It boast an industry, leading touch to noise ratio exceeding 45 DB.

Lee: But it offers heightened.

Lee: Sensitivity to come.

Lee: The challenging user conditions, such as co op wary.

Lee: We're seeing good operations.

Lee: Yes.

Lee: Oh comprehensive solution multi LCD and OLED displays.

Lee: Yes.

Lee: Spectrum of customer preferences and requirements.

Lee: No sharing robust customer loyalty and <unk>.

Speaker Change: Sorry for the operations.

Speaker Change: Global.

Speaker Change: Panel makers tier one suppliers.

Speaker Change: <unk> manufactures.

Speaker Change: We anticipate our automotive pieces will remain a significant catalysts for growth moving forward.

Jordan Wu: Next, for an update on our OLEDs, As I just covered, we have made significant progress in providing solutions for automotive audio displays, an area with exciting growth potential. We also are expanding into other OLED applications, such as tablet, notebook, and monitor, through collaboration with leading panel manufacturers in Korea and China, featuring a comprehensive offering covering DDIC, T-CON, and touch controllers. Additional products with new feature enhancements are slated to enter mass production in the second half of 2024. Regarding smartphone OLED, the current slowdown in smartphone market demand has unfortunately necessitated an adjustment to our initial timeline. Nevertheless, collaborations with customers in Korea and China persist with ongoing diversification and partnership projects.

Speaker Change: Let's for an update of our OLED business.

Speaker Change: As I just covered we have made.

Speaker Change: Significant progress in providing solutions for automotive OLED displays.

Speaker Change: Korea, we see exciting growth potential.

Speaker Change: We also are expanding into other OLED applications, such as tablet notebook and monitor.

Speaker Change: Through collaborations.

Speaker Change: The panel of inverse shows in Korea, and China, featuring the comprehensive offering coverage TD ICT come and touch controllers.

Speaker Change: Additional products, we still feature enhancements are slated to enter mass production in the second half of 2024.

Speaker Change: Regarding the smartphone OLED.

Speaker Change: <unk> slowed down smartphone market demand has unfortunately these face to face at the adjustment to our initial timeline.

Speaker Change: Nevertheless, collaborations with customers in Korea, and China persist with ongoing verification and partnerships across it.

Speaker Change: Okay.

Jordan Wu: I would like to now turn to our non-driver IC business, first for an update on our T-Comp business. We anticipate a notable sequential increase of more than 40% in T-Gone sales in Q2, driven by Escalade shipments for T-Con in large size displays and automotive. Himax has been devoted to developing panel driver ICs and timing controllers for decades. We stand as the industry leader in both monitors and automotive key cards, universally adopted by leading panel makers across the board in the monetary tech sector.

Speaker Change: <unk>.

Speaker Change: I would like to now turn.

Speaker Change: Our non driver IC business update.

Speaker Change: Okay.

Speaker Change: First for an update on our key campuses.

Speaker Change: We anticipate multiple sequential increase.

More than 40% in <unk> sales in Q2.

Speaker Change: Our payout by escalating shipments will come in large size displays and locomotives.

Speaker Change: Hi, Miss has been devoted to developing panel driver Ics and timing controllers for decades.

Speaker Change: We spent.

Speaker Change: The industry leader in pulse monitor and locomotive T cons.

Speaker Change: Universally adopted by leading panel makers across the port.

Speaker Change: In the monetary telecom sector sales.

Speaker Change: Sales either.

Jordan Wu: Himax excels in the higher market, especially in gaming, where intricate designs are required for high resolution, high refresh rate, and low latency display performance, crucial for achieving an immersive gaming and entertainment experience in the automotive technical domain. Our leading position remains unchallenged, posting; were over 100 design work projects, powered by our cutting-edge logo dimming technology along with our industry-leading proprietary algorithm. The incorporation of the ultimate T-con not only significantly enhances the display's contrast ratio but also offers improved power efficiency, particularly crucial for EV and large-size displays.

Speaker Change: The high end market, especially again with Korea intricate designs are required for high resolution high refresh rates are low.

Speaker Change: Low latency is paper wellness.

Speaker Change: Crucial full achieving immersive gaming and dependent on experiences.

Speaker Change: In the automotive telecom demand.

Our leading position remains unchanged.

Speaker Change: <unk>.

Speaker Change:

Speaker Change: But one good design win projects.

Speaker Change: Powered by our cutting edge global Dimming technology alone, we saw industry, leading proprietary upwards.

Speaker Change: The incorporation of the ultimate T com not only significantly enhances the displays.

Speaker Change: <unk> ratio.

Speaker Change: Also offers improved power efficiency.

Speaker Change: Particularly crucial for EV and loss size displays.

Jordan Wu: Our industry-leading low-voltage dimming T-con solutions support super high frame rates and a wide range of resolutions from FHD to up to 8K. We are encouraged by the rapidly expanding validation and widespread deployment of our solutions, initially in customers' premium car models, which have been expanded into mainstream models worldwide. In the second quarter, automotive t-cars are anticipated to grow more than 30% sequentially, representing 3% of total sales.

Speaker Change: Our industry, leading local community count solutions support Super high frame rates.

Speaker Change: Wide range of resolutions from HD to up to 8-K.

Speaker Change: We are encouraged by the rapid to be spending validation widespread deployment of our solutions initially in customers' premium cavazos push.

