Q2 2024 Himax Technologies Inc Earnings Call
Speaker Change: Hello ladies and gentlemen, welcome to the Himex Technologies 2nd Quarter 2024 Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode, and later we will conduct a Q&A session, and instructions will follow at that time.
Eric Lee: As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Eric Lee, Chief IR PR Officer at Himax. Eric, please proceed. Welcome everyone to the Himax...
Eric Lee: yeah
Eric Lee: My name is Eric Lee, chief IR PR office at HIMAX.
Speaker Change: Joining me today are Jordan Wu, President and Chief Security Officer, Jessica Peng, Chief Financial Officer. After the companies have prepared the comments, we have allocated time for questions in the Q&A session.
Speaker Change: If you have not yet received a copy of today's results, please do so now.
Speaker Change: Please email hins at ncgroup.us or hx underscore ir at himax.com.tw
Speaker Change: access the press release on financial portals or download a copy from Himax website at www.himax.com.tw
Speaker Change: Before we begin the formal remarks, I'd like to remind everyone that some of the statements in the conference call, including statements regarding expected future financial results and industrial growth, are forward-looking statements.
Speaker Change: That involves a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this conference call.
Speaker Change: A list of risk factors can be found in the company's SEC filing from 20-F.
Speaker Change: For the year ended December 31, 2023 in the session entitled Risk Factor as May be amended.
Speaker Change: He said, for the company's four-year 2023 financials,
Speaker Change: which were provided in companies 20F and 5 with the SEC on April 2nd, 2024.
Speaker Change: The financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFI's accounting.
Speaker Change: Such financial information is generated internally and has not been subjected to the same review and scrutiny.
Speaker Change: including internal auditing procedures and external audits by an independent auditor.
Speaker Change: to which we
Speaker Change: Subject, our annual consolidated financial statements and may vary materially from the audited consolidated financial information for the same period.
Speaker Change: 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: Please email himx at mcgroup.us or hax-ir at himax.com.tw to access the press release on financial portals or download a copy from Himax's website at www.himax.com.tw for the year ended December 31st, 2023 in the session entitled Risk Factor as May be amended. On today's call, I will first review HIMAX's consolidated financial performance for Jordan will then give an update on the status of our business.
Howard Yu: I will first review Himax's consolidated financial performance for the second quarter of 2024, followed by our third quarter outlook. Jordan will then give an update on the status of our business, after which we will take questions. You can submit your questions online through the webcast or by phone.
Speaker Change: On today's call, I will first review the Himex consolidated financial performance for the second quarter, 2024.
Speaker Change: followed by our third quarter outlook.
Speaker Change: Jordan will then give an update on the status of our business, after which we will take questions.
Mark Schwalenberg: Out of which, we were asked 10 questions, as well as increased orders in preparation for the shopping festival, both TV and monitor IC sales. However, Q2 Noble IC sales declined slightly following strong restocking in the previous quarter. The sequential decrease was primarily driven by decreases in test file expenses. Both the sequential and year-over-year increases were primarily due to higher sales and an improved growth margin. The cash balance reduction was partially offset by an operating cash inflow of $26.9 million during the quarter. As we've done historically, we will grant employees an annual bonus, including RFUs and cash awards on or around September 30th this year. Compared to $11.3 million, the immediately exhausted portion of this year's bonus has stayed above.
Jordan: You can submit your questions online, through the webcast, or by phone. We will review our financials on an IFRS basis.
Howard Yu: We will review all financials on an ISI basis. We are delighted to announce that Q2 revenue surpassed guidance, while gross margin and profits were in line with the guidance range issued on May 9, 2024. Despite the prevailing economic headwinds, the better-than-expected financial result primarily stems from resumed order momentum across most of our portal lines. Second quarter revenues registered $239.6 million, an increase of 15.5% sequentially, exceeding our guidance range of an 8% to 13% increase.
Speaker Change: We are delighted to announce that Q2 revenue surpassed guidance by gross margin and profits were in line with the guidance range issued on May 9, 2024.
Speaker Change: Despite the prevailing economic headwinds,
Speaker Change: The better-than-expected financial results primarily stemmed from resumed order momentum across most of our portal lines.
Speaker Change: Second quarter revenues registered $239.6 million, an increase of 15.5% sequentially, exceeding our guidance range of an 8% to 13% increase.
Howard Yu: Gross margin came in at 32%, in line with our guidance range of 31.5% to 33.5%, up from 29.3% of the previous quarter and 21.7% of the same period last year. The sequential growth was driven by cost improvements and favorable product mix, along with increased sales in the automotive IC and key comp product lines, both of which have higher than corporate average growth margins. The substantial improvement in gross margin from the same period last year was primarily due to one-time early termination expense paid to foundry partners, which elevated minimum fulfillment requirement constraints and high waiver costs set during the severe industrial capacity shortage. Consequently, our new wafer starts are no longer bound by these restrictive terms.
Speaker Change: Gross margin came in at 32%, in line with our guidance range of 31.5% to 33.5%, up from 29.3% of the previous quarter and 21.7% same period last year.
Speaker Change: The sequential growth was driven by cost improvements and favorable product mix, along with increased sales in the automotive IEC and TECOM product lines, both of which have higher than corporate average growth margins.
Speaker Change: The substantial improvement in gross margin from the same period last year was primarily due to one-time early termination expense paid to foundry partners, which elevated minimum fulfillment requirement constraints and high wafer costs.
Speaker Change: set during the severe industrial capacity shortage. Consequently, our new wafer spots are no longer bound by these restrictive terms.
Howard Yu: Additionally, we can now leverage diverse foundry sources for optimal operational efficiency and a significantly improved cost structure, thereby maintaining our product competitively. Q2 profit per diluted ABS was $0.169, at the top end of the guidance range of $0.13 to $0.17. Revenue from large district drivers came in at $39 million, reflecting a sequential increase of 24.7%. The increase was predominantly driven by customers restocking in TV and monitor IC after several quarters of multi-demand, as well as increased orders in preparation for the shopping festival. Both TV and monitor IC sales posted sequential double-digit increases quarter over quarter. In concert, Q2 Noble IC sales declined slightly following strong restocking in the previous quarter.
Speaker Change: Additionally, we can now leverage diverse foundry sources for optimal operational efficiency.
Speaker Change: and a significantly improved cost structure, thereby maintaining our product competitiveness.
Speaker Change: Q2 profit per diluted ABS was $0.169 at the top end of the guidance range of $0.13-$0.17.
Speaker Change: Revenue from large district drivers came in at $39 million, reflecting a sequential increase of 24.7%.
Speaker Change: The increase was predominantly driven by customers restocking in TV and monitor IC after several quarters of multi-demand, as well as increased order in preparation for shopping festivals.
Speaker Change: Both TV and monitor IC sales posted sequential double-digit increases quarter-over-quarter.
Speaker Change: In contrast, Q2 Noble IC sales declined slightly following strong restocking in the previous quarter.
Howard Yu: Sales of large panel driver ICs accounted for 16.3% of total revenues of the quarter compared to 15.1% last quarter and 19.3% a year ago. Small and medium-sized dissipation driver segment revenue reached $158.8 million, marking a sequential increase of 10.1 percent and surpassing guidance due to strong than anticipated sales in the TTDI products for automotive, smartphone, and tablet. In Q2, automotive driver sales, encompassing both traditional DDIC and TTDI, increased by a decent high tenth sequentially and more than 50% year over year.
Speaker Change: Sales of large panel driver IC accounted for 16.3% of total revenues.
Speaker Change: of the quarter compared to 15.1% last quarter and 19.3% a year ago.
Speaker Change: Small and medium-sized dissipation driver segment revenue reached $158.8 million, marking a sequential increase of 10.1% and surpassing a guidance
Speaker Change: due to stronger than anticipated sales in the TTDI products for automotive, smartphone, and tablet.
Speaker Change: In Q2, automotive driver sales encompassing both traditional DDIC and TTDI increased by a decent high tenth sequentially and more than 50% year over year.
Howard Yu: Despite expectations of weakening electric vehicle demand, both the automotive DDiC and the TTDi cells experienced sequential growth in Q2, thanks to our robust design wings pipeline in TTDi and the customers' continuous restocking momentum in DDiC since the end of Q1. Our automotive business, comprising driver, Qicom, and Olay sales remained the largest revenue contributor in the second quarter, representing over 47% of total sales. Meanwhile, Q2 template IC cells slightly increased sequentially, surpassing guidance of a decline. Fueled by leading customers, the new model has ramped up.
Speaker Change: Despite expectations of weakening electric vehicle demand, both automotive DDiC and TTDi cells experienced sequential growth in Q2.
Speaker Change: Thanks to our robust DesignWings pipeline in TDDi and the customers' continuous restocking momentum in DDiC since the end of Q1.
Speaker Change: Our automotive business.
Speaker Change: Comprising driver Qicom and Olay sales remained the largest revenue contributor in the second quarter, representing over 47% of total sales.
Speaker Change: Meanwhile, Q2 template IC sales slightly increased sequentially, surpassing guidance of a decline fueled by leading customers' new model ramp-ups.
Howard Yu: Conversely, smartphone driver sales declined as expected during a subdued festival season characterized by sluggish demand. The small and medium-sized driver IC segment accounted for 66.3% of total sales for the quarter, compared to 69.5% in the previous quarter and 63.9% a year ago. Second quarter non-driver sales reached 41.8 million dollars, up 30.6% from the previous quarter due to a resurgence in orders for our Qicom products for TV, monitor, automotive as well as OLED tablets.
Speaker Change: Conversely, smartphone driver sales declined as expected during a subdued festival season characterized by sluggish demand.
Speaker Change: The small and medium-sized driver IC segment accounted for 66.3% of total sales for the quarter, compared to 69.5% in the previous quarter and 63.9% a year ago.
Speaker Change: Second quarter non-driver sales reached $41.8 million, up 30.6% from the previous quarter due to a resurgence in orders for our Qicom products for TV, monitor, automotive, as well as OLED tablet.
Howard Yu: Our automotive local dimming TECOM, where we dominate the market, has been swiftly adopted by major panel makers, tier one suppliers, and car manufacturers worldwide, boasting well over 100 design-winning projects with only a small number of design awards, having commenced mass production.
Speaker Change: Our automotive local dimming TECOM, where we dominate the market, has been swiftly adopted by major panel makers, Tier 1 suppliers, and car manufacturers worldwide.
Speaker Change: boasting well over 100 design win projects with only a small number of design awards has having commenced mass production.
Howard Yu: This momentum is further fueled by the rapid expansion of project works across continents, positioning us for strong growth, mirroring the success we have achieved in automotive TDDI. Qigong business represented over 10% of our total sales in the second quarter. Non-driver products accounted for 17.4% of total revenues, as compared to 15.4% in the previous quarter and 16.8% a year ago. Second quarter operating expenses were $47.3 million, a decrease of 6.7% from the previous quarter and a decline of 11.1% from a year ago.
