Q3 2024 Himax Technologies Inc Earnings Call
Speaker Change: At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. Any instructions will follow at that time.
Speaker Change: As a reminder, this conference call is being recorded. And now, I would like to turn the conference over to Mr. Eric Lee, Chief IR PR Officer at HIMEX. Mr. Lee, please begin.
Eric Li: Welcome, everyone, to the HMET third quarter 2024, at this call. My name is Eric Li, Chief IRPR Officer at HMET.
Eric Li: Joining me today are Jordan Wu, President and Chief Executive Officer, Jessica Pan, Chief Financial Officer, after the company's prepared comments. We have allocated time for questions in a Q&A session.
If you have not yet received a copy of today's result, read it.
Please email himx at mzgroup.us or hx underscore ir at imx.com.tw
Access the press release on financial portals or download a copy from IMAX website at www.imax.com.tw
Before we begin, the formal remarks.
I'd like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industrial growth, are forward-looking statements that involve a number of risks and uncertainties.
Speaker Change: 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 SDEC filing, Form 20-F, for the year ended December 21, 2023, in the section entitled Risk Factors, as may be amended.
He said for the company's full year of 2023 financials.
Speaker Change: which were provided in the company's 20F and 5 with FDC on April 2, 2024. The financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFR's accounting.
Speaker Change: Such financial information is generated internally and has not been subjected to the same review and scrutiny.
including internal auditing procedures and external audits.
Speaker Change: by an independent audit to which we subject our annual consolidated financial statements and may vary materially from the audited consolidated financial information for the same period.
Speaker Change: On today's call, I will first review the IMF consolidated financial performance for the third quarter 2024, followed by our fourth quarter outlook.
Speaker Change: Jordan will then give an update on the status of our business, after which we will take questions.
Speaker Change: You may submit your question online, through the webcast, or by phone.
We will review all financials on an IFIS basis.
Speaker Change: We are delighted to announce that Q3 Revenues and Profits both surpassed guidance while growth margin was in line with guidance issued on August 8, 2024, despite prevailing economic challenges.
Speaker Change: The better-than-expected financial results stemmed primarily from strong order momentum in automotive, Chevrolet, and T-CAR product lines.
Speaker Change: Third quarter revenues registered $222.4 million, a decrease of 7.2% sequentially, yet significantly exceeded our guidance range of a 12% to 17% decrease.
Speaker Change: Gross margin came in at 30% in line with our guidance of around 30% but down from 30% in the previous quarter and 31.4% in the same period last year.
Speaker Change: Q3 profit per diluted ADS was 7.4 cents, considerably above the guidance range of 1.5 cents to 4.5 cents due to better-than-expected revenues.
Speaker Change: Revenues from large district drivers came in at $30.7 million, reflecting a sequential decrease of 21.2%.
Speaker Change: The decrease was primarily attributed to weaker monitor and TDIC sales due to customers disrupting any challenging market conditions.
following substantial Q2 replenishment for shopping festival.
Speaker Change: In contrast, local IC sales increased notably, resulting from rush orders for legacy products from leading panel customers.
Speaker Change: Sales of large panel driver ICs accounted for 13.8% of total revenue for the quarter compared to 16.3% last quarter and 18.3% a year ago.
Speaker Change: thanks to stronger-than-expected sales in the automotive and the tablet market.
renewed trading stimulus announcement.
Speaker Change: made in mid-August as part of their efforts to further boost automobile consumption.
Our world is a multi-business.
representing nearly half of
Speaker Change: Third quarter non-driver sales reached $36.3 million, a decline of 13.1% from the previous quarter.
Speaker Change: The decrease was primarily driven by a double-digit sequential decline in QICOM sales, particularly for monitor applications, as customers pulled forward their inventory purchases.
Hiya Burr!
Speaker Change: Automotive teacup sales saw an impressive sequential increase of over 30 percent.
That's our solution.
Speaker Change: continue to be rapidly adopted by major panel manufacturers, Tier 1 suppliers, and automotive manufacturers worldwide.
Speaker Change: with notable contribution from automotive TECOM, representing almost half of TECOM sales, supported by steady growth with well over 100 secured design winning projects.
Speaker Change: Non-driver products accounted for 16.3% of total remnants, as compared to 17.4% in the previous quarter and 14.1% a year ago.
Speaker Change: Third quarter operating expenses were $60.8 million, an increase of 28.4% from the previous quarter and a decline of 4.7% from a year ago.
Speaker Change: The subsequential increase stemmed primarily from expense for any of our last conversations.