Speaker Change: <unk> been expanded into mainstream models worldwide.

Speaker Change: In the second quarter <unk>.

Speaker Change: Automotive T costs are anticipated to grow more than 30% sequentially, representing more than 30 states.

Speaker Change: 3% rather of total sales.

Jordan Wu: From a longer-term perspective, the growing traction of our logo-themed T-card for automotive is on track to mirror the success of our automotive TDI over the last couple of years. Switching gears, to the Wi-Fi Ultra-Low Power AI Sensing Solution, a cutting-edge endpoint AI integration featuring proprietary ultra-low-power AI processors, always-on CMOS sensors, and advanced CNN-based AI algorithms in the Wi-Fi AI technology stands out for its expertise, all devised tiny ML solutions, and Unique Actual Power Consumption. Mercury, for instance, nearly single-digit mini-works.

Speaker Change: From a longer term perspective, the coil traction.

Speaker Change: Ultimate T cut Automotives is on track to mirror the success of our automotive team.

Speaker Change: Over the last couple of years.

Speaker Change: Switching gears to the wise ultra low power sensing solution.

Speaker Change: And Paul the AIA integration, featuring proprietary ultra low power AI processes always on Cmos image sensors and advanced CNS based.

Speaker Change: For instance.

Speaker Change: In the rapidly evolving.

Speaker Change: Kip.

Speaker Change: Whilst the AIP policy stands out.

Speaker Change: Voice expertise.

Speaker Change: Yes.

Speaker Change: All device tiny email solutions and unique ultra low power consumption.

Speaker Change: Terry nearly single digit million watts.

Jordan Wu: This opens the door for battery-powered handheld devices to incorporate AI sensors for intuitive and intelligent user interaction, something that would otherwise be impossible without such extremely low power consumption AI. For example, China's leading high-end door lock maker, Desmond.

Speaker Change: This opens the door for battery powered endpoint devices to incorporate AI sensing for intuitive.

Speaker Change: And you take these actions.

Speaker Change: Something that would otherwise be impossible without such it should the low power consumption.

Speaker Change: For instance.

Speaker Change: Smart door locks.

Speaker Change: Which are typically better policy bites.

Speaker Change: China, leading the high end <unk> maker basement.

Jordan Wu: Hollinson, Himexis, Ultralowpower, and Whiteside Air Technologies created the world's first smart dollar product. The Future of 24-7 Sentry Monitoring, real-time event recording Our Wi-Fi total solution for Desmond boasts an exceptionally low power draw of just 2.2 milliwatts, representing a novel and highly advantageous feature with minimal impact on battery life. The potent AI inherent in OSI allows the Thorlock camera to capture snapshots periodically on a 24-7 basis of who has detected you in the prison, immediately start recording, while concurrently waking up the door locks, a much higher power-consuming main process, a comprehensive event recording for seamless threat protection that better ensures security while mitigating potential breaches, all achieved with a battery-powered door lock.

Speaker Change: Pilots in IMAX as ultra low power <unk>.

Speaker Change: <unk> Air Technology.

Speaker Change: Created the worst.

Speaker Change: Smart all up products that.

Speaker Change: Dr Fischer plentiful stupid sentry monetary.

Speaker Change: Real time, you bet recordings.

Speaker Change: Oh is that total solution this mud pulse.

Speaker Change: Exceptionally low powered schroll of just 2.2 million watt.

Speaker Change: Representing a novel and Heidi.

Speaker Change: Advantageous features.

Speaker Change: It's minimal.

Speaker Change: On battery life.

Speaker Change: Yes.

Speaker Change: The pulp and AI.

Speaker Change: Parent.

Speaker Change: In the wireless side, a lot of the call look at camera to capture snapshots periodically.

Speaker Change: Four seven basis.

Speaker Change: Couldnt detected prisoners.

Speaker Change: Italy started recording park currently working up the thought the falloff much higher pulp consuming <unk> process.

Speaker Change: The result.

Speaker Change: It's a comprehensive event recorded for seamless threat protection.

Speaker Change: Insured securities acquired mitigated.

Speaker Change: Ill patients.

Speaker Change: All achieved with a battery powered all luck.

Jordan Wu: By working with ecosystem partners and customers, we are expanding Wi-Fi applications aggressively, covering new areas including, but not limited to, smart home, smart agriculture, automotive, small business, AMR, or automatic meter reading, health care, and a wide range of other AIoT applications to broaden our market reach and help shorten development cycles. We also offer a seamlessly integrated plug-and-play YSI module. These modules enable no-code slash low-code AI development for building context-aware AI algorithms, which are reprogrammable. Thank you.

Speaker Change: By working with ecosystem partners and customers where are you spending wise.

Speaker Change: Patients aggressive.

Speaker Change: Covering new areas, including but not limited to smartphone smart agriculture ophthalmologists small piece.

Speaker Change: Automatic meter reading.

Speaker Change: The scale and the wide range of other Iot applications.

Speaker Change: To broaden our market reach and help shorten customers.

Speaker Change: The development cycles, we also offer and seafood.

Speaker Change: The integrated <unk> play.

Speaker Change: Clay <unk> modules.

Speaker Change: This module to enable.

Speaker Change: No cold slash low cold AI development.

Speaker Change: Development required provide the building context aware algorithms, which are reprogrammable.