Speaker Change: This momentum is further fueled by the rapid expansion of project awards across continents, positioning us for strong growth, mirroring the success we have achieved in automotive TDDI.
Speaker Change: Qicom's business represented over 10% of our total sales in the second quarter.
Speaker Change: Non-driver products accounted for 17.4% of total revenues, as compared to 15.4% in the previous quarter and 16.8% a year ago.
Speaker Change: Second quarter operating expenses were $47.3 million, a decrease of 6.7% from the previous quarter and a decline of 11.1% from a year ago.
Howard Yu: The sequential decrease was primarily driven by decreases in test file expenses. The year-over-year decreases were primarily due to reduced checkout expenses and a decline in the annual bonuses for the amortized tranches of the previous year's bonuses. Given any ongoing macroeconomic challenges, we are strictly enforcing budget and expense controls to manage these conditions.
Speaker Change: The sequential decrease was primarily driven by decreases in test file expenses.
Speaker Change: The year-over-year decrease was primarily due to reduced checkout expenses and a decline in the annual bonuses for the amortized tranches of the previous year's bonuses.
Speaker Change: Amid ongoing macroeconomic challenges, we are strictly enforcing budget and expense controls to manage these conditions.
Howard Yu: Second quarter operating income was $29.3 million, or 12.2% of sales, compared to minus 0.9% of sales for the same period last year and 4.8% of sales last quarter. Both the sequential and year-over-year increases were primarily due to higher sales and an improved gross margin. Second quarter after tax profit was $29.6 million or $0.169 per diluted ADS compared to $12.5 million or $0.071 per diluted ADS last quarter and $0.9 million or $0.05 in the same period last year.
Speaker Change: Second quarter operating income was $29.3 million, or 12.2% of sales, compared to minus 0.9% of sales for the same period last year and 4.8% of sales last quarter.
Speaker Change: Both the sequential and the year-over-year increases were primarily due to higher sales and an improved gross margin.
Speaker Change: second quarter after tax profit was twenty nine point six million dollars over sixteen point nine f per duutive ad compared to trail point five million dollars or seven point one centse for that ou ad the last quarter
Speaker Change: and $0.9 million or 0.5 cents in the same period last year.
Speaker Change: The asset tax profit for the first half was $42.1 million or $0.241 per diluted ADS, a significant increase from $15.8 million or $0.091 for the same period last year.
Howard Yu: The asset tax profit for the first half was $42.1 million or $0.241 per diluted ADS, a significant increase from $15.8 million or $0.091 for the same period last year. Turning to the balance sheet, we had $253.8 million of cash, cash equivalents, and other financial assets at the end of June 2024, compared to $277.4 million a quarter ago and $219.5 million at the same time last year. The sequential decrease in cash balance was primarily due to customers' refunds for their deposits made during the industry-wide capacity shortage, along with a strategic investment of approximately $16 million in FOCI through private placements.
Howard Yu: The cash balance reduction was partially offset by an operating cash inflow of $26.9 million during the quarter, compared to an operating cash inflow of $56.7 million in Q1. The sequential decrease was mainly attributable to reduced sales over the preceding two quarters, leading to lower receivables. Additionally, the increase in accounts payable in Q2 was a result of higher Q1 wafer stocks as we anticipated larger shipment volumes in Q2. Other significant operating cash outflows in Q2 included annual income tax payments.
Speaker Change: Turning to the balance sheet, we had $253.8 million of cash, cash equivalents, and other financial assets at the end of June 2024.
Speaker Change: compared to $277.4 million a quarter ago and $219.5 million at the same time last year.
Speaker Change: the sequential decrease in cash feers was primarily due to customers to reform for their deposits made during the industrial like papy shortage along with a strategic demoment of proimentatelyally sixteen million dollars in f o ci
Speaker Change: through private placement.
Speaker Change: the cash balance the reduction was partially offtest by an operating cash inflow of twenty-six point nine dollars during the quarter
Speaker Change: Compared to the operating cash inflow of $56.7 million in Q1, the sequential decrease was mainly attributable to reduced sales over the preceding two quarters.
Speaker Change: leading to lower receivables.
Speaker Change: Additionally, the increase in accounts payable in Q2 was a result of higher Q1 wafer stocks as we anticipated larger shipment volumes in Q2.
Speaker Change: Other significant operating cash outflows in Q2 included annual income tax payments.
Howard Yu: Looking ahead to Q3, we anticipate a decline in cash equivalents and other financial assets, primarily due to a payment of $50.7 million for the annual dividend to shareholders. We also expect to distribute a total of approximately $30.7 million in employee bonus awards at the end of this quarter, which includes around $11.3 million for the immediately vested portion of this year's award, with the actual amount subject to the final board decision and $19.4 million for vested awards granted over the past three years.
Speaker Change: Looking ahead to Q3, we anticipate a decline in cash equivalents and other financial assets.
Speaker Change: primarily due to a payment of $50.7 million for annual dividend to shareholders.
Speaker Change: We also expect to distribute a total of approximately $30.7 million for employee bonus award at the end of this quarter.
Speaker Change: which include around $11.3 million for the immediately lasted portion of this year's award.
Speaker Change: With the actual amount subject to the final board decision and the $19.4 million for VASTID award granted over the past three years.
Howard Yu: Our quarter-end inventories of June 30, 2024 were $203.7 million, similar to $201.9 million last quarter, indicating a well-managed and balanced inventory level. Accounts receivable at the end of June 2024 was $242.4 million, up from $212.3 million last quarter and $239 million a year ago. DSO was 99 days at the quarter end, as compared to 93 days last quarter and 90 days a year ago.
Speaker Change: Our quarter end inventories of June 30, 2024 were $203.7 million, similar to $201.9 million last quarter, indicating a well-managed and balanced inventory level.
Speaker Change: A cost receivable at the end of June 2024 was $242.4 million, up from $212.3 million last quarter and $239 million a year ago.
Speaker Change: DSO was 99 days at the quarter end, compared to 93 days last quarter and 90 days a year ago.
Howard Yu: Second quarter capital expenditures were $4.6 million versus $2.7 million last quarter and $2.9 million a year ago. The second quarter CAPAX was mainly for R&D-related equipment and in-house testers for our IC design business. As of June 30, 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 second quarter was 175.1 million.
Speaker Change: Second quarter capital expenditure were $4.6 million versus $2.7 million last quarter and $2.9 million a year ago.
Speaker Change: The second quarter CAPAX was mainly for R&D-related equipment and in-house testers for our IC design business.
Speaker Change: As of June 30, 2024, Himax had 174.7 million ADS outstanding unchanged from last quarter.
Speaker Change: On a fully diluted basis, the total number of ADS outstanding for the second quarter was 175.1 million.
Howard Yu: Now, turning to our third quarter 2024 guidance, we expect third quarter revenue to decrease 12% to 17% sequentially. Gross margin is expected to be around 30%, depending on product. The third quarter profit attributable to shareholders is estimated to be in the range of 1.5 to 4.5 cents per fully diluted ADS. As we've done historically, we will grant employees an annual bonus, including RFUs and cash awards on or around September 30th this year.
Speaker Change: Now, turning to our third quarter, 2024 guidance.
Speaker Change: We expect third quarter revenue to decrease 12% to 17% sequentially. Growth margin is expected to be around 30% depending on product mix.
Speaker Change: The third quarter profit attributable to shareholders is estimated to be in the range of 1.5 to 4.5 cents per fully diluted ADF.
Speaker Change: As we have done historically, we will grant employees annual bonus including RFUs and cash awards on or around September 30th this year.
Howard Yu: The third quarter guidance for profit per diluted ADS has taken into account the expected 2024 annual bonus, which, subject to board approval, is now assumed to be around $12.5 million, all of which $11.3 million will be lost and expensed immediately on the grand day. As a reminder, the total annual bonus amount and the immediately last portion are our current best estimates only. And the actual amount could vary materially, depending on, among other things, our Q4 profit and the final board decision on the total bonus amount and its lasting scheme.
Speaker Change: The third quarter guidance for profit per diluted ADS has taken into account the expected 2024 annual bonus, which, subject to board approval, is now assumed to be around $12.5 million.
Speaker Change: Out of which $11.3 million will be adopted and expensed immediately on the grand day.
Speaker Change: As a reminder, the total annual bonus amount and the immediately exhausted portion are our current best estimates.
Speaker Change: only, and the actual amount could vary materially depending on, among other things, our Q4 profit and the final board decision for the total bonus amount and its vesting scheme.
Howard Yu: As is the case for previous years, we expect the annual bonus grant in 2024 to lead to higher third-quarter operating expenses compared to other quarters of the year. In comparison, the annual bonuses for 2023 and 2022 were $10.4 million and $39.6 million, respectively, of which $9.7 million and $18.5 million lasted immediately. In providing all Q3 financial guidance, the Q3 expense related to employee bonuses is estimated to be $14.2 million, compared to $11.3 million, the immediately adopted portion of this year's bonus, as stated above, and $2.9 million, the amortized portion of the previous year's unvaccinated bonus.
Speaker Change: As is the case for previous year, we expect the annual bonus grant in 2024 to lead to higher third quarter operating expenses compared to other quarters of the year. In comparison,
Speaker Change: The annual bonus for 2023 and 2022 were $10.4 million and $39.6 million respectively, of which $9.7 million and $18.5 million lasted immediately.
Speaker Change: In providing all Q3 financial guidance, the Q3 expense related to employee bonus is estimated to be $14.2 million.
Speaker Change: compared to $11.3 million, the immediately vast portion of this year's bonus as stated above, and $2.9 million, the amortized portion of the previous year's unvast bonuses.
Howard Yu: For the sake of completeness, employee bonus expense in each of the last 3 quarters was also around $2.9 million. I would now turn the call over to Jordan to discuss our Q3 Outlook. Jordan, the floor is yours.
Speaker Change: For the sake of completeness, employee bonus expense in each of the last three quarters was also around $2.9 million.
Speaker Change: I would now turn the call over to Jordan to discuss our Q3 Outlook. Jordan, the floor is yours.
Jordan Wu: Given the prevailing macroeconomic uncertainty, end customers remain conservative, causing panel makers to take a cautious stance and strictly control production to maintain low inventory levels. This is adversely impacting asset demand, leading to our conservative third quarter forecast.
Mark Schwalenberg: Given the prevailing macroeconomic uncertainty, end customers remain conservative, causing panel makers to take a cautious stance and strictly control production to maintain low inventory levels. However, these intense campaigns did not generate the anticipated sales growth and may have even triggered consumers to hesitate in purchasing new cars.
Jordan: Thank you, Eric.
Jordan: Given the prevailing macroeconomic uncertainty, end customers remain conservative, causing panel makers to take a cautious stance and strictly control production to maintain low inventory levels.