Speaker Change: which we award employees at the end of September each year.
Speaker Change: typically resulting in higher Q3 employee compensation expense compared to other quarters per year.
Speaker Change: The amortized portion of prior year's bonuses for last year was higher than that for this year.
Speaker Change: As a reviser, we grant annual bonuses to employees at the end of September each year, including RISU and cash awards based on the expected profits of the four years.
Speaker Change: of which $9.7 million and $18.5 million were invested and expensed immediately.
to further elaborate.
Speaker Change: Second, $2.7 million was spent for the amortized tranche of five-year bonuses.
Speaker Change: AMIT's ongoing macroeconomic challenges. We are strictly enforcing budget and expense controls, with four-year 2024 OPEC projected to decline mid-single digit compared to last year.
Speaker Change: compared to 12.2% last quarter and 4.6% of sales for the same period last year.
Speaker Change: The sequential equities, aside from lower sales and a contraction in gross margin, primarily reflected the difference.
Speaker Change: In annual employee bonus compensation, as mentioned earlier, totaling $11.2 million or 5.1% of sales, they immediately lost and expanded a portion of this year's new grant.
Speaker Change: The year-over-year decrease in operating margin was mainly driven by a decline in sales and lower gross margins.
Hence, the sequential increase in after-tax process.
Turning to the balance sheet
Speaker Change: We have $206.5 million of cash, cash equivalents, and other financial assets at the end of September 2024 compared to $253.8 million a quarter ago and $155.4 million at the same time last year.
Speaker Change: which included $10.8 million for the immediately vested portion of the year's award and $19.3 million for vested awards granted over the past three years.
Speaker Change: Operating cash flow, excluding employee bonus, was $27 million in flow during the quarter.
Our quarter-end inventory of September 30, 2024 was $192.5 million.
Speaker Change: Lower than $203.7 million last quarter and $269.6 million in the same period last year, indicating a well-managed and balanced inventory level from quarter to quarter.
Speaker Change: Accounts receivable at the end of September 2024 was $224.6 million, down from $242.4 million last quarter and $248.5 million a year ago.
Speaker Change: DSO was 92 days at the quarter end as compared to 99 days last quarter and 95 days a year ago.
Speaker Change: Third quarter capital expenditure was worth $2.6 million versus $4.6 million last quarter and $2.6 million a year ago.
Speaker Change: The third quarter KFS was mainly for R&D related equipment for our IT design business.
Speaker Change: As of September 30, 2024, IMAX had 175 meetings ADS outstanding.
Speaker Change: Now, turning to our fourth quarter 2024 guidance, we expect fourth quarter revenues to be flat to slightly down sequentially.
Speaker Change: Gord's margin is expected to be slacked to slightly up sequentially, depending on product mix.
Speaker Change: The fourth quarter profit attributable to shareholders is estimated to be in the range of $0.093 to $0.11 per fully diluted ADS.
Eric Li: I will now turn the call over to Jordan to discuss our Q4 Outlook. Jordan, the floor is yours.
The World War II
Dr. Yu, Mark Schwalenberg, Donnie Teng
Thank you, Eric.
looking ahead to Q4.
The microenvironment remains challenging.
Eric Li: At the same time, M Brands are also taking a cautious approach to panel procurement and maintaining low inventory levels.
Eric Li: Taken together, these factors have suppressed IC demand, leading to a conservative outlook for the fourth quarter.
and the biggest suppliers.
Eric Li: First, let me elaborate on the automotive sector, our primary revenue contributor.
Eric Li: We remain optimistic in our long-term outlook as the automotive display market continues to expand through innovation and technological advancements.
Eric Li: Our confidence also stems from our comprehensive offering and leading position in the market.
Speaker Change: particularly in the areas of LCD-TV-DI, OLED, and T-con all of which are relatively new and cutting-edge technologies for automotive display
Speaker Change: These technologies are expected to see continued adoption, providing us with sustainable long-term growth opportunities.
Thank you.
Speaker Change: It is worth noting that there have been significant fluctuations in automotive market demands in recent quarters.
Speaker Change: particularly from the Chinese market, which accounts for over 30% of global vehicle sales.
Speaker Change: Government policies, subsidies, and aggressive discount campaigns like car manufactures have made supply and demand less predictable.
Creating new challenges for commodity suppliers
Thank you very much.
Speaker Change: Longer production lead time, which poses greater challenges in handling customers' rush orders.