Jordan Wu: Thank you. Within a few months after its launch, Wi-Fi modules have been successful and have seen successful adoption in battery-powered parking systems across Asia, as well as applications in fleet management. Occupancy Sensing, Pet Tracking, Off-Road Sensing, Access Control, and the like. Moreover, for companies with their own AI expertise, we provide hands-on, open-source AI frameworks, toolchains, and robust AI models to streamline development efforts and reduce costs and lead time for AI product introduction.

Speaker Change: Customers.

Speaker Change: We did a few months after its launch.

Speaker Change: Wifi modules have been successful have seen successful adoption in peso repower parking systems across Asia, that's worth applications in fleet management.

Speaker Change: Occupancy.

Speaker Change: Pet tracking.

Speaker Change: Also.

Speaker Change: Sure.

Speaker Change: That's.

Speaker Change: Moreover for companies, we see a whole AI expertise, we provide turns on <unk>.

Speaker Change: Yes frameworks tool sheds, a robust AI models to streamline development efforts, a reduced cost and lead time development yes.

Speaker Change: Yes.

Speaker Change: Hopefully you have product introduction.

Jordan Wu: This year at ISC West, the leading U.S. trade show for the security industry, Himax unveiled Wi-Fi, PalmVent Technologies, and the Ultra Low Power Contactless Biometric Authentication Solution, powered by the Advanced Wi-Fi 2 AI processor. Wi-Fi Palm Venn can swiftly authenticate an individual's identity in less than 100 milliseconds, while consuming nearly no power. It boasts exceptional accuracy, enhancing security by minimizing the risk of duplication or spoofing through the distinct palm vein patterns unique to every individual.

Speaker Change: Okay.

Speaker Change: This year at the ISC West the leading U S trade show for the security industry.

Speaker Change: Hi, Max unveiled Wayside park with technology.

Speaker Change: And ultra low power contactless biometric authentication solution.

Speaker Change: Powered by the advanced Wi Fi Chew AI processor, OSI palm vein could slip to the authenticate individuals I think.

Speaker Change: Yes.

Speaker Change: Many symptoms.

Speaker Change: Wildcat Schumi nearly many watts of power.

Speaker Change: At both exceptional accuracy.

Speaker Change: Hence the insecurity by minimizing the risk of deprecation or spoofing.

Speaker Change: Through the distinct palm vein patterns unique to every individual.

Jordan Wu: The solution targets battery-powered access control devices for a small group of authorized individuals and has only been launched recently. Wi-Fi power van technology has already attracted interest for applications such as automotive, door lock, surveillance, laptop, and more.

Speaker Change: The solution target spread to repower, the excess control devices.

Speaker Change: For a small group of also IC demetrios.

Speaker Change: Having only launched recently.

Speaker Change: <unk> <unk> technology has already attracted interest.

Speaker Change: Locations, such as automotive, so look surveillance laptops and more.

Jordan Wu: We are actively accelerating verification and partnership projects in these areas and are enthusiastic about the potential for a wide-side palm vent authentication that marks a significant breakthrough in the industry. Thanks for an update on our Aerocosmical Display Technology at the upcoming Display Week 2024 in May in San Jose, California. Himax, where I'm at, is a groundbreaking, ultra-luminous, new generation color sequential front-of-the-air cosmic display capable of achieving a brightness of up to 250,000 nits.

Speaker Change: We are actively accelerating verification partnership projects in these areas.

Speaker Change: And <unk> about the potential for WSI part of the case.

Speaker Change: <unk>.

Speaker Change: Marks a significant breakthrough in the industry.

Speaker Change: Lex oil update of.

Speaker Change: Ill close my hope you split it.

Speaker Change: At the upcoming display.

Speaker Change: 2024 in May you said he'll say, California.

Speaker Change: Yes.

Speaker Change: Whereas there is groundbreaking ultra loop in this new generation consequential problem caused by the display capable of achieving a brightness of.

Speaker Change: Up to towards good T cell that Mitch.

Jordan Wu: This represents a notable 2.5-fold increase from its predecessor announced at its display week 2023, while maintaining a low power consumption of just 300 milliwatts. Additionally, thanks to its compact form factor of just 0.5 cc in volume, when incorporating both illumination optics and the air-cooled panel, stylish and everyday ready AR glasses are becoming a reality. While volume commercialization of AR glasses targeting the general public may still take several years, we are proud that Himax's new generation color sequential front-link AirCos stands as the sole viable solution in the marketplace for authentic see-through AR glasses.

Speaker Change: This represents a notable two five fold increase from its predecessor, but allows us as its slate week 2011 Street.

Speaker Change: <unk> Henri low power consumption of just 300 megawatts.

Speaker Change: Additionally, thanks to its compact form factor of just <unk> evolving.

Speaker Change: Incorporating both illumination upticks and the <unk> panel.

Speaker Change: Stylish and every day ready AI Plusses, all becoming a reality.

Speaker Change: Oil body commercialization of alkalosis targeted the general public may still take several years, we are proud behind messes, new generation code sequential from the locals stents as the sole viable solution in the marketplace for authentic.

Speaker Change: <unk> losses.

Speaker Change: He's very unparalleled brightness.

Jordan Wu: Power consumption, form factor, display quality, and mass production readiness. Collaborations with leading tech companies worldwide are on the rise, solidifying Himex's position as the leader in the field. For a non-driver IT business, we expect revenue to increase double digits sequentially in the second quarter. That concludes my report for this quarter. Thank you for your interest in Himax. We appreciate you joining today's call and are now ready to take questions.