Jordan: This is adversely impacting active demand, leading to our conservative third quarter forecast.
Jordan Wu: During the second quarter, in the automotive market, car makers initially anticipated a sales boost due to promotional activities and government subsidies, especially in China. Consequently, we saw a major uptick in second-quarter IT sales, along with the aggressive discount campaigns of car makers. However, these intense campaigns did not generate the anticipated sales growth and may have even triggered consumers to hesitate in purchasing new cars, leading to disappointing car sales in China for the second quarter and resulting in excessive inventories throughout the supply chain.
Speaker Change: During the second quarter, it will be the automotive market.
Jordan: Car makers initially anticipated a sales boost.
Jordan: due to promotional activities and government subsidies, especially in China. Consequently, we saw a major uptick in the second quarter IT sales, along with the aggressive discount campaigns of car makers.
Jordan: However, these intense campaigns did not generate the anticipated sales growth and may have even triggered consumers to hesitate in purchasing new cars.
Jordan: leading to disappointing car sales in China for the second quarter and resulting in excessive inventories throughout the supply chain.
Jordan Wu: As a result, our panel customers have begun to scale back their IT procurement in Q3 to manage inventory levels. In comparison, the automotive makers in Europe and the US have remained relatively stable since last year without experiencing the dramatic fluctuations seen in China. As the leader in the automotive display ICs, we serve a diverse range of brands worldwide, with sales evenly distributed across all major markets. However, since China is the world's largest automotive market, commanding over 30% of global sales, fluctuations in China do have a substantial impact on our business.
Jordan: As a result, our panel customers have begun to scale back their IC procurement in Q3 to manage inventory levels.
Jordan: In comparison, the automotive makers in Europe and the U.S. have remained relatively stable since last year without experiencing the dramatic fluctuations.
Jordan: As the leader of the automotive display ICs, we serve a diverse range of brands worldwide, with sales evenly distributed across all major markets.
Jordan: However, since China is the world's largest automotive market, commanding over 30% of the global sales, fluctuations in China do have a substantial impact on our business.
Jordan Wu: Moving forward, we'll navigate the current challenging business environment through close collaborations with panel makers and T1 suppliers, meticulously managing our waver stocks and closely monitoring customer demand. The automotive IT business is Himax's largest revenue contributor, accounting for over 47% of total sales in Q2, significantly higher than our peers. I'm sorry, I'm sorry, I'm sorry, I'm sorry. Despite the recent challenges, we remain optimistic and are committed to the long-term innovation and development of our automotive products.
Jordan: Moving forward, we will navigate the current challenging business environment through close collaborations with panel makers and T1 suppliers, meticulously managing our weather spots and closely monitoring customer demands.
Mark Schwalenberg: The automotive IT business is Himax's largest revenue contributor, accounting for over 47% of total sales in Q2, significantly higher than our peers. The automotive display market remains on solid footing with a positive growth trajectory driven by diverse innovations and technological advancements. We commend a 40% gold market share in traditional automotive TDIC and hold an even larger share in both the automotive TDDI and the legitimate T-Car market, further solidifying our multi-leadership position for Advanced Mothership Modules.
Jordan: The automotive IT business is Himax's largest revenue contributor, accounting for over 47% of total sales in Q2, significantly higher than our peers.
Speaker Change: Thank you. Thank you.
Jordan: Despite the recent challenges, we remain optimistic.
Jordan: and are committed to the long-term innovation and development of our automotive products.
Jordan Wu: The automotive display market remains on solid footing with a positive growth trajectory driven by diverse innovations and technological advancement. Advanced and fancier displays are increasingly becoming a major selling point for car makers, driving the automotive display market towards a mega trend of expanding quantities, sizes, and sophistication. As a leading player in the automotive I.C.
Jordan: The automotive display market remains on solid footing with a positive growth trajectory driven by versatile innovations and technology advancements.
Jordan: Advanced and fancier displays are increasingly becoming a major selling point for car makers, driving the automotive display market towards a mega-trend of expanding quantities, sizes and sophistication.
Jordan Wu: market, Himax is well positioned to be the key beneficiary of the trend. We currently hold a 40% global market share in traditional automotive TDICs and hold an even larger share in both the automotive TTI and low-emission T-car market. In addition to offering the most comprehensive range of automotive IC products for LCB panels, we are actively expanding to the automotive OLED panel market, forming strategic partnerships with major TV leading panel makers in Korea, China, and Japan to develop comprehensive solutions for COMPASY, DDIC, TCUP, and Touch Control IC.
Speaker Change: as the laning player in the aucommotiized sea market highmax is were positioned to be the key en iciary of the trend
Speaker Change: We commend a 40% global market share in traditional automotive TDIC and hold an even larger share in both the automotive TDDI and novelty T-car markets.
Speaker Change: In addition to offering the most comprehensive range of automotive IT products for LCD panels, we are actively expanding to the automotive OLED panel market.
Jordan: forming strategic partnerships with major TV leading panel makers in Korea, China, and Japan to develop comprehensive solutions encompassing DDIC, TCUP, and touch control ICs.
Jordan Wu: This proactive approach pushes us to navigate industry shifts and capitalize on the anticipated widespread adoption of all the displays in the high-end VHF, further solidifying our multi-leadership. During the quarter, we announced two substantial strategic investments. First, in an effort to strengthen the long-term partnership with Fosil, we, as a strategic investor, acquired a 5.3% equity stake through a private placement.
Jordan: This proactive approach positions us to navigate industry shifts and capitalize on the anticipated widespread adoption of all the displays in the high-end vehicles.
Jordan: for further solidifying our multileadership.
Jordan: During the quarter, we announced two substantial sufficient investments.
Jordan: First, in an effort to strengthen the long-term partnership with 4Sea, we as a strategic investor acquired a 5.3% equity stake through private placement.
Jordan Wu: The partnership integrates Himax's web-level optics, or WLO, expertise and 4C's optical fiber know-how to create innovative, world-leading linear choice plug-and-play optics, or LPL, and co-packaged optics, or CPL, solutions for Advanced Mothership Modules, which are required for the fast-growing cloud AI and high-speed computing market. This collaboration not only highlights the application versatility of the WL technology and Himax's market leadership but also underscores the significant potential of OWO in advancing LPL-CPL technology, which is vital for the advancement of cloud AI and high-speed computing.
Jordan: The partnership integrates Himexis, Weber-Level Optics, or WLO.
Jordan: expertise.
Jordan: and Fauci's Optical Fiber Know-How.
Jordan: for Advanced Mothership Modules.
Jordan: required for the fast-growing cloud AI and high-speed computing markets.
Mark Schwalenberg: This collaboration not only highlights the application versatility of the WL technology but also Himax's market leadership. Separately, we invested in U.S.-based obsidian sensors, following substantial order replenishment in preparation for shopping festivals in the previous quarter, for two new market areas, namely LCD displays equipped with touch features and OLED displays, both expected to enjoy decent penetration.
Jordan: This collaboration not only highlights the application versatility of the WL technology and Himax's market leadership.
Jordan: but also underscores the significant potential of RWO in advancing LPL-CPL technology, which is vital for the advancement of cloud AI and high-speed computing.
Jordan Wu: Also, separately, we invested in U.S.-based Obsidian sensors, whose revolutionary high-resolution thermal imaging sensors meet a growing demand for thermal imaging across various industries, including automotive, security, surveillance, drones, and military. This investment broadens our portfolio of imaging sensors, which, when matched with our ultra-low-power Wi-Fi AI, enable enhanced sensor fusion possibilities for end-point AI applications. The Obsidian investment positions us at the forefront of machine vision AI applications, delivering high effectiveness, particularly in harsh environments and completely dark scenarios. Thank you.
Jordan: Separately, we invested in the U.S.-based Obsidian sensors.
Jordan: whose revolutionary high-resolution thermal imaging sensors meet a growing demand for thermal imaging across various industries, including automotive, security, surveillance, drones, and military.
Jordan: This investment broadens our portfolio of imaging sensors, which, when matched with our ultra-low-power Wi-Fi AI, enable enhanced sensor fusion possibilities for end-point AI applications.
Jordan: The Obsidian investment positions us at the forefront of machine vision, AI applications, delivering high effectiveness, particularly in harsh environments and completely dark scenarios.
Jordan Wu: As we look ahead, our focus remains on enhancing profitability, strengthening operational resilience, and improving adaptability to the evolving market. We continue to optimize our cost structure and reinforce our supplier diversification strategies for foundries, as well as packaging and testing. At the same time, we remain committed to stringent expense control to further reduce operating expenses compared to last year.
Jordan: As we look ahead, our focus remains on enhancing profitability, strengthening operational resilience, and improving adaptability to the evolving market.
Jordan: We continue to optimize our cost structure and reinforce our supplier diversification strategies for foundries, as well as packaging and testing.
Jordan: At the same time, we remain committed to stringent expense control.
Jordan Wu: For reference, we achieved a 4% year-over-year reduction in operating expenses in 2023. With that, I will now begin with an update on the last panel of our ICPSR. In Q3, we anticipate a double-digit sequential revenue decrease for last-display driver ICs, primarily due to subdued monitoring TV IC sales, set to decline double-digit and single-digit, respectively, following substantial order replenishments in preparation for shopping festivals in the previous quarter. However, procurements from our leading panel customers have become more conservative due to sluggish market conditions driven by worse-than-expected shopping and festival sales.
Jordan: said to further reduce operating expenses compared to last year. For reference, we achieved a 4% year-over-year reduction in operating expenses in 2023.
Speaker Change: With that, I will now begin with an update on the last panel of Tri-YZ PCs.
Speaker Change: In Q3, we anticipate a double-digit sequential revenue decrease for last-display driver ICs, primarily due to subdued monetary and TVIC sales, set to decline double-digit and single-digit, respectively.
Jordan: following substantial order replenishment in preparation for shopping festivals in the previous quarter.
Jordan: Procurements from our leading panel customers have become more conservative due to sluggish market conditions, driven by worse than expected shopping and transport sales.
Jordan Wu: However, local IC sales are poised for a decent increase, bolstered by robust order replenishment from our leading panel customers. Looking ahead in the novel sector, we have made a strategic effort to capitalize on the anticipated rising demand, Awwww, Amen, for two new market areas, namely LCD displays equipped with touch features and OLED displays. Both are expected to enjoy this demonstration in the premium notebook and the upcoming AOPC market. Leveraging our industry leadership in TDDI solutions for the tablet market, we are working closely with LCD panel customers in the development of in-sale TDDI and new generation T-Con solutions for LCD displays. Concurrently, we have made significant strides in older technology for notebooks in strategic partnerships with digital panel makers in Korea and China, developing state-of-the-art touch controllers, DDICs, and T-con solutions.
Jordan: However, local IT sales are poised for a decent increase, bolstered by robust order replenishment from our leading panel customers.
