Q2 2025 Himax Technologies Inc Earnings Call
Speaker #4: Later, we will conduct a question and answer session. An instruction will follow at that time. As a reminder, this conference call is being recorded.
Speaker #4: I will now like to turn the conference over to Ms. Karen Tiao, Head IR, PR, and Himax. Ms. Tiao, please go ahead.
Speaker #5: Welcome, everyone, to the Himax second quarter 2025 earnings call. My name is Karen Tiao, Head of IR, R, and Himax. Joining me today are Jordan Wu, President and Chief Executive Officer and Jessica Tan, Chief Financial Officer.
Speaker #5: After the company's prepared comments, we have allocated time for questions in the Q&A section. If you have not yet received a copy of today's results release, please email hx_ir@himax.com.tw.
Speaker #5: Or HIMX@mvgroup.us access the press release on financial portals or download a copy from Himax's website at www.himax.com.tw. Before we begin the formal remarks, I would like to remind everyone that some of the statements in this conference call, including the statement regarding expected future financial results and industry growth, are forward-looking statements.
Speaker #5: They involve a number of risks and uncertainties that could cause actual events or result in different material holistic scripts in this conference call. A list of the risk factors can be found in the company's SEC filings, Form 20F, for the year-end December 31st, 2024.
Speaker #5: In the section entitled Risk Factors, this may be amended. Except for companies for the year of 2024 financials, which were provided in the company's 20F and filed with the SEC on April 2nd, 2025, the financial information included in this conference call is unedited and consolidated and prepared in accordance with the IFRS accounting.
Speaker #5: Such financial information is generated internally and has not been subjected the same review and scrutiny including internal auditing procedures and external audit finance independent auditors.
Speaker #5: To which we subject our annual consolidated financial statements and may vary materially from the audited consolidated financial information for the same period. A company undertakes no obligations to publicly update or revise any forward-looking statements.
Speaker #5: Such as the result of new information, future events, or otherwise. On today's call, I will first review the Himax consolidated financial performance for the second quarter 2025.
Speaker #5: Followed by our third quarter outlook. Jordan will then give an update on the status of our business. And after which, we will take questions.
Speaker #5: You can submit your questions online through the webcast or by phone. We will review our financials on an IFRS basis. During the second quarter, rather than US tariff measures continue to intensify global trade tensions, heightening macroeconomic and demand uncertainty, this was confronted further by the abrupt and significant depreciation of the anti-dollars against the US dollar during this quarter.
Speaker #5: Jordan will elaborate on the impact of the anti-dollar fluctuations on our financials in a moment. Despite this headwind, we are pleased to report our future growth margin exceeded the guidance provided on the May 8th, 2025.
Speaker #5: While the growth revenue and profit can be within the projected range, the quarter revenues registered 214.8 million dollars. Representing a sequential decline of the 0.2%.
Speaker #5: Better than the midpoint of guidance range, which was 5.0% declined Tuesday, 0.0% increase. Gross margin was 31.2%, outperforming our guidance of around 31% and improving from 30.5% in the prior quarters.
Speaker #5: Primarily driven by a favorable product mix. Q2 profit per diluted ADS was 9.5 cents, within the guidance range of 8.5 to 11.5 cents. Revenue from large display drivers came in at 24.9 million dollars.
Speaker #5: Representing a slight decline of 0.6% from the previous quarter. Gross notebook and monitor item sales declined in Q2. While TV item sales outperformed guidance with a single-digit sequential increase driven by higher shipments to key customers after several subdued quarters.
Speaker #5: Sales of large fanel driver IC accounted for 11.6% of total revenue for the quarter. Compared to 11.6% last quarter and 16.3% a year ago.
Speaker #5: Revenue from the small and medium-sized display driver segment totaled 144.5 million dollars. Reflecting a sequential decline of 4.0%. However, Q2 automotive driver sales including both traditional VDIC and TDDI outperformed our guidance of meeting sequential declines posting only a single-digit decrease quarter-over-quarter.