Speaker Change: Paul consumption form fit.

Speaker Change: Display quality.

Speaker Change: Mass production readiness.

Speaker Change: Collaborations with leading tech companies worldwide.

Speaker Change: Right.

Speaker Change: So we define imax's position as the leader in the field.

Speaker Change: For non driver IC business, we expect revenue to increase double digits sequentially in the second quarter.

Speaker Change: That concludes my report for this quarter. Thank you for interest in high rates. We appreciate youre, joining todays call and are now ready to take questions.

Operator: Thank you, Jordan. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Frank Wang with Athena Capital.

Speaker Change: Thank you Sir at this time, we will conduct a question and answer session.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.

Speaker Change: Your question. Please press star one again, please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of drank Wang with Athena Capital You May proceed.

Frank Wang: Yeah, hi, good evening. My first question is about the auto business.

Drank Wang: Yes, hi, good evening.

Drank Wang: My first question is on the auto business.

Frank Wang: Texas Instruments, NSP, UMC, TMCMC, or indicate some softness in the ultrasonic... We can't hear you, Frank. Oh, okay. Can you hear me OK? Can you hear me now? Hello, can you hear me okay? Frank, we can hear you. I'm going to actually remove you and then re promote you because it seems like the team needs you.

Drank Wang: Texas instruments.

Speaker Change: P C.

Speaker Change: C C.

Speaker Change: Fee or indicate some softness in all we can't hear you Frank.

Speaker Change: Okay.

Frank: Can you hear me okay.

Speaker Change: Can you hear me now.

Speaker Change: Hello can you hear me okay.

Operator: Frank, we can hear you. I'm going to actually remove you and then re-promote you because it seems like the team with Jordan and Eric are not able to hear you, so please stand by. [inaudible] Hey Frank, we have brought you online again. Please proceed and confirm that the team with Eric and Jordan and the rest of the team can hear you. Okay, yep. Okay, thank you. Good evening. The first question is on the auto...

Speaker Change: Frankly can hear you I'm going to actually remove U and then read Paramount because it seems like that.

Speaker Change: The team at.

Speaker Change: Jordan and Eric are unable to hear you. So please standby.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Thank you.

Speaker Change: Thank you John.

Speaker Change: Yes.

Speaker Change: Okay.

John: And frankly in Brown shoe online again, please proceed and confirm that the <unk> with Eric in Jordan and team can hear you.

Speaker Change: Okay.

Speaker Change: Okay. Thank you.

Frank Wang: The first question is on the auto sector. Texas Instruments, NHP, CFMC, UMCO indicate some softness in the auto sector. What is your view? And why do these leading semiconductor companies seem to be more pessimistic about the auto sector? Why are you expecting a decent quarter of a quarter growth in the, Thank you.

Speaker Change: Hum.

Operator: Okay, yep. Thank you. Yes. Good evening.

Speaker Change: Yes.

Speaker Change: Good evening.

Speaker Change: First question is on the auto sector.

Speaker Change: Texas instruments.

Speaker Change: Kathryn indicated some softness in the auto sector.

Speaker Change: What is your view on.

Speaker Change: Why are the leading semiconductor companies.

Speaker Change: More pessimistic on the auto sector, what are you expecting a decent quarter over quarter growth in that.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Speaker Change: Okay.

Operator: Donnie Teng, Jerry Su, Donnie Teng, Jordan Wu, Hsin Yeh, Himax Technologies Inc.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: That's all.

Speaker Change: Some of the symptoms.

Operator: Frank, it seems the team is still unable to hear you. So we're going to bring you back and then try again. We're going to prompt you for questions.

Speaker Change: It seems the team is still in April.

Speaker Change:

Speaker Change: To hear you so we're going to.

Speaker Change: Bringing you back and then try again, we're going to prompt for questions.

Operator: Can you hear me, Frank, Mr. Operator? I can hear you fine.

Speaker Change: Can you hear me.

Speaker Change: I can hear you fine.

Operator: We can hear Frank, and the rest of the people can. I don't know why the folks in your room are not able to hear him. That is very weird.

Speaker Change: We can hear Frank and the rest of the people can I don't know why the folks in your room are not able to hear him.

Operator: Very weird.

Speaker Change: That is very weird.

Operator: Okay, wait, that's all right. I've got another person coming to assist on this. We're going to keep Frank in questions, please. Thank you, everyone, for your patience. Crystal, thank you for coming in to assist. Everyone can hear Frank except for Eric's line where the group is gathered.

Speaker Change: And we that's alright, I've got another person coming to assist.

Speaker Change: And then we're going to keep cranking questions. Please.

Speaker Change: Thank you everyone for your patience Crystal and thank you for coming into assessed.

Speaker Change: Everyone can hear Frank except for.

Speaker Change: Eric Stine, where the curve is gathered.

Operator: Or, Mr. Operator, can you relay Frank's question to us? Because we can clearly hear you, and we are assuming you can hear us. I'm assuming everybody can hear us, and your peers, but everybody, your friends, except for us. I don't know why. So if you can pass on your friends' question to us, then we can respond to the question. I can do my...

Speaker Change: Or.

Speaker Change: Mr. Operator.

Speaker Change: Can you relay the question of frame to us because we can clearly hear you.