Speaker Change: looking ahead in the novel sector we have me a stratetgificic effort to position oursselvesales to capitalize on the anticipated rising
Jordan: Demands for two new market areas, namely LCD displays equipped with touch features and OLED displays.
Jordan: Both expected to enjoy decent penetration in premium notebook and the upcoming AIPC markets.
Mark Schwalenberg: Leveraging our industry leadership in TDDI solutions for the tablet market, we are working closely with LCD panel customers in the development of in-sale TDDI and new generation T-con solutions for LCD displays. Concurrently, we have made significant strides in older technology for notebooks in strategic partnerships with digital panel makers in Korea and China, and DDIC for all that notebooks are slated for mass production in the second half of this year with billion panel makers.
Jordan: Leveraging our industry leadership in TDDS solutions for the tablet market.
Jordan: We are working closely with the LCD panel customers.
Jordan: in the development of In-Cell TDDI and new generation T-Con solutions for LCD displays. Concurrently, we have made significant strides in older technology for notebooks.
Jordan: in strategic partnerships with digital panel makers in Korea and China.
Jordan: developing state-of-the-art touch controllers, DDICs, and T-con solutions.
Jordan Wu: Some of the projects above, including Insight LTV-DI for Mainstream LCD Notebooks, and Path NT Card, and DDIC for all notebooks, are slated for mass production in the second half of this year with billion panel makers. We are optimistic that the notebook segment will act as a strong growth catalyst for Himax as we move into 2045, turning to the small and medium-sized display drive IC PC. We anticipate third quarter revenue to decline by low teens sequentially.
Jordan: some of the projects above, including Insight LTV-DI for mainstream LCD notebooks, and TARP and TCARP.
Jordan: and DDIC for OLED notebooks are slated for mass production in the second half of this year with billion panel makers.
Jordan: and
Jordan: We are optimistic that the notebook segment will act as a strong growth catalyst for Himex as we move into 2025.
Jordan: turning to the small and medium-sized display driver IC pieces.
Speaker Change: We anticipate third quarter revenue to decline low teens sequentially.
Jordan Wu: Impacted by customers' disruptive measures, especially for the Chinese market, as I just mentioned, automotive revenue in Q3 is expected to decrease in the high teens sequentially, following high teens growth of both Lidiazid and Pyridia in Q2. That being said...
Speaker Change: Impacted by our customers' disruptive measures, especially for the Chinese market, as I just mentioned, automotive revenue in Q3 is expected to decrease high teens sequentially.
Speaker Change: following h enens are growls opbothst pdiis activity are in tube trip
Jordan Wu: Through the first nine months of the year, our automotive drive IT sales are still set to grow by teens year-over-year, triggered by continued expansion of TVDI adoption across all major end-customers. We have secured over 450 TDDI design wing projects, with only approximately 30% currently in mass production, indicating significant growth potential going forward. Meanwhile, a trend is emerging where more customers are opting for Himax's TDDI or LTDI, along with our local team at DECON, as their standard development platform for creating new automotive displays of various sizes.
Mark Schwalenberg: Through the first nine months of the year, our automotive drive IT sales are still set to grow maintenance year-over-year, triggered by continued expansion of TVDI adoption across all major end-customers for creating new automotive displays of various sizes. Next, for an update on our OLED display.
Jordan: that being said
Speaker Change: Through the first nine months of the year, our automotive drive IT sales are still set to grow and maintain year-over-year, triggered by the continued expansion of TVDI adoption across all major end customers.
Speaker Change: We have secured over 450 TDDI design wing projects with only approximately 30% currently in mass production.
Speaker Change: indicating significant growth potential going forward.
Speaker Change: Meanwhile, a trend is emerging where more customers are opting for Himex's LTDI.
Speaker Change: along with our local team at DECON as their standard development platform for creating new automotive displays of various sizes.
Jordan Wu: This growing adoption of more of our automotive IC offerings also signifies an increase in content value for Himax on a per-panel basis. Himax is widely recognized as the leader in the automotive display IT market, offering the industry's broadest range of products, from traditional DVI-C and PVDI to advanced technologies such as low-volume T-con, LVDI, and OLED. We are committed to continuously enhancing our product portfolio to meet customers' diverse and evolving needs. Our newly introduced TDDI, incorporating local dimming TCOM in one chip, exemplifies this commitment to providing customers with small options as a new solution is ideal for smaller panels that usually require only one to two ICs for cost considerations, while still equipped with advanced touch and low dimming features.
Speaker Change: This growing adoption of more of our automotive IC offerings also signifies an increase in content value for HIMAX on a per panel basis.
Speaker Change: Pimax is widely recognized as the leader in the automotive display IC market, offering the industry's broadest range of products, from traditional DVI-C and TVDI to advanced technologies such as low-dimming T-con, LTDI and OLED.
Speaker Change: We are committed to continuously enhancing our product portfolio to meet customers' diverse and evolving needs.
Speaker Change: our newly introduced td in compcreary the hoiminity come in one chip bigexsamimplifies its commitment
Speaker Change: to providing customers with more options.
Speaker Change: as a new solution is ideal.
Speaker Change: for smaller panels that usually require only 1-2 ICs for cost considerations, while still equipped with advanced touch and low dimming features.
Jordan Wu: Turning to smartphone IT sales, we expect a decent double-digit increase sequentially thanks to new product launches by key customers during the quarter. However, despite the positive outlook for the smartphone business, Q3 tablet sales are projected to decline sequentially, as Anycustomers prolong their replacement cycles in response to challenging economic conditions.
Speaker Change: Turning to smartphone IC sales, we expect a decent double-digit increase sequentially thanks to new product launches by key customers during the quarter.
Speaker Change: incouncontrist
Speaker Change: Through the positive outlook in smartphone business, Q3 tablet sales are projected to decline sequentially as end-customers prolong their replacement cycles in response to challenging economic conditions.
Jordan Wu: Next for an update on our OLED display. For the automotive online market, we have formed strategic alliances with leading panel manufacturers in Korea, China, and Japan, leveraging our leadership in automotive LCD technology and all their design expertise, these partnerships for the strengthening of our presence in the market. We offer a comprehensive suite of all the solutions for automotive, including DBI-C, T-CON, and on-sale touch controllers, ensuring company coverage of customer requirements. Notably, our meticulously engineered, audited on-sale touch controllers set a new standard, both in an industry-leading touch signal-to-noise ratio of over 45 dB, greatly enhancing sensitivity. This allows automatic displays to maintain proper functionality under challenging conditions such as glove wear and within the operation.
Speaker Change: next point update on our all busance
Speaker Change: For the automotive-only market, we have formed strategic alliances with leading panel manufacturers in Korea, China, and Japan.
Speaker Change: never regi our leadership in automotive lcd technology and all the design our expertise these partnerships f urther strengthen or presence in the market
Speaker Change: We offer a comprehensive suite of all the solutions for automotive, including DVI-C, T-con, and on-sale touch controllers.
Speaker Change: ensuring complete coverage of customer requirements.
Speaker Change: notably our meticulously engineered olded wholessale touch controllers certainnew standard
Speaker Change: both d a industry releading touch signal to nois ratio of our forty five dp quantly enhancing sensitivity
Speaker Change: This allows automatic displays to maintain proper functionality under challenging conditions such as cloth wearing and within the operations.
Jordan Wu: We are pleased to share that our outlet on the touch controller for automotive has entered mass production this quarter. With additional projects set for mass production soon, we anticipate sales of our OnSale Touch Controller to further bolster our revenues starting 2025. Beyond the automotive sector, we have made notable advances in the tablet and notebook sectors with top-of-the-line panel manufacturers in Korea and China. Our comprehensive OLED product offerings, encompassing DDIC, T-con, and touch controllers, have led to several new projects that are on track to enter mass production later in the year.
Mark Schwalenberg: We are pleased to share that our outlet on the touch controller for automotive has entered mass production this quarter. With additional projects set for mass production soon, we anticipate sales of our OnSale Touch Controller to further bolster our revenues starting 2025. Regarding smartphone OLED, the current market collapse of our customers has prompted us to revise our production timeline to next year. Furthermore, since only a small portion of the secure design wins are currently in mass production, we anticipate significant growth potential for our automotive T-con business in the coming years.
Speaker Change: We are pleased to share that our OLED on-field touch controller for automotive has entered mass production this quarter.
Speaker Change: With additional projects set for mass production soon, we anticipate sales of our outlet OnSale Touch controller to further bolster our revenues starting 2035.
Speaker Change: Beyond the automotive sector, we have made notable advances in the tablet and notebook sectors with top OLED panel manufacturers in Korea and China. Our comprehensive OLED product offerings
Speaker Change: in compassing ddiic tcoun and touch controllers has went to several panel of the to several new projects now track to end the m production later in the year
Jordan Wu: Regarding Smartphone Outlet, the current market drawdown of our customers has prompted us to revise our production timeline for next year. Despite these challenges, we are actively collaborating with customers in Korea and China and have several verification and partnership projects currently in progress. I would like to now turn to our non-drug IT pieces update, first thought of the O.R.T. competition. We anticipate a double-digit sequential decline in Q3 teacup sales as customers pull forward their inventory purchases during the prior quarter, particularly for monetary applications.
Speaker Change: regarding smuffle all let the korean market are trrolldown of our customers has franted us to revise our production timeline to next year
Speaker Change: despite these challenges we are actively collaborated with customers in korean china and have several derrotcation and partnership projects currently in progress
Speaker Change: I would like to now turn to our non-drive IT pieces update.
Speaker Change: first fourll upd on what three conuses
Speaker Change: We anticipate a double-digit sequential decline in Q3 T-con sales as customers pull forward their inventory purchases during the prior quarter, particularly for monetary application.
Jordan Wu: However, our automotive teacup business is expected to achieve decent double-digit growth in Q3, despite the current headwinds in the automotive market, driven by the shipment of new projects, are from previously secured design wins. Since only a small portion of the secure design wins are currently in mass production, we anticipate significant growth potential for our automotive T-con business in the coming year. While ongoing weak macroeconomic conditions continue to subdue demand for consumer electronics, some of our newly developed T-con ICs for all the tablets and e-paper displays are starting to show promising results. In the tablet segment, we are expanding our product line and strengthening our position in the high-value acid outlet market, building on our early success in the tablet retail market.
Speaker Change: However, our automotive teacup business is expected to achieve a decent double digit growth in Q3.
Speaker Change: despite the current headwinds in the automotive market fueled by the shipment of new projects.
Speaker Change: from previously secured design wins.
Speaker Change: since only a small portion of the security valyewins are currently be mass production we anticipate significant growth potential for our automodity on business in the coming years
Mark Schwalenberg: While ongoing weak macroeconomic conditions continue to subdue demand for consumer electronics, in the tablets segment, we are expanding our product line-up and strengthening our position in the high-value acid outlet market, building on our early success in the tablet outlet market. For the rapidly growing e-paper market, we recently made a joint announcement with e-ink, the global leader in the e-paper market, leveraging Himax's decades of expertise in image display processing and T-con design.