Speaker #5: The sequential decline reflected the combined impact of tariffs and the tapering effect of Chinese automotive subsidy program. Naturally, automotive driver sales for the first half of 2025 still recorded a 3.2% year-over-year increase.
Speaker #5: Indicating resilience underlying demand despite global softness in automotive sales. Our automotive business comprising VDIC, TDDI, THON, and OLED IC sales remained the largest revenue contributor in the second quarter.
Speaker #5: Representing approximately 50% of total revenues. Meanwhile, Q2 smartphone item sales outperformed our guidance of meeting sequential declines showing a slight increase from the prior quarter.
Speaker #5: Mainly driven by large orders from the leading customers. Our tablet driver sales increased as expected, supported by renewed demand from leading customers following several quarters of soft demand.
Speaker #5: The small and medium-sized display driver IC segment accounted for 67.3% of total sales for the quarter. Compared to the 70.0% in the previous quarter and 66.3% a year ago.
Speaker #5: Our Q2 non-driver sales reached 45.1 million dollars or 14.7% increase from the previous quarter. The sequential increase was primarily attributable to the increased shipment of THON for automotive and monitor products.
Speaker #5: Himax continued to hold on disputed leadership position with the dominant market share in automotive THON. Particularly in solutions featuring local semi-functionality. Our growing pipeline now exceeding 200 design wings is poised to transition into a mass reduction over the next few years.
Speaker #5: THON business accounted for over 12% of total sales. This notable contribution from automotive THON. Non-driver products accounted for 21.1% of total revenues, as compared 18.4% in the previous quarter and 7.4% a year ago.
Speaker #5: The second quarter operating expenses were $48.9 million, which represents an increase of 6.9% from the previous quarter and 3.3% from a year ago. The appreciation of the anti-dollar against the U.S. dollar in Q2 was the key factor behind the sequential increase.
Speaker #5: Similar factors drove the year-over-year increase, though it was partially offset by the decline in employee bonus compensation due to the decline in the annual bonus expenses for the amortized trenches of the previous year's bonuses.
Speaker #5: Excluding the impact of anti-dollar appreciation, the second quarter operating expenses would have been remained flat year-over-year. Amid ongoing macroeconomic challenges, we remain vigilant in invoicing budget and expense control.
Speaker #5: The second quarter operating income was 18.1 million dollars. Representing an operating margin of 8.4%, compared to 9.2% last quarter and 12.2% for the same period last year.
Speaker #5: Operating profit declined 8.6% sequentially, mainly due to the higher operating expenses. Partially offset by the increase in gross margin and gross profit. Excluding impact of anti-dollar appreciation on Q2, expenses operating income increased slightly compared to the previous quarter.
Speaker #5: Operating profit declined 38.1 year-over-year. Primarily due to the lower sales and reduced gross margin. The quarter FTEX 16.5 million dollars, or 9.5 cents per diluted ADS.
Speaker #5: Compared to 20.0 million dollars, or 11.4 cents per diluted ADS last year. And down from 29.6 million dollars or 16.9 cents in the same period last year.
Speaker #5: Turning to the balance sheet, we have 32.8 million dollars of cash, cash equivalent in our financial assets as of June 13th, 2025. This compared to 253.8 million dollars at the same time last year, and 281.1 million dollars a year ago.
Speaker #5: The sequential increase was mainly driven by strong positive operating cash flow of 60.5 million dollars in the second quarter. Looking ahead to Q3, we anticipate a decline in cash cash equivalence in our financial assets.
Speaker #5: Primarily due to a payment of 64.8 million dollars for the annual dividend to shareholders which was met on July 11th. In addition, subject to final board decision, we will distribute a total of approximately 13.3 million dollars for employee bonus awards at the end of the third quarter.
Speaker #5: Which includes around 7.2 million dollars for the immediate effective portion of this year's award and 6.1 million dollars for the effective award granted over the past three years.