Mr. Operator: And you can do.

Speaker Change: Uh huh.

Speaker Change: Yes.

Speaker Change: I am assuming.

Speaker Change: Everybody can hear us.

Speaker Change: Yes.

Speaker Change: And <unk>.

Speaker Change: Everybody, Frank except for Us I don't know why.

Speaker Change: So if you can.

Speaker Change: Cutoff.

Speaker Change: Push it to us and we can respond to the question.

Operator: I can do my best. He asked for a lot of information.

Speaker Change: I can do my math here.

Speaker Change: Information.

Operator: So let me set up one more time. So the first question is regarding the auto sector. Himax is more optimistic, expecting very good growth for the second quarter. But other companies, the semi-conductor companies, are expecting some softness.

Speaker Change: Okay.

Speaker Change: Uh huh.

Speaker Change: So let me answer them one at a time. So the first question is regarding the auto sector.

Speaker Change: Hi, Matt is more optimistic expecting a very good growth for the second quarter, but other companies semiconductor companies.

Operator: So what's the view? How's that different? Thank you.

Speaker Change: Expecting some softness and so on.

Speaker Change: What's the view how is that different thank you.

Operator: There seems to be someone talking.

Speaker Change: So that's our path.

Operator: So, what is the view from Himax in terms of the auto sector? Frank asked some questions about there being some softness, so I'm doing my best to relay information.

Speaker Change: And what is the near term high Max in terms of the auto sector. Frank asked some pieces about there was some softness I'm doing my best.

Speaker Change: Relay information so.

Jordan Wu: Okay, I think I got the answer to the question. Yes, that is the question. So... So I suppose the question from Frank... Again, for some technical system reasons, we cannot hear it.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: I think I got it.

Speaker Change: The question, Yes, that's.

Speaker Change: That's the that is the question so.

Speaker Change: So I suppose the question from Frank again, I apologize for some tech system reasons, we cannot do that.

Jordan Wu: But the relay from the operator appears to be that the industry is going through softness in the auto semiconductor business, where we are, for a pretty strong outlook. So I guess Frank's question is why we are seeing this departure of direction. I think indeed we have seen in recent and others semiconductor companies, both foundries and IDMs across US, Europe, and Japan, where they are giving rather cautionary outlooks on the auto market demand. But if you read carefully their comments, you will be able to see that they are not saying the auto industry's overall shipment is going to decline. What they are saying merely is that their stocks are perhaps too high, and they are going through a stopping process.

Speaker Change: But.

Speaker Change: Really April the operator.

Speaker Change: He has to be.

Speaker Change: The industry is going through softness in auto our semiconductor business.

Speaker Change: Sure.

Speaker Change: Got it meaningful is pretty strong outlook. So I guess Frank's question is.

Speaker Change: Why.

Speaker Change: We are seeing is a partial of directions.

Speaker Change:

Speaker Change: Indeed.

Speaker Change: We have seen in recent.

Speaker Change: Earnings calls from.

Speaker Change: Semiconductor companies, both foundries and idms across U S Europe and Japan.

Speaker Change: <unk>.

Speaker Change: Clearly given rather caution in our outlook.

Jordan Wu: The auto.

Speaker Change: Market demand.

Speaker Change: But if you.

Speaker Change: Retail for the above their comments.

Frank Wang: You'll be able to see that.

Speaker Change: They are not saying.

Jordan Wu: <unk> industries overall shipment is going to decline.

Speaker Change: While they are saying is that they are stopped.

Jordan Wu: Stops.

Speaker Change: Perhaps too high and they're going through is.

Jordan Wu: And that is the reason for their cautionary out of the, and if you look at the industry forecast, most people are, I mean, while we are not expecting a very strong shipment outlook for this year, people are not focusing on any decline either, typically at least something like 3% or 5%, or some forecasts even projecting for higher growth outlook for the vehicle shipment volume this year. So the industry actually remains solid. And I mentioned in my previous remarks that our inventory for the auto market is actually very, very lean.

Jordan Wu: Destocking process.

Jordan Wu: <unk>.

Jordan Wu: That is the reason for the cautionary outlook.

Speaker Change: And if you look at the.

Jordan Wu: The English industry forecast most people are I mean, while we are not expecting a very strong although shipment for this year.

Jordan Wu: <unk> not focusing any decline either.

Jordan Wu: Because at this something next three or 5% ophthalmic focus.

Jordan Wu: People higher outgrowth outlook for the vehicle shipment volume.

Jordan Wu: This year.

Jordan Wu: So the industry actually remains solid.

Jordan Wu: And.

Jordan Wu: And.

Jordan Wu: We I mentioned and you might prepared remarks.

Jordan Wu: Our inventory for Holdco.

Jordan Wu: Market actually is very very Lee.

Jordan Wu: And.

Jordan Wu: So.

Jordan Wu: Our customers' inventory positions.

Jordan Wu: And so our customers' inventory position. And I particularly mentioned in my prepared remarks that we actually had to take a lot of rush orders recently. Actually, I'm talking about very sizable quantities of rush orders from our panel customers, and the reason why they are giving rush orders is clearly because they have run out of stock, and their existing stock cannot meet customer demand. And with the rush orders, we also have to turn around and place our orders, rush orders, for our foundry partners. Because, again, for the same reason, our inventory is very low. And our existing inventory simply cannot meet the demand of the customer. So I think I have also explained my prepared remarks.