Speaker Change: while ongoing weak macroeconomic conditions continue to subdue demand in consumer electronics.
Speaker Change: some of our newly developed tices forall the hapllette and epaper displace are startying to show promising results
Speaker Change: In the tablet segment, we are expanding our product line-up and strengthening our position in the high-value acid outlet market, building on our early success in the tablet outlet market.
Jordan Wu: For the rapidly growing e-paper market, we recently made a joint announcement with e-Inc, the global leader in the e-paper market. Swazil T2000, a state-of-the-art next generation color e-paper teacup, stands out for its energy efficiency, consuming power only during screen updates, leveraging Himax's decades of expertise in image display processing and T-con design. The T2000 T-con accelerates screen updates for a better viewing experience, while greatly reducing power consumption of the e-paper display. Additionally, the T2000 features an exclusive handwriting processing accelerator, enabling seamless, nearly lag-free handwriting while boosting prompt display responsiveness on incredible displays without requiring an SOC.
Speaker Change: For the rapidly growing e-paper market, we recently made a joint announcement with E Ink, the global leader in e-paper market, to unveil T2000.
Speaker Change: A state-of-the-art, next-generation, color e-paper teacup.
Speaker Change: epay for er standends out fullyice energy efficiency consuming power only during screen updage
Speaker Change: naourregime hemax are tenes of expertise the image displaying processcy and tcom design
Mark Schwalenberg: The T2000T-CON accelerates screen updates for a better viewing experience while greatly reducing power consumption of the e-paper display. Additionally, the T2000 features an exclusive handwriting processing accelerator, enabling seamless, nearly lag-free handwriting while boosting prompt display responsiveness on incredible displays without requiring an SOC, enhancing the display's visual appeal across a broad spectrum of e-ink, color e-paper platforms, who introduced the world's first smart door locks with tangible 7th century monitoring and real-time event recording, power van authentication significantly reduces the risk of duplication or spoofing compared to conventional fingerprint or face recognition, log in authentication and other access control applications.
Speaker Change: the te tools thousand and hecan accelerates squeen updates for better view experience quire quaterly reducing power consumption of the epaper display
Speaker Change: Additionally, the T2000 features an exclusive handwriting processing accelerator, enabling seamless, nearly lag-free handwriting, while boosting prompt display responsiveness on equitable displays without requiring an SOC.
Jordan Wu: It also enables richer and more vibrant colors, enhancing the display's visual appeal across a broad spectrum of e-ink and color e-paper platforms. The collaboration opens new possibilities for color e-paper applications in e-readers, e-paper digital signage, and more.
Speaker Change: it also enables rher and hall vibrint colors
Speaker Change: enhancing the displace our visual appeal across the proud spectr of the ininks are colorly paper platforms
Speaker Change: The collaboration opens new possibilities for color e-paper applications in e-readers, e-paper digital signages, and more.
Jordan Wu: Switching gears to the WideSight Ultra-Low Power AI Sensing Solution, a cutting-edge endpoint AI integration featuring industry-leading Ultra-Low Power AI processor, always-known CMOS image sensor, and advanced CNN-based AI algorithm. In the fast-changing AI landscape, Wi-Fi AI technology stands out for its expertise in all-device tiny ML microcontroller solutions, categorized by remarkably low power consumption, operating at Our Wi-Fi technology is creating new opportunities for companies such as Tesla.
Speaker Change: swing gi ven to the wi si also poidiz as solution a cabinage and point a i in integration feuring industry leadin afterlo hoia processor always long su was in sensor and advanced seeing and basased a brief
Speaker Change: In the fast-changing AI landscape, Wi-Fi AI technology stands out for its expertise in all device timing and microcontroller solutions.
Speaker Change: categorized by remarkably low power consumption, operating at just single-digit mini-watts.
Speaker Change: making it possible to add AI functionalities to battery-powered endpoint devices.
Speaker Change: Our Wi-Fi technology is creating new opportunities for companies such as Desma, China's leading high-end smart door lock vendor.
Jordan Wu: China's leading high-end smart door lock vendor, who introduced the world's first smart door locks with tangible 7th century monitoring and real-time event recording, with fancy AI features achieved while still maintaining over 6 months of power or battery operation. Our collaboration with Dexman has sparked increased interest from other door lock vendors across various continents to develop innovative value-added AI features such as parcel recognition, smart anti-pinch protection, and biometric access. Notably, some of our customers are currently evaluating our newly introduced Wi-Fi power line solution, which offers effortless, keyless, and highly secure biometric access for entry control. Weissai Pomegran is part of our Weissai AI market business, integrated into Himes Weissai to AI processor. It was similar to the MSNC
Speaker Change: who introduced the world's first smart door locks with possible 7th century monitoring and real-time event recording.
Speaker Change: with advanced AI features achieved while still maintaining over 6 months of power or battery operation.
Speaker Change: all in collaboration with Betzmann.
Speaker Change: has sparked increased interest from other dollar vendors across various continents.
Speaker Change: to develop.
Speaker Change: innovative value-added AI features, such as
Speaker Change: Puzzle Recognition, Smart Anti-Pinch Protection, and Biometric Access.
Speaker Change: Notably, some of our customers are currently evaluating our newly introduced Wi-Fi partner solution, which offers effortless, keyless, and highly secure biometric access for entry control.
Speaker Change: Wi-Fi PalmRAM is part of our Wi-Fi AI module business, integrating HIMAX Wi-Fi to AI processor, AOS CMOS image sensor, and our proprietary PalmRAM authentication algorithm.
Speaker Change: We see growing traction and extensive engineering activities for this contactless biometric authentication solution that can authenticate an individual's identity in under 100 milliseconds.
Speaker Change: for consu just few really was a power
Jordan Wu: This represents a significant breakthrough in security technology by enabling biometric authentication in battery-powered devices. With outstanding accuracy and robust lightness check capability, power van authentication significantly reduces the risk of duplication or spoofing compared to conventional fingerprint or face recognition, making it an ideal choice for indoor security, log-in authentication, and other access control applications. Wi-Fi partnering upholds robust security standards while offering best-in-class power efficiency, making it the only solution suitable for battery-powered devices.
Speaker Change: This represents a significant breakthrough in security technology by enabling biometric authentication in battery-powered devices.
Speaker Change: with outstanding accuracy and robust lightness check capabilities.
Speaker Change: poweran au thenedication significantly reduces the risk of tiplication or spofeit compared to conventional fingerprint offface recognition
Speaker Change: Making it an ideal choice for indoor security.
Speaker Change: login authentication and other access control applications.
Mark Schwalenberg: Wi-Fi partner upholds robust security standards while offering best-in-class power efficiency, making it the only solution suitable for battery-powered devices. While just launched at the beginning of the year, Wi-Fi power van has already been successfully adopted by a U.S. customer for smart security and is set to commence mass production starting the end of this year. The Wi-Fi convent will profoundly impact the security industry and unlock new opportunities for battery-powered devices across various use cases.
Speaker Change: Wi-Fi partner upholds robust security standards while offering best-in-class power efficiency.
Speaker Change: m the only solution suitbow forpeatory poweric devices
Jordan Wu: We are collaborating with vendors across various sectors globally, including door lock, access control, notebook, and automotive. While just launched at the beginning of the year, Wi-Fi power van has already been successfully adopted by a U.S. customer for smart security and is set to commence mass production starting the end of this year. We believe, uh... Wi-Fi-powered vans will profoundly impact the security industry and unlock new opportunities for battery-powered devices across various use cases to broaden Weisai AI's market reach and short-term customer development cycles.
Speaker Change: We are collaborating with vendors across various sectors globally, including door lock, access control, notebook, and automotive.
Speaker Change: While just launched at the beginning of the year, Wi-Fi Power RAN has already been successfully adopted by a U.S. customer for smart security and is set to commence mass production starting the end of this year.
Speaker Change: We believe, uh...
Speaker Change: Wi-Fi palm vans will profoundly impact the security industry and unlock new opportunities for battery-powered devices across various use cases.
Mark Schwalenberg: YSI AI's market reach and short-term customer development cycles. We also provide seamlessly integrated plug-and-play YSI modules and no-code, low-code AI development platforms, featuring diverse context-aware AI algorithms that customers can reprogram or fine-tune with minimal effort for real-world use cases. Additionally, in response to growing AI-driven demands for machine vision across various environments, which is now widened to cover harsh sensing conditions such as heavy fog or complete darkness.
Speaker Change: to broaden
Speaker Change: one a ai market reach a short-term customer development cycles we also provide simillessly integrity pl and play wsi margules and noco loco ai dividend platformunch
Jordan Wu: We also provide seamlessly integrated plug-and-play Weisai modules and no-code, low-code AI development platforms featuring diverse context-aware AI algorithms that customers can reprogram or fine-tune with minimal effort for real-world use cases. Our recent announcement with NVIDIA TAU exemplifies this approach, whereby our Wi-Fi module customers' targeted AI deployment on resource-constrained endpoint devices can easily optimize and quantize deep learning models with pre-trained, enterprise-ready AI models and tools offered by NVIDIA.
Speaker Change: featuring diverse context-aware AI algorithms that customers can reprogram or fine-tune with minimal effort for real-world use cases.
Speaker Change: our recent nouncement with a media power fensifies is approach whoby our wiide marial customers cut in areaot deployment on weof constraint and point devices can easily optimize and quantise
Alibia: particularly models with pre-trained, enterprise-ready AI models and tools offered by Alibia.
Jordan Wu: This facilitates the rapid democratization of end-point AI applications using cost-effective production-ready AI modules for various use cases. Additionally, in response to growing AI-driven demands for machine vision across various environments, we recently made a strategic investment in Obsidian Sensors, a San Diego-based company renowned for its revolutionary high-resolution, low-cost thermal sensors, offering unmatched versatility by detecting heat differences even in complete darkness, measuring temperature, This investment expands our image sensor portfolio beyond optical sensors to include thermal sensors, a valuable complement to our product suite, which is now broadened to cover harsh sensing conditions such as heavy fog or complete darkness.
Alibia: This facilitates rapid democratization of end-point AI applications using cost-effective production-ready AI modules for various use cases.
Alibia: Additionally, in response to close A-attribute demands,
Jordan Wu: Moreover, this strategic investment promises synergy between the two companies with our Wi-Fi AI aggregated data from both optical and thermal imaging sensors for a truly holistic view of the environment beyond human vision. In addition, we are engaged in ongoing engineering collaborations that leverage Himex's IT design resources and know-how. We believe, by integrating the strengths of Himax and Obsidian, we can seize new opportunities in the expanding sensor and AI markets across industrial, defense, security, consumer electronics, and automotive sectors. As an illustration, the U.S. National Highway Traffic Safety Administration issued a new rule in April 2024, mandating that automatic Emergency Braking, or AEB, including pedestrian AEB or PAEB, be implemented starting in 2029.