Speaker Change: In fact, our ability to respond to these class-mated demands for automotive ICs was instrumental in our better-than-expected third quarter financial results.
Speaker Change: with final revenues exceeding the mid-point of our guidance by as much as 7%.
Speaker Change: The higher revenues were driven primarily by rush orders that arose after our last earnings call held in the middle of the third quarter.
Speaker Change: Indeed, being able to quickly respond to changing customer needs has become the crucial competitive advantage in the automotive IT sector for us.
Thank you.
Speaker Change: In terms of our W.O. business, we are committed in our collaboration with 4Z.
Speaker Change: on the LTO-CPO business, where I am pleased to share that we are making decent progress in the initial small-scale production of the first-generation solution.
Here he is.
Speaker Change: Demand for high-speed optical communication technology is surging, triggered by advancements in high-performance computing and artificial intelligence.
Speaker Change: Moreover, Pymax and Torsi, along with world-leading AI smart conductor companies and foundry partners, have begun new technology developments for future-generation products.
We believe this will create new revenue streams for Himex.
Speaker Change: and make a significant contribution to our total revenue and profit in the coming years.
Ongoing customer stock is 622, and intensified China local competition.
Speaker Change: As I just mentioned, panel manufacturers are strategically reducing production to safeguard panel prices, while other brands are enforcing strict procurement control in response to soft demand and maintaining low inventory levels.
looking ahead in the global sector.
THANK YOU!
on KIDI Divers for LCD
We are pioneering Instant Touch TDPI Port Noble LCD Display
Speaker Change: features the proprietary architecture where the touch controller is embedded inside the TDPI chip with the display portion of the TDPI taking advantage of the conventional display driver configuration to convey TCAM data to drive the panel.
Speaker Change: This allows customers to maintain the existing T-car adoption, substantially reducing their product development efforts, and enhancing product production flexibility.
Speaker Change: Additionally, the TDI features high integration, multi-chip cascade, and increased channel output.
Speaker Change: enabling high resolution of up to 4K, a larger screen of up to 16 inches with complex PCB and narrow bezel designs.
Speaker Change: In the third quarter, our newly introduced in-cell touchscreen BI successfully entered mass production for a prominent brand, First AIPC.
Speaker Change: Several projects are also in progress with other brands for their upcoming notebook models.
Multiple projects with top panel and laptop diffusers are underway.
Eric Li: Thank you, Kurt, to both the OCD and all the panelists.
supporting high progress
No power cannot replace adaptive think and high resolution.
Eric Li: We aim to launch our EDP 1.5T pump in the second quarter of 2025.
Eric Li: We are confident that with these new initiatives, Chimex will be the frontrunner of next-gen AIPCs and premium notebooks.
for local IT business for the coming years.
We anticipate fourth quarter revenue to be flat sequentially.
Eric Li: many supported by ongoing China market promotional events and the Chinese government's renewed trading stimulus policies as earlier mentioned
Eric Li: In the automotive TDI sector, we continue to strengthen our market dominance with cumulative shipments already exceeding 70 million units, thus surpassing most of our competitors.
Eric Li: Remarkably, our Q4 Automotive TDI sales are set to surpass DDIT sales for the first time.
Eric Li: Highlighting the widespread adoption of our solutions forward, along with growing demand for more intuitive, interactive, and cost-competitive task-panel features enabled by TDDI solutions.
and the other side of the house.
for our full year 2024 traditional automotive DDIC sales
Eric Li: The main displays, such as cluster display, HUD, or rear and side view mirrors, do not require touch feature.
Eric Li: who remains the leader of the automotive DDIC market with approximately 40% global market share.
and the other one.
Eric Li: coupled with our local team in Tecum as their standard development platform for new automotive displays across various sizes and applications.
Eric Li: HiMesh is widely recognized as the leader in the automotive display IT market, offering the industry's broadest range of products, with leading market share in each of the product areas.
different customer needs that are attached to changing market trends.
thereby strengthening our market presence and boosting potential revenue.
Speaker Change: It sacrifices our commitment to providing customers with more competitive, flexible and broader options.
Speaker Change: This solution is ideal for smaller panels that typically require only 1-2 ICs for cost consideration, while still offering advanced touch and lower dimming features.
Speaker Change: Production is set to begin in early 2025, with several projects and engagements currently underway with major customers.
Eric Li: Meanwhile, we are actively collaborating with automotive TOM partners to develop more advanced, innovative and or cost-optimized solutions tailored to various market needs.