Speaker #5: Our quarterly inventory was 134.6 million dollars. Higher than the 129.9 million dollars last quarter but lower than the 203.7 million dollars a year ago.
Speaker #5: After 10 consecutive quarters of inventory declines from this peak during the industry-wide supply shortage, Q2 inventory has slightly increased but is now still at a healthy level.
Speaker #5: As macroeconomics on certain limits visibility across the ecosystem. We will continue to manage our inventory conservatively. Accounts receivable at the end of June 2025 was 219 million dollars, a slight increase from the 217.5 million dollars last quarter but down from 242.4 million dollars a year ago.
Speaker #5: DSO was 92 days at the end of the year at the quarter end. As compared to 91 days last quarter and 99 days a year ago.
Speaker #5: The second quarter capital expenditure was 4.6 million dollars. Versus 5.2 million dollars last quarter and 4.6 million dollars a year ago. The second quarter CAPEX was mainly for R&D-related equipment for our IC design business and the construction in progress for the new preschool near our Tainan headquarters built for employee children.
Speaker #5: As of June 13th, 2025, Himax had a 174.3 million ADS outstanding. Declined from last quarter. And on the fully diluted basis, the total number of ADS outstanding for the second quarter was 174.5 million.
Speaker #5: Now, turning to our third quarter 2025 guidance. We expect third quarter revenues to decrease 12% to 17% sequentially. Our gross margin is expected to be around 30% depending on our product mix.
Speaker #5: The third quarter loss attributable to shareholders is estimated to be in the range of 2.0 to 4.0 cents per fully diluted ADS. As we have done historically, we will grant employees annual bonus including RSUs and cash rewards on or around September 13th this year.
Speaker #5: Our first quarter guidance of the loss per diluted ADS has taken into account the expected 2025 annual bonus. Which subject to board approval, is not assumed to be around 7.5 million dollars.
Speaker #5: Out of which 7.2 million dollars was invested and expense immediately on the granted. As a reminder, the total annual bonus amount and the immediate invested portion are out of the current best estimates.
Speaker #5: Only an actual amount to vary materially depending on among other things, our Q4 profit and the final board decision for the total bonus amount and the investing fee.
Speaker #5: As is the case for previous years, we expect the annual bonus grant in 2025 to lead to higher third quarter operating expenses compared to the other quarter of the year.
Speaker #5: In comparison, the annual bonus for the 2024 and 2023 was 12.5 million dollars and 10.4 million dollars respectively. Of which 11.3 million dollars and 9.7 million dollars invested immediately.
Speaker #5: In providing our Q3 financial guidance, a Q3 expenses related to the employee bonus is estimated to be 8.2 million dollars. Representing 4.7% per diluted ADS before tax.
Speaker #5: Comprised of 7.2 million dollars, the immediate invested portion of this bonus is stated above. And the 1.0 million the amortized portion of the previous years.
Speaker #5: invested bonuses from
Speaker #5: For the sake of completeness, employee bonus expense in each of the last three quarters was also around 0.8 million dollars. I will now turn the call over to Jordan to discuss our Q3 2025 outlook.
Speaker #5: Jordan, the floor is yours.
Speaker #6: Thank you, Karen. I certainly surrounding tariff policies, persistent across the global economy. Throughout the second quarter and into July. However, starting in August, the US became clarified its tariff measures toward most of the countries.
Speaker #6: Including major economies such as Japan, and the EU. This development have helped reduce uncertainty in global trade environment. That said, less than 24 hours ago, the US government announced plans to impose tariffs of approximately 100% on semiconductor chips imported from companies that do not manufacture in the United States.
Speaker #6: As the details of the new tariff plan have yet to be released, we are unable to comment further regarding its potential impact at this time.
Speaker #6: We are closely monitoring the situation and will respond accordingly. It is worth noting that tariffs have not had a significant direct impact on Himax's business.