Alibia: our tools machine miion
Alibia: across various environments.
Speaker Change: We recently made a strategic investment in Obsidian Sensors, a San Diego-based company renowned for its revolutionary, high-resolution, low-cost thermal sensors, offering unmatched versatility.
Speaker Change: by detecting heat differences even in complete darkness, measuring temperature and identifying distant objects.
Alibia: This investment expands our image sensor portfolio beyond optical sensors to include thermal sensors.
Speaker Change: a valuable complement to our product suit which is now wiisened to cover a ho sing conditions such as heavy fork or complete darkness
Mark Schwalenberg: Moreover, this strategic investment promises synergies between the two companies with our Wi-Fi AI aggregating data. In addition, we are engaged in ongoing engineering collaborations that leverage Himex's IC design resources and know-how, as an illustration. Similar rules are increasingly being mandated by regulatory authorities worldwide.
Speaker Change: Moreover, this strategic investment promises synergy of the two companies with our Wi-Fi AI aggregating data.
Speaker Change: from both optical and thermal imaging sensors for a truly holistic view of the environment beyond human vision.
Speaker Change: In addition, we are engaged in ongoing engineering collaborations that leverage Himax's IT design resources and know-how.
Speaker Change: We believe by integrating the strengths of Himax and Obsidian, we can seize new opportunities in the expanding sensor and AI markets across industrial, defense, security, consumer electronics and automotive sectors.
Speaker Change: ass an illustration the u u s national higher tr sap administration
Speaker Change: issued a new rule in April 2024, mandating that automatic emergency braking or AED, including pedestrian AED or P-AED,
Speaker Change: We implemented starting in 2009.
Jordan Wu: This regulation aims to significantly reduce rail and pedestrian crashes. Similar rules are increasingly being mandated by regulatory authorities worldwide to novel edges in the AEB system. Integrated with obsidian are thermal sensors that provide clear vision in low light and adverse weather conditions such as fog, smoke, rain, and snow. This ensures better driving safety and security, underscoring the trend and significant potential demand for thermal imaging sensors.
Speaker Change: This regulation aims to significantly reduce rail and pedestrian crashes.
Speaker Change: Similar rules are increasingly being mandated by regulatory authorities worldwide.
Mark Schwalenberg: The novel enters an AEB system, which integrated with Obsidian's ophthalmosensors provides clear vision in low light and adverse weather conditions such as fog, smoke, rain, and snow. During the second quarter, we made a strategic investment in 4C, a Taiwan-based global leader for silicon photonics connectors, through a $16 million private placement, resulting in a 5.3% equity stake. This collaboration highlights the immense potential of our W.O. technology for LTO-CPO, which is crucial for further advancing high-speed AI and HPC technology.
Speaker Change: to now enders av systems in the integrated with obsidians are smo sers arise clearvision in low light and averse withather conditions such as fork smoke ren and snow
Speaker Change: This ensures better driving safety and security, underscoring the trend and significant potential demand for thermal imaging sensors.
Jordan Wu: Love, Owen W. Owell, During the second quarter, we made a strategic investment in 4C, a Taiwan-based global leader for silicon photonics connectors through a $16 million private placement, resulting in a 5.3% equity stake. This collaboration highlights the immense potential of our W.O. technology for LTO-CPO, which are crucial for further advancing high-speed AI and HPC technology. Our partnership integrates 4C's proprietary LPO-CPO connector technology with Himax's nanoscale weather-level optics know-how to create an industry-leading optical transmission solution catered for the most advanced multi-chip modules, which demand enhanced bandwidth, improved data rate, minimized signal loss, reduced latency, and lower energy consumption, all for LTO CPU technology is crucial for furthering generative AI and SPC, which will continue to evolve rapidly to meet the explosive demand in these areas.
Jordan Wu: We are committed to advancing the technology with policy, ensuring our solutions stay at the cutting edge and align with the multi-year-old maps of our AI chip and foundry partners and customers. We believe this will generate new, long-lasting revenue streams for Himex, and will provide further updates as they become available. S4C is a company listed on the Taipei Exchange.
Speaker Change: last home wo
Speaker Change: During the second quarter, we had a strategic investment in 4C, a Taiwan-based global leader for silicon photonics connector, through a $16 million private placement, resulting in a 5.3% equity stake.
Speaker Change: This collaboration highlights the immense potential of our WO technology for LPO-CPO, which are crucial for further advancing high-speed AI and HPC technologies.
Speaker Change: of partnership integrates forces propoetory heillp suchashh cpoo connector technology
Speaker Change: with Hymex's nanoscale, web-level optics know-how to create an industry-leading optical transmission solution catered for the most advanced mothership modules.
Speaker Change: which demand enhanced bandwidth, improved data rate, minimized signal loss, reduced latency, and lower energy consumption all for accommodating future generation needs of generative AI and HPC.
Speaker Change: current ing close collabation we swore the new assmmat the backlo players and buntary partner
Speaker Change: We are working closely with 4C on LPO-CPO development for products that meet customers' near-term production goals.
Speaker Change: The OPL CPU technology is crucial for furthering generative AI and SPC that will continue to evolve rapidly to meet the explosive demand in these areas.
Speaker Change: we are committed to advancecing thetechnology with fy uring our solutions st at a cutinage and the line with mother year old maps awhy chap and boundary partners slash customers
Speaker Change: we believe is were generate new north last the rovening straight for highrisates
Speaker Change: will provide further updates as they become available.
Speaker Change: our as falsely is a accompan slit on the pyday it exchange
Jordan Wu: Ah, the stock price and resulting call-and-call fair value reflected on our books changed each day. These fluctuations have been, and will continue to be, recognized by way of changes in order cycle as a balance sheet item, not affecting our profit and loss. As an illustration, based on the close of the Aussie stock price as of the end of June 2024, we met a quote-unquote gap of $9.6 million on our $16 million Aussie investment.
Speaker Change: the stock price and resulting...
Speaker Change: The stock price and resulting quote-unquote fair value reflected on our books changed each day.
Mark Schwalenberg: These fluctuations have been and will continue to be recognized by way of changes in the order cycle. As an illustration, based on the close of the Aussie stock price as of the end of June 2024, we met a quote-unquote gap of $9.6 million on our $16 million Aussie investment. However, the said quote-unquote gains were not recorded as an investment profit.
Speaker Change: These fluctuations have been and will continue to be recognized by way of changes in owners' equity.
Speaker Change: as a balance sheet item, not affecting our profit and loss.
Speaker Change: As an illustration, based on the close of 4C stock price as of the end of June 2024, we met a quote-unquote gain of $9.6 million on our $16 million 4C investment.
Jordan Wu: However, the said quote-unquote gain was not recorded as an investment profit in our Q2 financial statement and instead was booked as an increase in owner's equity. Likewise, upon disposal, the resulting investment gain or loss will also be recognized as a change of equity through retained earnings, thus not affecting our profit or loss at the time of the disposal either.
Speaker Change: However, the said quote-unquote gains was not recorded as an investment profit in our Q2 financial statements.
Speaker Change: and instead was booked as an increase in owner's equity.
Speaker Change: Likewise, upon disposal, the resulting investment gain or loss will also be recognized as a change of equity through retained earnings, thus not affecting our profit or loss at the time of the disposal either.
Jordan Wu: The accounting method we chose reflects our long-term commitment to the 4Cs. With over a decade of experience in W.O., Himax has developed diverse designs across a broad spectrum, including 3D sensing, AR-VR devices, biomedical inspection, and optical communication, just to name a few.
Mark Schwalenberg: The accounting method we chose reflects our long-term commitment to the 4Cs method. These technologies have been widely adopted by some of the world's leading companies, thanks to their versatility, high-precision, lightweight, and small form-factor characteristics that are not feasible with alternative technologies. For non-drive-by-seat businesses, we expect revenue to decline in the high-teens sequentially in the third quarter.
Speaker Change: the econy meod which shows reflects although tempted to be committment to the four these vestors
Speaker Change: With over a decade of experience in CWO, Himax has developed diverse designs across a broad spectrum, including 3D sensing, AR-VR devices, biomedical inspection, and optical communication. Just to name a few.
Speaker Change: These technologies have been widely adopted by some of the world's most prominent tech companies, with cumulative shipments reaching more than 600 million units.
Jordan Wu: These technologies have been widely adopted by some of the world's most prominent tech companies, with cumulative shipments reaching more than 600 million units. We anticipate WO playing an even more decisive role in the next-generation optical technology landscape, thanks to its versatility, high-precision, lightweight, and small form factor characteristics that are not feasible with alternative technologies. In addition to the progress made in LPL-CPL, we are seeing an increase in engineering projects with globally recognized leaders who are leveraging OWO expertise for their upcoming AR-VR devices, underscoring the widespread recognition of our technology. For non-drive IC businesses, we expect revenue to decline high-teen sequentially in the third quarter.
Speaker Change: We anticipate WO playing an even more decisive role in the next-generation optical technology landscape.
Speaker Change: Thanks to its versatile, high-precision, lightweight, and small form factor characteristics that are not feasible with alternative technologies.
Speaker Change: in addition to the progress meant in the appeal c
Speaker Change: We are seeing an increase.
Speaker Change: in engineering projects with globally recognized leaders who are leveraging OWO expertise for their upcoming AR, VR devices, underscoring the widespread recognition of our technology.
Speaker Change: For non-drive IC businesses, we expect revenue to decline high-teen sequentially in the third quarter.
Jordan Wu: That concludes my report for this quarter. Thank you for your interest in Timex. We appreciate your joining us on today's call and are now ready to take questions.
Mark Schwalenberg: That concludes my report for this quarter. Thank you for your interest in Timex. We appreciate your joining us on today's call and are now ready to take questions.
Speaker Change: That concludes my report for this quarter. Thank you for your interest in HIMAX. We appreciate your joining today's call and are now ready to take questions.
Operator: Thanks very much, Jordan. And ladies and gentlemen, we are now in a Q&A session. If you would like to ask questions, please press the star key and one on your telephone keypad. After your name is announced, please ask a question.
Operator: Thanks very much, Jordan. And ladies and gentlemen, we are now in a Q&A session. If you would like to ask questions, please press the star key and one on your telephone keypad. After your name is announced, please ask a question.
Speaker Change: Thanks very much, Jordan. And ladies and gentlemen, we are now in Q&A session. If you would like to ask questions, please press star key and 1 on your telephone keypad.
Speaker Change: After your name is announced, please ask a question.
Speaker Change: To cancel your questions, just press star key and number 2. Thank you.
Operator: To cancel your questions, just press the star key and number two. Thank you. Now please press the star key and 1 if you would like to ask a question. Thank you. The first one to ask questions, Donnie Teng, Nomura, go ahead, please.