Eric Li: This not only underscores our customers' confidence in our technology leadership, but also reflects their commitment to engaging with us in future roadmap collaborations.
Moving to smartphone high-heels sales
Eric Li: We anticipate Q4 to slightly decline sequentially with ongoing shipments to key customers.
Eric Li: Q4 FDIT sales are projected to decline low teens sequentially as end customers are extending their replacement cycles due to challenging economic conditions.
Work best.
Next, for an update of our holiday business.
Eric Li: In the automotive market, we have formed strategic partnerships with leading panel manufacturers in Korea, China and Japan.
It's all the technology, construction, your premium car models.
Eric Li: Leveraging our first mobile advantage, we looked to capitalize on the growing adoption of OLED in automotive displays.
Eric Li: by offering a comprehensive range of OLED solutions including DDIC, T-Con, and non-standard touch controller.
for your space.
Thank you. Thank you.
Speaker Change: With additional projects starting mass production next year, we expect this segment's contribution to our revenues to increase starting in 2025.
of Comprehensive OLED Product Offerings.
Speaker Change: Regarding smartphone outlets, we expect mass production to commence next year. Currently, we are making good progress in collaborations with customers in Korea and China on several verification and partnership projects.
Speaker Change: Additionally, we are building strong long-term partnerships with senior Olympic players to enhance our market position.
Thank you for watching!
[inaudible]
First soil update from our teacup business.
triggered by the shipment of secure design wings.
Speaker Change: Moving forward, we are confident in the strong growth trajectory in the automotive teacup business.
many panel houses he was and all year
Speaker Change: have now expanded the adoption of our leading-edge, low-dimming T-con solutions from premium to mainstream car models.
Speaker Change: Despite subdued market demand, we are actively developing next-generation OLED TKICs for tablets, notebooks, and automotive applications.
Thank you.
Speaker Change: some of our new development T-Cut ICs for all the technologies
and locals are already showing promising results.
Dr. Wu, Mark Schwalenberg, Donnie Teng
switching gears to Wi-Fi ultra-low power AI sensing solution
Speaker Change: is the first to test the device by remarkably low power consumption, operating at just single digit milliwatts.
Speaker Change: making it possible to add AI functionalities to battery-powered end-point devices.
Speaker Change: Our Wi-Fi technology is unlocking new opportunities across various applications, particularly in end-point devices for everyday life.
The prime example is a smart door lock.
Speaker Change: stemming from our collaboration with Desmond, a leading vendor in China's high-end smart door lock market.
Smart Anti-Pinch Protection and Palm Van Biometric Access
his approach
Speaker Change: targets diverse home security markets that value wide-size household power consumption and on-device AI capabilities, which are crucial for battery-powered end-point AI devices.
Thanks for an update on our Wi-Fi module business.
Speaker Change: We continue to offer a diverse range of plug-and-play modules, collaborating with ecosystem partners and third-party system integrators to develop pre-trained, no-code and low-code AI solutions.
Speaker Change: with the goal of lowering barriers and timelines for developers entering the AI space.
Speaker Change: Progress is being made across various domains, including smart parking, access control, permanent authentication, smart offices, smart homes, and more.
Thank you for watching!
Speaker Change: Among these, there is a hardware solution, which is part of our Wi-Fi AI module business.
Speaker Change: has garnered significant attention and positive feedback from customers since its launch this year.
Speaker Change: He has already been adopted by a U.S. customer for smart assist control systems.
Speaker Change: and his own thread to begin mass production by the end of the year.
Speaker Change: Extensive engineering activities on Wi-Fi hardware are ongoing with world-leading players across various industries.
The Wi-Fi Part Man Solution
Speaker Change: He integrates the Hynix Wi-Fi 2 AI processor, an AOS Simultaneous Sensor, and a proven Parment Authentication Algorithm.
Speaker Change: It features an ultra-low power, compact module capable of authenticating an individual's identity in under 100 milliseconds, while consuming only a few milliwatts of power.
Speaker Change: We anticipate increasing sales contribution from our Wi-Fi department across a diverse array of applications starting next year and are excited about the strong customer interest and opportunity for rapid growth in our Wi-Fi module business.
Now switching to a quick update on W030.
in June of this year.
Speaker Change: HiMETS joined forces with Fossey, a global leader in silicon photonics connectors, to announce the launch of an industry-leading optical communication solution designed for the most advanced multi-chip modules.
Speaker Change: Himex and Palsy are currently progressing through the small-scale production phase of our first-generation solution designed for the LTO architecture.