Speaker #6: As our IT products are not directly exported to the US, instead, they are integrated into panels or modules by customers outside the United States.
Speaker #6: And as so globally, including into the US market. Only a negligible portion about 2% of Himax's products are shipped directly to the US. In the automotive sector, the US recently reached separate agreements with EU, Japan, and Korea.
Speaker #6: This tariff agreement among the world's major automotive manufacturing and consumption regions helped ease market uncertainty. And trade and shipments among these markets are expected to gradually normalize.
Speaker #6: Now we stand in this early signs of clarity regarding automotive tariffs. Given the timing of the announcements, which were made just days prior to this earnings call, we have not yet received any customer adjustments in demand for automotive ICs in response to the new tariffs.
Speaker #6: The situation remains dynamic and subject to further observation. Overall, automotive market demand visibility remains low. With customers continuing to adopt a cautious stance, by maintaining low inventory levels and delaying new product introductions.
Speaker #6: As a result, we are maintaining a conservative outlook for the third quarter and continuing our strategy of strict expense controls for our actively reducing procurement costs and enhancing supply accessibility.
Speaker #6: At the same time, we are accelerating the geographic diversification of our foundry and backend vendors to address customers' diversified deployment needs. Stemming from geopolitical considerations, this strategy aims to strengthen our global manufacturing resilience and reduce risk associated with regional concentration.
Speaker #6: In the automotive sector, we remain optimistic about our long-term business outlook. Primarily driven by the continued upgrade of smart cockpits. Where this phrase serves as a key component fully market growth.
Speaker #6: We stand in two decades of dedicated experience in the automotive field, Himax offers the industry's most advanced and comprehensive automotive display IC solutions. Spanning LCD to OLED technologies, Himax holds the number one global market share across all segments of automotive display ICs.
Speaker #6: With an over 20 lead over competitors. Looking ahead, we expect continued growth in automotive TDDI and THON technologies. Both of which are relatively new and advanced display solutions.
Speaker #6: For vehicles. To date, these technologies have been successfully designed into hundreds of projects worldwide. With just approximately one-third already in mass production. And a remainder expected to enter mass production within the next few years.
Speaker #6: In the area of traditional automotive TDIC, although TDICs have gradually been replaced by TDDI in panels with touch functionality. Traditional TDICs remain essential for applications such as dashboard agilities, and rare and side-view view mirrors.
Speaker #6: Which do not require touch integration. In addition, Himax has spent years cultivating its automotive OLED business. In close collaboration with leading panel makers. The number of new project engagements is rising rapidly.
Speaker #6: And starting in 2027, automotive OLED-related growth momentum is expected to accelerate significantly. Making it one of our key long-term revenue drivers. Despite limited visibility to the second half of the year, the recent clarification of tariff policies and continued low inventory levels has panel customers provided some positive signals.
Speaker #6: We remained prudent in navigating market dynamics by continuing to closely monitor customer demand. Throughout ongoing macroeconomic uncertainty, we remain committed to expanding beyond display ICs into new business areas.
Speaker #6: Characterized by high growth potential, high added value, and high technological barriers. Areas expected to drive our long-term growth. Himax has been deeply engaged in this field for one or two decades.
Speaker #6: It's leveraging significant technical barriers and security and securing a robust portfolio of key patents. All these efforts begin to bear as all these efforts begin to bear fruit.
Speaker #6: They are expected to inject strong momentum into the future operations. First, in a wise-eyed AI domain, we continue to collaborate with several leading notebook brands such as Dell and Acer.
Speaker #6: Achieving significant results. We expect this growth to continue over the coming years by adding more leading notebook customers and reducing further AI features to the notebook.
Speaker #6: In addition, Himax has made both technological and market breakthroughs in additional battery power applications. Such as small door locks, permanent recognition, and smart home.
Speaker #6: Jointly developing unprecedented and innovative AI applications with top-tier global customers. These applications are mostly battery powered. Showcasing wise-eyed unique advantage in ultra-low power computing.