Speaker Change: Now please press star key and 1 if you would like to ask questions. Thank you.
Speaker Change: The first one to ask questions, Donnie Teng, Nomura. Go ahead, please.
Donnie Teng: Thank you, Jordan, for taking my question. My first question is regarding the automotive business. So I think we started to see some positive signs back in April, and I remember we were pretty positive, you know, back in June and even entering into July. The guidance looks like to be a little disappointed, and you just mentioned about, you know, customers digesting inventories quickly. I'm just wondering when exactly you are seeing this kind of work.
Donnie Teng: Thank you, Jordan, for taking my question. My first question is regarding to the automotive business. So I think we have started to see some positive signs back in April .
Speaker Change: And I remember we were pretty positive, you know, back in June and even entering into July .
Donnie Teng: The guidance looks like we'll be a little bit disappointed, and you just mentioned about, you know, customers digesting inventories quickly. The Chinese government is asking EV companies to check their localization rate in terms of the component and IC procurement. So I wonder if there is any issue there, you know, whether we will be..., likely to be charged a tariff by the Chinese EV makers or it's not the case. Thank you.
Speaker Change: but guidance look like to be a littlebit disappointed and you just mentioned about your customers igesting very quickly just's wondering when exactly you are being the kind of wicknessy
Donnie Teng: from the cosmos and also because in the middle of July there was news in China that the Chinese government was asking EV companies to check their localization rate in terms of the component and IC procurement. So I wonder if there is any issue there, you know, whether we will be... like we clarify the Chinese EV makers, or it's not the case. Thank you.
Speaker Change: from the customers and also because the need of julythere has seen the loo in china that you know
Speaker Change: Chinese government asking EV companies to check their localization rate in terms of the component and IC performance. So I wonder if there is any issue there, you know, whether we will be
Speaker Change: likelywe parv the chinese seey members or it's not a case thank you
Jordan Wu: Thank you, Donnie. You are right in that we were in Q4, but as of today, the projection remains pretty positive, with actually decent double-digit growth compared to Q3. However, we are toning down our Q4 automotive prospect, probably at the beginning of this quarter, only very recently, but we did see a steady kind of a slight pullback of customers for forecasts, you know, almost week by week, slightly but steadily, and that is certainly another very promising sign.
Jordan Wu: Thank you, Donnie. You are right in that we were more positive last quarter when we had our conference call than at the present moment, and uh... And I think the reason behind it is what I've already explained in rather detail in my previous remarks, i.e. The fluctuation in the Chinese market is the main factor causing the difference in our view. And as it turns out, our customers were all optimistic about their second half outlook entering Q2, and they were apparently sourcing too much IC inventory. And now they are going through the discounting process.
Speaker Change: Thank you, Donnie. You are right in that we were
Speaker Change: We were more positive last quarter when we had our conference call than the present moment.
Speaker Change: And I think the reason behind it I've already explained in rather detail in my previous remarks, i.e. the fluctuation in Chinese market is the main factor causing the difference in our view.
Speaker Change: and as it turns out our customers will be optimistic
Speaker Change: for their second half outlook, entering the Q2, and they were apparently
Speaker Change: On the last webinar, we once again made a point of enforcement of whistle-blowing.
Jordan Wu: And also, we also mentioned in our prepared remarks that the U.S. and European markets are relatively stable compared to China. Now, if you look at the Q3 prospect, and also if we look further into Q4, so the over-procurement in Q2 and the discounting in Q3, kind of explain our changing position, you know, our look. Now, the real question is, how is this going to go, going forward?
Speaker Change: The U.S. and the...
Speaker Change: joia markets are reically stable comparedable ch chge china now if you look at the the q three proback and also if we look further into q four so we build the overpetun q two and and the sp starting in q three
Speaker Change: Da damm.
Speaker Change: kindof pls our tryy petition you know our look
Speaker Change: Now, the real question is how it is going to go.
Jordan Wu: And I think, I mean, certainly for the longer term, like next year, we remain still pretty positive about the outlook, which I will probably cover in a few minutes. Now, more importantly, what is the near term in Q4? And I'll tell you the truth.
Speaker Change: going forward.
Speaker Change: Still pretty positive about the outlook, which I will probably cover in a few minutes. Now, more importantly, what is the near-term issue for? And I'll tell you the truth.
Jordan Wu: Our internal forecasts, which were the result of collective forecasts coming from various customers globally, including Panelmakers and T01s. For Q4, as of today, the projection remains pretty positive, with actually decent double-digit growth compared to Q3. However, we are toning down our Q4 automotive prospect right now, given the very recent I'm talking about last week also, the global turmoil in financial markets, which might impact consumer confidence in their major good spending, such as buying new cars.
Speaker Change: Our internal forecasts, which were the result of collective forecasts coming from various customers globally, including panel makers and T01s.
Speaker Change: Q4, as of today, the projection remains pretty positive, with actually a decent double-digit growth compared to Q3. However, we are toning down our Q4 automotive prospect.
Speaker Change: Right now, given the very recent, I'm talking about last week also, the global turmoil in financial markets, which
Speaker Change: light impact the consumer comingidence in the middle in not pe is spending such as by new cars so but we are united and we are given the shoel time
Jordan Wu: So, we are not certain, and we are given a short period of time because the major financial turmoil across the global financial market really occurred only last week, so there's no time for us to get feedback from our customers, and I suspect there's no time for our customers to get good feedback either from the market. So we are taking a wait-and-see attitude, but in fact, as of today, our outlook for Q4, based on our forecast book, is still pretty positive. And when did the sentiment turn?
Speaker Change: because the major financial turmoil across the global financial market really occurred only last week. So there's no time for us to get feedback from our customers, and I suspect there's no time for our customers to get...
Speaker Change: We are getting good feedback from the market. So we are taking a wait and see attitude. But in fact, as of today, our…
Speaker Change: allow fo q four based on our forecast book is the are pretty positive and when de the the sentiment turn i would say
Jordan Wu: I would say... probably the beginning of this quarter, only very recently, but we did see a steady kind of a slight pullback of customers for forecast, you know, almost week by week, slightly but steadily. And that is certainly another very promising sign. Now, on your concern about Chinese localization, yes, indeed, they've made announcements and set targets to further localize their IT supply for China's automotive sectors. But as far as we are concerned, in our IC, which is our automotive IC, which is display IC, we, I wouldn't say that would not be a threat because any competition is a threat.
Speaker Change: probably the beginning of this quarter, only very recently, but we did see a steady
Speaker Change: kind of a slight pullback of customers for forecasts, you know, almost week by week, slightly, but steadily, and that is certainly another very promising sign.
Jordan Wu: Now, on your concern about China's localization, yes, indeed, they've made announcements and set targets to further localize their IT supply for China's automotive sectors. But as far as we are concerned, our IC, which is our automotive IC, which is display IC, but I think I will leave it at that, is now so significant that I can see any impact of Chinese competition in the near term or in the foreseeable future.
Speaker Change: Now, on your concern of China localization, yes, indeed, they have made announcements and set targets.
Speaker Change: to further localize their IT supply for China's automotive sectors. But as far as we are concerned, in our IC, which is our automotive IC, which is display ICs,
Speaker Change: wei wouldn't say that it would that would have a be strength because any capity any competition is a strrengight but i think our lineian page
Jordan Wu: But I think I will leave it at that. It is now so significant that I can see any impact of Chinese competition in the near term or in the foreseeable future. And compared to consumer electronics, as we all are very aware of, automotive ICs are much harder to replace, and you have to go through a much lengthier ecosystem, let alone the various requirements, higher standards of safety, and other requirements. So, uh...
Speaker Change: is now soci ificreant significant that
Speaker Change: I can see any impact.
Speaker Change: of Chinese competition in the near term or in the foreseeable future. And compared to consumer electronics, as we all are very aware of, automotive ICs are much harder.
Jordan Wu: And compared to consumer electronics, as we all are very aware, automotive ICs are much harder to replace, and you have to go through a much lengthier ecosystem, let alone the various requirements, higher standards of safety, and other requirements.
Speaker Change: of the early 2000s.
Jordan Wu: So, Chinese localization certainly does not play any role in our more conservative outlook for Q3 or going forward into Q4. In fact, next year, if anything, we believe our market share, especially for those new technologies such as PVDI, double-chambered T-con, or OLED, actually starting next year, we are likely to see some rapid, early growth. I think, if anything, we believe quite confidently that our market share for automotive display ICs will further rise from this year's level.
Speaker Change: So, Chinese localization certainly does not play a big role.
Jordan Wu: Any role in our more conservative outlook for Q3, or going forward into Q4. In fact, let's see if anything, we believe our market share, especially for those new technologies such as TVDI, the whole team in TECON, all of them actually starting next year, we are likely to see some rapid, early growth. I think, if anything, we believe quite confidently in our market share. Costs happens to be a major item if the government wants to push their GDP, so I think again, I'm not providing a solid outlook for next year. But I just want to say there's no reason for us to believe next year will be a bad year for the Multi Mark.
Speaker Change: Any role in our more conservative outlook for Q3 or going forward into Q4, i.e., in fact, next year, if anything, we believe.
Speaker Change: our market share, especially for those new technologies such as TVDI.
Speaker Change: The whole team in TECON, all of them actually starting next year, we are likely to see some ramping, early ramping. I think, if anything, we believe quite confidently on market share.
Speaker Change: of automoti bu participises or furthe rise from this year's level
Jordan Wu: And there's no reason for us to believe next year's automotive market will continue to be very bearish. I mean, I think it's too early for us to form a very... Saudi view for next year, but there's no indication of signs that people's costs of spending on cars will necessarily decrease given the fact that economy is going through some struggles but I think all governments, authorities, the feds of different countries were likely to to to take measures to to encourage consumption and boost their GDP, car spending happens to be a major item if the government wants to push their GDP so, I think again, I'm not I'm not providing a solid outlook for next year but I just want to say there's no reason for us to believe next year will be a bad year for automotive market, I hope that addresses your question.
Speaker Change: And there's no reason for us to believe next year's automotive market will continue to be very bearish. I mean, I think it's too early for us to form a very...
Jordan Wu: Okay. Thank you, Jordan.
Speaker Change: for next year, but there's no indication of signs that
Speaker Change: oh
Speaker Change: people's cost are spending on cars will necessarily decrease given the fact that economies going through some struggggles but i think all governments for authorities defense of differenting countries are likely to
Speaker Change: to take measures to encourage consumption and boost their GDPs.
Carl Svendin: and Carl Svendin, who happens to be a major item.
Speaker Change: if the government wants to boost their GDP, so I think, again, I'm not...
Speaker Change: I'm not providing a solid outlook for next year, but I just want to say there's no reason for us to believe next year will be a bad year for the automotive market.
Carl Svendin: I hope that addresses your question.