Speaker Change: has commenced development for next-generation technologies with the objective of incorporating these advancements into more sophisticated CPU architectures.
Leveraging our years of W.O.R. engineering expertise
Paris has meticulously designed and developed
the LTO-CTO Optical Solution.
Speaker Change: This achieves high-precision, low-loss and high-speed transmission to meet the demands of silicon photonic transmission in high-speed computing.
In addition to the progress made in LPO-CTL,
Speaker Change: We have seen an increase in engineer collaborations with global technology leaders who are leveraging our W.O. expertise for AR, VR and a range of other applications.
underscoring the widespread recognition of our technology.
Speaker Change: who believes that WHO will make a significant contribution to all more resilient projects in the coming years.
Speaker Change: That concludes my report for the quarter. Thank you for your interest in HighMatch. We appreciate your joining today's call and are now ready to take questions.
Speaker Change: Yes, thank you Jordan. Ladies and gentlemen, we will now begin our question and answer session.
Speaker Change: If you have a question for any of today's speakers, please press star 1 on your telephone keypad and you will enter the queue.
and after you are announced, please ask your question.
Speaker Change: If you find that your question has been answered before it is your turn to speak, please press star 2 to cancel the question. Thank you.
Speaker Change: Now please press start key and number 1 on your keypad to ask a question or submit your questions through the webcast. Thank you.
Speaker Change: Now we'll have our first question. Donny Tan, Nomura. Go ahead, please.
Donny Tan: Thank you Jordan and Eric for taking my question. My first question is regarding to your automotive business.
Speaker Change: But when we look at some of Peer's announcements like, for example, like Novatec, like Radian, they all mention about that automotive driver IC sales in fourth quarter may decline a little bit sequentially.
Speaker Change: And also, I remember that back in the past few months, it seems like the automotive business
Speaker Change: was pretty volatile, you know, customers adding orders and cut orders within a couple of months. So, what makes this kind of volatility that big and how confident we are to outperform our peers?
in terms of automotive business into fourth quarter. Thank you.
Thank you for the question.
All the best.
Speaker Change: I mean, as you know, we are always very competent, and actually we are always on a somehow conservative side when we provide our guidance.
Speaker Change: So when we say the Q4 automotive overall business is likely to, is projected to grow, I mean, we certainly, we mean business.
Speaker Change: Similar to the last quarter, we are seeing a lot of rush orders, which, fortunately, we are able to fulfill because of the reasons I mentioned earlier in my prepared remarks.
Speaker Change: is fulfilling our responsibility by, you know, fulfilling such was orders.
for being the leading market share player.
the last minute Q3 rush orders.
You know, China is renewing its steam...
Speaker Change: and that is rushing the car makers and, to a great extent, consumers to make their purchase.
Speaker Change: before the incentive plan expires, and I think that is what we are seeing. Having said that though, we are very confident about our position for Q4.
Speaker Change: A more important question is what is our prospect for 2025? I know you didn't ask that question, but I think it's probably a good opportunity for me to elaborate a little bit on our prospect here.
Speaker Change: So, again, we are very confident about our continued market share leadership and close engagement with our customers across the global automotive supply chain.
Speaker Change: However, we don't have good visibility to requirements for automotive business for 2025.
Speaker Change: And this is mainly because of the uncertainty related to the macro environment, both politically and economically in all of this.
Speaker Change: I think I don't need to elaborate further on that, we all know what I'm talking about, you know, about the uncertainty.
Speaker Change: Nevertheless, regardless of the macro environment, we are quite comfortable about further growing our automotive DDI business next year.
Speaker Change: which surpassing DDIC is already our largest source of revenue right now, as you know.
Speaker Change: which is still projected to summer growth further although certainly not at the same kind of high growth rate that we got to enjoy over the last few years.
Speaker Change: Our confidence level is even higher for growing our local gaming teacup as well as LTTF business in 2025 for very similar reasons i.e.
Speaker Change: a large number of design wing projects already in hand and dominant market position.
Speaker Change: We are actually now projecting for the T-con to grow a rather decent double digit next year.
Speaker Change: and LTDI, starting from a relatively low base, to grow triple digits next year. Again, we are fairly confident about this prospect.
Speaker Change: However, I can't say the same for traditional DVI-C for next year.
Speaker Change: So, the business next year for our automotive DDIC will depend largely on the overall automotive shipment. We don't really expect our market share to decline, but we can't really, with our 40% market share, which is already quite high, we can't really project our market share to grow much further either.