Jordan Wu: And I, particularly mentioned in my prepared remarks.

Jordan Wu: We actually had two.

Jordan Wu: Sure.

Jordan Wu: Hello, Doug Rush orders recently.

Jordan Wu: You are talking about very sizable quantities of rush orders for our panel customers.

Jordan Wu: And the reason why the activities in Russia orders clearly is because they had run out of stock.

Jordan Wu: Yes.

Jordan Wu: Stock cannot Mickey.

Jordan Wu: The customer demands and with the rush orders, we also to turn around and place orders rush orders to our foundry partners because.

Jordan Wu: For the same reason our inventory is very low and quality inventory simply cannot meet the demand of <unk>.

Jordan Wu: Of the customer.

Jordan Wu: I think.

Jordan Wu: Right.

Jordan Wu: There have been a total of seven quarters in a row when we see our inventory consistently declining very nicely. And also, we announced at the end of last year that we believe our inventory level has become very healthy. And that certainly covers the auto industry. And I think that that is the major reason for departure, I suppose.

Jordan Wu: He also explained my prepared remarks, there has been a total of seven quarters in a row when that we see.

Jordan Wu: Our inventory.

Jordan Wu: Instantly declining very nicely and that and also we announced.

Jordan Wu: And the last year that we believe our inventory level has become very healthy at vessels when he covers.

Jordan Wu: The.

Jordan Wu: The auto industry.

Jordan Wu: And I think.

Jordan Wu: That is the major reason will be posture I suppose and also I think we continue to highlight the fact that.

Jordan Wu: And also, I think we continue to highlight the fact that the auto industry is going through this mega trend to upgrade their panels in terms of Quantity, Feature, Sophistication, Size, etc. for Vehicle Panels And that is very good news for panel makers targeting the auto industry because for each vehicle, the panel content value is increasing. And even more so for IC vendors because for each panel going to vehicles, the IC content value is increasing.

Jordan Wu: Although industry is going through this makeup trend.

Jordan Wu: Upgrade their panels in terms of.

Jordan Wu: The quantity.

Jordan Wu: Sure certification.

Jordan Wu: <unk> et cetera for vehicles panels and that is very good news for panel makers talcott being auto industry because for each vehicle. The panel countervailing is increasing and even more so for IC vendors because for each panel two vehicles.

Jordan Wu: So we are going through that megatrend right now, and being a market leader, I think we really are taking a nice ride and enjoying this megatrend. So I hope that explains the short-term difference in our outlook as opposed to most semiconductor manufacturers. I expect to see you, Operator.

Jordan Wu: Content value you see increasing so we are going through that makeup trend right now and b market either I think we really.

Jordan Wu: Taking a nice strides enjoyed makeup.

Jordan Wu: Makeup trend so.

Jordan Wu: I hope that explains the.

Jordan Wu: The short term difference in outlook as opposed to most semiconductor makers.

Jordan Wu: Sure.

Speaker Change: Thank you operator.

Operator: Thank you, Frank, for your question.

Operator: Thank you Frank for your question.

Operator: Thank you, Operator. Yes. Can I just ask you to relay one more question, please? Himax is a leader in L-Cos. Can I talk about the change that will make see-through AR glasses really happen? Thank you.

Speaker Change: Thank you operator.

Operator: Yes.

Speaker Change: Can I just.

Speaker Change: Our tier three there one more question please.

Speaker Change: Hi, Matt.

Operator: Leader in Elkhart.

Speaker Change: Can I talk about that.

Operator: Ken.

Operator: Sure.

Operator: Dr classes to really happen. Thank you.

Operator: So I'm going to do my best to relay, they're asking about Himax as a leader for B2BR classes or classes and want you guys to speak to that scenario.

Operator: So I'm going to do my best to relay.

Operator: They are asking about.

Operator: Hi, Max as a leader about B to B R.

Operator: Glasses in their classes.

Operator: And why are you guys just speak to that scenario.

Jordan Wu: OK. Yes, I suppose so, Frank.

Operator: Okay.

Speaker Change: Yes, I suppose Frank.

Jordan Wu: Aski the ball, a gloss, and particularly our AeroCost solution, Talking Nut Mark. And in my, towards the end of my presentation, we highlighted the major breakthrough in technology and and uh, and our excitement about the breakthrough and I suppose, not knowing, not hearing the details of Frank's question. I suppose many people may wonder why AR is... as a general term for our products, has not seen great success so far, and air-course is just a supporting technology for the air and air-gas industries.

Jordan Wu: Paul.

Jordan Wu: Glasses and.

Jordan Wu: Because acuity, our <unk> solution tuck in that market and towards the end of my prepared remarks, we highlighted.

Jordan Wu: The major breakthrough technology.

Jordan Wu: Sure.

Jordan Wu: And.

Jordan Wu: And.

Jordan Wu: And our excitement.

Jordan Wu: About the breakthrough and I suppose.

Jordan Wu: Ludlow impact here in the details of the France question Thats suppose many people may one there.

Jordan Wu: Sure.

Jordan Wu: As a general.

Jordan Wu: Our products.

Jordan Wu: <unk> has.

Jordan Wu: Has not seen.

Jordan Wu: Great success, so far.

Jordan Wu: And it of course is just.

Jordan Wu: So police technologies for here in.