Donnie Teng: And my second question is regarding... CTO. So, would you maybe elaborate more on, you know, what's your timeline for this CPO product? When should we expect to see some, you know, small volume contribution? And how confident are you to ramp up this business in the near to long term?
Speaker Change: Thank you, Jordan. My second question is regarding to...
Jordan Wu: Would you maybe elaborate more on, you know, what's your timeline for this CPO product? When should we expect to see some, you know, small volume contributions?
Speaker Change: cpuo so
Speaker Change: Would you maybe elaborate more on, you know, what's your timeline?
Speaker Change: of the cpu product when should we expect to see some small volume contribution
Speaker Change: And how confident you are, how confident you are is like to ramp up this business in the near to long term.
Jordan Wu: Precise timeline, I'm now bound by the NDA of my partners and customers. So I'm afraid I cannot give you a very, very specific date or timetable, but I can tell you.
Speaker Change: Precise timeline, I'm now by NDA of my partners and customers. So I'm afraid I cannot give you very, very specific date or timetable. But I can tell you...
Jordan Wu: So I'm afraid I cannot give you a very, very specific date or timetable, but I can tell you that what we are working on right now, the design, is targeted for mass production. It is certainly not an R&D concept, an R&D project. It's not. Actually, we're way past that stage. I mean, certainly we did that before, years before, but we're way past that stage.
Jordan Wu: What we are working on right now, the design, is targeted for mass production. It is certainly not an R&D concept, an R&D project; it's not. Actually, we're way past that stage. I mean, certainly, we did that before, years before, but we're way past that stage. And we are now pushed towards mass production, ASAP, that's what I can tell you. In fact, we expect to see some small but very early results, hopefully, by the end of this year. But that's minimal. But next year... You know, if everything goes as planned, they will be steady. They will be steady, right?
Speaker Change: What we are working on right now, the design, is...
Speaker Change: is targeted for mass production. It is certainly not a R&D concept.
Speaker Change: and the R&D Project is now. Actually, we are way past that stage. I mean, certainly, we did that before, years before, but we are way past that stage. And we are now...
Jordan Wu: And we are now pushed towards mass production, ASAP, that's what I can tell you. In fact, we expect to see some small but very early results, hopefully, by the end of this year. But that's minimal. But next year..., and the confidence that they will meet the long term, I would say very confident.
Speaker Change: push towards mass production ASAP. That's what I can tell you. And in fact, we expect to see some small but very early
Speaker Change: results hopefully by the end of this year, but that's minimal. But next year...
Speaker Change: You know, if everything goes as planned, they will be steady, they will be steady, steady rapid.
Jordan Wu: and the confidence they will meet long term. I would say very confident. I think... We all know about this hunger for more processing power because of our generative AI, right? And we are all very aware of the issues there, you know, the challenges to further increase your bandwidth, your processing power, your processing speed. But there are all kinds of issues, including power consumption, heat dissipation, and all that, right? And I would say, CPU is a... It's a relatively low cost, and the rest is easy.
Speaker Change: and I'm confident they will meet the long term. I would say very confident.
Speaker Change: I think...
Speaker Change: We all know about this hunger for more processing power because of generative AI, right? And we are all very aware of the issues there, you know. The challenge is to further increase your bandwidth, your processing power, your processing speed.
Speaker Change: But there are all kinds of issues, including power consumption, heat dissipation, and all that. And I would say, CPU is a...
Speaker Change: It's a...
Jordan Wu: I'm not saying it's easy, but it's relatively easy to fix all these issues, and also cost-wise as well. Because right now, if you analyze the most advanced, you know, HPC ICs or, you know, GPU ICs, they have very big processing power. But their bottleneck right now is actually the transmission with the outside. The transmission of the IC, the IC can process a lot of data, you know, high bandwidth, super high bandwidth, very fast, and the bandwidth is expected to expand exponentially over the next few years.
Jordan Wu: I think... and the rest is easy. I'm not saying it's easy, but it's relatively easy to fix all these issues, and also cost-wise as well. Because right now, if you analyze the most advanced, you know, HPC ICs or, you know, GPU ICs, they have very big processing power. The transmission of the IC, the IC can process a lot of data, you know, high bandwidth, super high bandwidth, very fast, and the bandwidth is expected to expand exponentially over the next few years.
Speaker Change: It's a relatively low cost.
Speaker Change: And relatively easy, I'm not saying it's easy, but it's relatively easy to fix to all these issues.
Speaker Change: and also cost-wise as well, because right now if you analyze the most advanced HPC ICs or GPU ICs
Speaker Change: They have a very big processing power.
Speaker Change: But their bottleneck right now is actually the transmission with the outside.
Speaker Change: The transmission of the IC, the IC can process a lot of power, data, you know, high bandwidth, super high bandwidth, very fast, and it's still, the bandwidth is expanding, expected to expand.
Jordan Wu: Now, with advanced packaging, the expansion is going to be, you know, faster and faster. However, the real bottleneck right now is their transmission capability, their transmission bandwidth, which is limited because now they are relying on metal wire to do the transmission. And we all know there's no secret to really improve that.
Jordan Wu: Now, with advanced packaging, the expansion is going to be faster and faster. However, the real bottleneck right now is their transmission capability, their transmission bandwidth, which is limited because now they are relying on metal wires to do the transmission. And we all know there's no secret to really improving that; you just need to replace your metal wire with fiber optics, and that's exactly what we're trying to achieve, right, that we're trying to help to resolve. Right, please be mad, very high bandwidth.
Speaker Change: exponentially over the next few years. Now with advanced packaging, the expansion is going to be, you know, faster and faster. However, the real bottleneck right now is their...
Speaker Change: They have transmission capability, their transmission bandwidth, which is limited because now they are relying on metal wire to do the transmission. And we all know there's no secret to really improve that. You just need to replace your metal wire with fiber optics.
Jordan Wu: You just need to replace your metal wire with fiber optics, and that's exactly what we're trying to achieve, right, that we're trying to help to resolve. So if you can successfully replace your metal wire with fiber optics, right away, you boost your bandwidth by a huge amount, and thereby, as a major side benefit, you also reduce your power consumption because the thermal loss will become much less, and you increase your data accuracy, et cetera, et cetera.
Speaker Change: And that's exactly what we're trying to achieve, right? That we're trying to help to resolve.
Speaker Change: So if you can successfully replace your metal wire with fiber optics, right away you boost your bandwidth.
Speaker Change: on the next session.
Jordan Wu: So I would say everybody in the ecosystem is very keen to make sure that this happens ASAP and when it happens, because, as I mentioned, it's a relatively cheap and easy fix for their solutions. So I don't see any reason why this should not be adopted across the board to cover as many of the ICs as possible. Right now, I'm only talking about ICs that demand very high bandwidth. Right, please be mad, very high bandwidth.
Speaker Change: So I would say it's a you know, everybody in in the ecosystem. It's very keen
Speaker Change: to making sure that this happens, ASAP. And when it happens, because as I mentioned, right, it's a relatively cheap and easy fix to their solutions. So I don't see any reason why.
Speaker Change: This should not be adopted across the board, you know, to cover as many of the ICs as possible. Now, I'm only talking about ICs which demand very high bandwidth.
Jordan Wu: And our goal, our role is to build on the foundation of today to continue to help expand the transmission bandwidth. Right, and we have a role, together with partners, our customers, and really pretty dramatically, and many others, to expand the transmission bandwidth very substantially. I'm talking about multiple times over the next few years. And some of these projects are already in the experimental stage, in the earliest experimental stage or more mature experimental stage.
Jordan Wu: And our goal, our role, is to, building on the foundation of today, to continue to help expand the transmission bandwidth. I think this is a really exciting opportunity for us, for W.O. I mean, it was a surprise when we realized, you know, a long time ago, that W.O. can actually be utilized to tackle this issue. But as we did further and further, we realized this is actually a very, very perfect solution, a very perfect fix, for the data transmission bandwidth issue that is now.
Speaker Change: And our goal, our role is to building on the foundation of today to continue to help expand the transmission bandwidth.
Speaker Change: Right, and we have a role to play together with our partners, our customers.
Speaker Change: to really pretty dramatically
Speaker Change: expand the transmission bandwidth.
Speaker Change: Very substantially, I'm talking about multiple times over the next few years.
Speaker Change: and some of these projects are already in experimental stage, in the earliest experimental stage or more mature experimental stage. But what I'm trying to tell you is that...
Jordan Wu: But what I'm trying to tell you is that the first generation upon mass production will greatly expand the transmission bandwidth of those ICs already, with further solutions expected to be available in a rather short time span with multiple times improvement in transmission bandwidth.
Speaker Change: The first generation, the power loss reduction will greatly expand the transmission bandwidth of those IECs already.
Speaker Change: with further solutions expected to be available.
Speaker Change: in rather short time span with multiple times improvement in transmission bandwidth. So I think...
Jordan Wu: So I think... I think this is a really exciting opportunity for us, for W.O. I mean, it was a surprise when we realized, you know, a long time ago, that W.O. can actually be utilized to tackle this issue. But as we dig further and further, we realize this is actually a very, very perfect solution, a very perfect fix, for the data transmission bandwidth issue that is now faced by this AI technology advance. Any further questions from Donnie or others?
Jordan Wu: Well, thank you Jordan. Very helpful. Thank you.
Speaker Change: I think this is a really exciting opportunity for us, for WHO. I mean, it was a surprise when we realized...
Speaker Change: you know
Speaker Change: long time ago. That we all can actually be utilized to tackle this issue. But as we dig further and further, we realize this is actually a very, very perfect solution, and a very perfect fix.
Speaker Change: for the data transmission bandwidth issue that is now faced by this AI technology advancement.
Speaker Change: Any further questions from Donnie or others?
Donnie Teng: Thank you, Jordan. Very helpful. Thank you.
Operator: Ladies and gentlemen, we are still in the Q&A session. If you would like to ask questions, please press the star key and one on your telephone keypad. Thank you.
Operator: Ladies and gentlemen, we are still in the Q&A session. If you would like to ask questions, please press the star key and one on your telephone keypad. Thank you.
Speaker Change: Ladies and gentlemen, we are still in Q&A session. If you would like to ask questions, please press star key and one on your telephone keypad. Thank you.
Operator: As a final note, Eric Li, our Chief IRP Officer, will maintain visitor marketing activities and continue to attend visitor coverage, and will announce the details in a couple of talks. Thank you and have a nice day.
Speaker Change: As a final note, Eric Li, our chief IRPR officer, will maintain visitor marketing activities and continue to attend visitor conferences. We will announce the details as they come about. Thank you and have a nice day.
Operator: I will announce the details in a couple of talks. Thank you and have a nice day.
Jordan Wu: And... our proprietary permanent authentication algorithm. We see growing traction and extensive engineering activities for this contactless biometric authentication solution that can authenticate an individual's identity in under 100 milliseconds, and for our consumers, just a few milliwatts of power.