Speaker Change: We are already collaborating very closely with leading customers in Korea, China and Japan.
on the
on New Generation Projects.
Speaker Change: for All that, with our Tesla Solution already in production, as we just mentioned.
Speaker Change: So, while the automotive OLED will be the story of 2026 and beyond.
Speaker Change: We believe it will represent a major growth engine for Hymex.
Speaker Change: when it happens, because what we are seeing right now, what we are experiencing right now is very, very busy design activities with not just panel makers, but also tier 1s and OEMs for their high-end models.
I hope that addresses your question.
and the other one is the first one.
Speaker Change: So, other than the overall customer situation seems like getting better towards the end of this year, is there any specific company reason to drive our automotive sales to be outperforming our peers?
Speaker Change: I certainly don't know what is happening with our peers, but we are seeing these rush orders actually coming from not just one or two single customers, it's actually widespread from almost across the board, various panel makers.
and I recall very vividly.
Bye.
Speaker Change: with our automotive teacup which has actually very, very long production lead time and we are scrambling to meet the customer's demand which luckily we are able to achieve. However, in the meantime, we are complaining to the customer that this should not happen anymore because...
You know
Thank you.
The rush order actually came from
Speaker Change: Not just Chinese, also other countries, panel makers, PL1s and automotive.
Speaker Change: Understood. And my second question is regarding to the CPO progress.
Speaker Change: I'm wondering if you... Okay, firstly, it's like, it looks like non-driver ICCL scores in fourth quarter.
Primarily driven by T.Kong
Speaker Change: So is CPO playing any role there in fourth quarter yet or how should we look at the update progress there for CPO? Thank you.
The answer is no, not in Q4. In Q4, we...
Speaker Change: We do see some small amount of revenue from this, starting from Q4. These are early, very early, very small quantity shipments for customer engineering, verification and trial production purposes.
Speaker Change: So our W-O-O for CPO doesn't really contribute to our non-driver growth for Q4.
Speaker Change: I see. Do you have any update on the future progress? I mean, when exactly?
Speaker Change: We will see more meaningful progress or sales contributions on CPO. Is there any update on the schedule? And you know, the industry dynamics as well.
Okay, okay, good question.
of the
Speaker Change: Let me probably elaborate a little bit on, in our prepared remarks, right, we talked about working on next generation technologies and products.
Speaker Change: You may wonder, you know, exactly what those are and its timeline, and therefore your question about contribution potential for next year or the year after.
Speaker Change: As you know, it's essentially the bundling of multiple chiplets into a single module through so-called advanced packaging, right?
Speaker Change: We all know Optico Vibor is being used to replace the traditional metal wire for such high bandwidth data transmission.
Speaker Change: However, the bandwidth of each optical fiber line is still fixed, is still limited, right? And therefore...
Speaker Change: to up the overall bandwidth of the whole multi-chip module. The simple idea is to have multiple optical fiber lines working in parallel.
Speaker Change: We are targeting some phenomenal increases over the next few years to cope with the projected increase of data amount that need to be transmitted by the Advanced Multiple Multi-Chip Module.
Speaker Change: Another example would be for more precise coupling of the optical fiber with the photonic IC that our device is connected to.
So in terms of timeline
Speaker Change: I can't really speak on behalf of my customers, so all I can say is that we are being requested to accelerate the timeline from something already quite challenging.
for the migration from first-generation LPL to more advanced CPL.
Speaker Change: As well as for the readiness of our next generation products, enabling fast increasing number of optical fiber lines.
Speaker Change: And we certainly, we have run the the mess internally several times, right? And we are certainly very excited about the prospect because
Speaker Change: If we look at our partners' or customers' projected capacity expansion, as well as their projected growth of such high-end 2.5D modules or XPUs,
even if we are to
fully realize our existing capacity. We can only meet the
a small fraction of their projected demand.
because
Speaker Change: All these generational products I just mentioned, whether it's this generation or future generations of our products will be manufactured in our existing WFOFEP with existing capacity, which was built for the purpose of some earlier projects that we work on.
several years back for consumer electronics products.
Speaker Change: LPL, CPL demand much more sophisticated optical design manufacturing compared to those used for earlier products, which, as I mentioned, is for consumer electronics.
So I hope that
Speaker Change: Okay, thank you Jordan. It's helpful. I'll go back to Q. Thank you.
Thank you.
Speaker Change: If you would like to ask a question, please press star 1 on your keypad.
Thank you.
Speaker Change: Ladies and gentlemen, we are now in question and answer session.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. Thank you.