Jordan Wu: So is that, is, so what is our common future? And the company, over many years, seems to have been committed to the development of air-course technology for aircraft. So I guess many people may have questions about whether this strategy actually makes sense. And my response is, obviously, we believe it does.

Jordan Wu: Thus this industry. So is that is there.

Jordan Wu: So what is all common is the future.

Jordan Wu: The company over the many years seems to have become.

Jordan Wu: Fee income.

Jordan Wu: Committed to the development of <unk>.

Jordan Wu: Yeah of course in the aircraft technology folio causes so I guess the.

Jordan Wu: Many people may have questions about whether this strategy makes sense.

Jordan Wu: And my response is obviously we believe.

Jordan Wu: There's a reasonable chance for AR glasses to become successful, and I will... I will elaborate on the importance of the micro-display or the aero-cross micro-display for the success of AR glasses. And clearly, we are committed and friendly, bringing money to develop this technology for many, many years because of the simple reason that we have a very strong commitment to its success. And we certainly believe that the chance of success is quite good.

Jordan Wu: Yes.

Jordan Wu: Yes.

Jordan Wu: Reasonable chance for <unk> to become successful.

Jordan Wu: And.

Jordan Wu: And I will.

Jordan Wu: I will elaborate on the importance of vehicle display audio close Michael display photo successfully eyeglasses and clearly we are committed and frankly plenty money.

Jordan Wu: To develop this technology for many many years.

Jordan Wu: Because of the simple reason that we have a very strong commitment for success and we certainly believe that the chance of success is quite good.

Jordan Wu: And I will also highlight the fact that, simply because the technology is so difficult, when it's successful, it's going to be a tremendous potential, a tremendous business opportunity for Himex because very few people are involved. Now, let me elaborate on the background a little bit.

Jordan Wu: I will also highlight the fact that the b.

Jordan Wu: Because simply because the technology is so difficult.

Jordan Wu: What is successful it's going to be tremendous.

Jordan Wu: Potential tremendous business opportunity for <unk>, because very few people I was simply because the technologies actually quite challenging.

Jordan Wu: One of the major technical challenges for see-through AR glasses is the display system, which by definition needs to be totally different from the displays we are so used to every day for say, a smartphone or watch or even those for AR or MR. So basically, a see-through display system is comprised of three things: a Microdisplay, which generates images, a web guide which projects the image, and a coupling lens which channels the image generated Now, because of the see-through nature and the need to allow for outdoor youth.

Jordan Wu: Now, let me decorate the Petra little bit one of the major technical challenges for see through causes.

Jordan Wu: The displays.

Jordan Wu: By definition needs to be totally different than the displays we are so used to everyday allstate smartphone will watch or even though its way al and Bob goggles.

Jordan Wu: So basically a see through display system is comprised of three things.

Jordan Wu: Display.

Jordan Wu: <unk> generates image.

Jordan Wu: Guy.

Jordan Wu: The image.

Jordan Wu: As a company and less which channels the image generated by micro display to the webcast.

Jordan Wu: Okay.

Jordan Wu: Because of the C thru nature.

Jordan Wu: And the need to allow for outdoor use the prizes to ice for display DOCSIS needs to be significantly higher than those for the usual displays which typically ranges between 250 to three anja nice a route.

Jordan Wu: The President to I, for displayable AR glasses, needs to be significantly higher than those for the usual displays, which typically range between 250 to 300 nits. I'm talking about your usual notebook displays, or cell phone displays, or TV displays, right? Typically between 250 to 350 nits.

Jordan Wu: I'm talking about your usual.

Jordan Wu: Local displays I'll say won't displace all TV displays.

Jordan Wu: Typically between two August 15th two strategy teammates.

Jordan Wu: In comparison, our customers are now demanding the brightness of the ICE to be at least 1000 nits, which is... quite a number of times higher than our usual display. Now the trouble is the optical efficiencies of both the waveguide and the coupling lens are quite low, especially the waveguide which is typically as low as 1% or less, while the oil for the coupling lens is around 50-60%.

Jordan Wu: In comparison, our customers are now demanding for the brightness twice for the buses to be at least one other needs which is.

Jordan Wu: Quite a number of times higher than our usual displays.

Jordan Wu: Now the trouble is.

Jordan Wu: The optical I'd appreciate it sees a post the lip guy at copper and less quite low, especially the web guide, which is typically a slow as what percent of OLED or less Oracle the company less is around 50, 60%.

Jordan Wu: So what this means is that more than 99% of the price generated by the micro display is quote-and-quote wasted after traveling through the optical system and before the image is projected onto the eye. And this is the reason why we are now offering our new generation from the Air Force with super high brightness of 250,000 nits. So on a four-part basis, if the waveguide efficiency is what percent?

Jordan Wu: So what this means is that more than 99% of the brightness generated by the micro display is called.

Jordan Wu: Corporate costs with it.

Jordan Wu: Upgrades February through the optical system.

Jordan Wu: We hold the image is projected onto the ice.

Jordan Wu: then our 250,000 nits air course can create about 1,500 nits brightness for eyes, which is going to meet the demand of our customers for Airglass. So while we continue to work towards even higher brightness, we believe for the first time ever, for the first time ever in the industry. We are finally seeing a micro display that offers a legitimate level of breadth for AR Glass, targeting the general public. Um, so to complete the story, in addition to the major breakthrough in Brighton.

Jordan Wu: Avenue from the airport also offers a low power consumption of around 300 mW, as I mentioned in my previous remarks, and a form factor of just 0.5 cc in total volume. All of these are very critical for the success of AR Glass. Last but not least, our AirCold solution is way beyond the laboratory level and is actually now quite ready for volume production. I would just add one last point, which is that the only competing technology for AR glasses for display is micro-LED, for which the industry has put in tremendous resources over the last few years to develop billions of dollars of resources.

Jordan Wu: Revenue from these calls.

Jordan Wu: Also offers low power consumption of around 200 million what.

Jordan Wu: I mentioned in my prepared remarks, and the form factor of just point of ICC in total volume.

Jordan Wu: All of these are very critical for the success of our glasses.

Jordan Wu: Last but not least our <unk> solution is way.

Jordan Wu: Beyond April three level and is actually now quite ready for volume production.

Jordan Wu: Okay.

Jordan Wu: I would just add one last point, which is.

Jordan Wu: The only competing technology buoy up losses for display is micro very deep for which the industry is putting tremendous resources over the last few years to develop.

Jordan Wu: Billions of dollars of resources.

Jordan Wu: In our view, our proprietary front lid air hose provides much better power efficiency. [inaudible] i.e., given the same amount of power consumption, our solution actually produces a much better price, and the L.E.D. The MicroE. They're micro-ED, micro-display. So, as far as we can tell, what we have achieved so far in our consequential front-of-the-air core solution is far better than the performance delivered by any micro-ED micro-display. We are offering a comparable form factor with much better readiness for mass production. So this is a pretty lengthy response, but I hope that kind of addresses the issue for our long-term commitment to the development of air courses for the air glass industry.

Jordan Wu: In our view.

Jordan Wu: Our proprietary front <unk> provides much better power efficiency the microarray.

Jordan Wu: I E.

Jordan Wu: Given the Senate model power consumption, our solution actually produces.

Jordan Wu: Much better prices than the OLED micro OLED.

Jordan Wu: They're micro OLED micro display.

Jordan Wu: So as far as we can tell what we have achieved so far in our consequential front cost solution is far better than the performance.

Jordan Wu: <unk> delivered by our new micro OLED micro display.

Jordan Wu: Sure.

Jordan Wu: Our offering comparable form factor with much better readiness for mass production.

Jordan Wu: No.

Jordan Wu: This is a pretty lengthy response, but I hope that kind of addresses the issue for our long term commitment to the development of <unk>.

Jordan Wu: Of course for our losses.

Speaker Change: Industry. Thank you.

Operator: Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. If you need to withdraw your question, please press star 101 again. Please stand by while we compile the Q&A roster. Our next question comes from the line of Tyler Bamba with Baird. You may proceed. [inaudible] Tyler, your line is open. You may proceed with your question

Operator: Tyler, okay. We're going to proceed to the next question. Again, to ask a question, you need to press star 1-1 on your telephone and wait for your name to be announced. Our next question comes from the line of Nathan Zee with Morgan Stanley. You may proceed.

Operator: Thank you. Thank you. As a reminder to myself,

Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced if you need to withdraw your question. Please press star one on one again, please standby, while we compile the Q&A roster.

Operator: Huh, who's that? I don't know who that is. Yeah. Oh, who'd have thought that? We are still not hearing the question. Operator, I'm wondering whether you can hear the question.

Jordan Wu: So we tried to contact the people that were supposed to take questions, but we did not hear them. This concludes the Q&A. We're going to hand it over to you, Jordan, for closing remarks.

Jordan Wu: Okay.

Jordan Wu: I apologize for the system issue. But as a final note, Eric Lee, our chief IRP officer, will maintain investor marketing activities and continue to attend this conference, and will announce the details as they come about. Thank you.

Jordan Wu: Our next question comes from the line Tanner Bommer with Baird you May proceed.

Jordan Wu: Okay.

Jordan Wu: Yes.

Operator: This concludes today's conference; you may now disconnect.

Jordan Wu: Okay.

Jordan Wu: Tyler Your line is open you May proceed with your question.

Jordan Wu: Yes, that's helpful.

Operator: Okay.

Jordan Wu: Tie in there okay.

Jordan Wu: We're going to proceed to the next question.

Jordan Wu: Again to ask a question you need to press star one on your telephone and wait for your name to be announced.

Operator: Okay.

Operator: Yeah.

Operator: Yes.

Operator: Yes.

Operator: Okay.

Operator: Okay.

Operator: Sure.

Operator: Our next question comes from the line of Nathan <unk> with Morgan Stanley You May proceed.

Operator: Okay.

Operator: Okay.

Jordan Wu: I'll follow up with us.

Operator: Yep.

Operator: Right.

Operator: Chicago from Aladdin.

Operator: We have a theory, we're still not hearing the question operator wonder whether you can hear the questions.

Jordan Wu: So we tried to people that were supposed to take questions. We did not hear them. This concludes the.

Operator: Q&A Ann we're going to hand, it over to you Jordan for closing remarks.

Speaker Change: Oh I apologize.

Jordan Wu: For the system issue, but as a final note.

Jordan Wu: Our <unk> is we are maintaining investor marketing activities and continue to Apache Mr. Conferences, we announced the details as they come about thank you.

Operator: Yes.

Jordan Wu: This concludes today's conference you may now disconnect.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Operator: [music].