Speaker #6: Further, a recent major application addition is in smart glasses for a wise-eyed has gained strong design traction due to the stringent power efficiency requirements of smart glasses.
Speaker #6: Looking ahead, the wise-eyed business is entering the phase of rapid growth after years of customer and application development. Becoming one of our key growth drivers.
Speaker #6: In the field of co-packaged optics, or CPO, Himax's preparatory WLO technology plays a critical role. Together with our partner Forsy, we have achieved significant breakthroughs in silicon photonics technology with the first-generation solution being validated by our anchor customers/partners.
Speaker #6: We are working toward the goal of entering mass production in 2026. Meanwhile, Himax and Forsy are collaborating with several heavyweight customers and partners to jointly develop future-generation high-speed optical transmission technologies.
Speaker #6: To meet the explosive bandwidth demands of HPC and AI applications while also helping to address the pain point of overheating associated with high-speed transmission.
Speaker #6: Turning to smart glasses, after years of lukewarm consumer reception, smart glasses are getting extraordinary market attention of late. And becoming a segment of strategic importance for Himax.
Speaker #6: With the option of generative AI and large language models, AR and AI glasses are widely expected by the industry to become the next breakout market.
Speaker #6: Numerous world-class hyperscalers and specialized smart glasses developers from around the globe are actively investing in the development of new smart glasses, with China in particular leading the way in terms of the number of players.
Speaker #6: Himax stands out as one of the new Himax stands out as one of the few companies in the industry to possess three critical enabling technologies for smart glasses.
Speaker #6: Namely, ultra-low power, intelligent sensing, metal display, and nano optics. Giving it a unique competitive advantage in this emerging field. In intelligent sensing, Himax is wise-eyed AI delivers all day ultra-low power contextual awareness which average power consumption of just a few milliwatts.
Speaker #6: It significantly enhances the interactivity and perception of smart glasses while preserving battery life and data privacy. The technology has been widely adopted and successfully integrated into the next generation smart glasses of multiple customers.
Speaker #6: In metal display, Himax's latest rounded air cove metal display features 350 thousand nits of brightness. Exceptional optical power efficiency. And outstanding image quality. All in an extremely compact and lightweight form factor.
Speaker #6: It is considered the most commercially viable solution. Closest to the ideal metal display for see-through AI glasses. Since its debut at Display Week 2025, the module has drawn strong attention.
Speaker #6: And is soon entering sampling stages with multiple customers. In the field of nano optics, Himax offers preparatory WLO technology for advanced nano optical foundry service through selected customers.
Speaker #6: Developing waveguide solutions which can significantly enhance both light transmission and display efficiency of AI glasses. Looking ahead, we expect revenue from AR and AI glasses related applications.
Speaker #6: To grow substantially over the next few years. Becoming a key driver of the company's mid to long-term growth. Lastly, and before I get into comments of specific sectors, regarding foreign exchange, while Himax is a Taiwan-based company, our financial statements are US dollar dominated.
Speaker #6: Since both of our revenue and cost of goods sales are in US dollars, this provides a natural hedge for Himax's trade activities. Additionally, a portion of our operating expenses are also in US dollars.
Speaker #6: Offering further natural hedging. The non-USB denominated operating expenses primarily include employee salaries and utility costs. Other non-US dollar expenses are tax. Overall, the impact of currency fluctuations of Himax's financials is relatively limited.
Speaker #6: Based on internal estimates, and as around current revenue levels, a 1% appreciation of the ND dollar will reduce operating margin by approximately 0.15%. Himax's third quarter financial against the US dollar 29.4 ND dollar against the US dollar.
Speaker #6: Which is equivalent to the daily average of the quarter after the day before the earnings call. With that, I will now begin with an update of the large panel driver IC business.
Speaker #6: In Q3, large display driver IC sales are expected to decline double-digit sequentially. Amid the volatile macro environment, most panel customers remain cautious. Adhering to a MACD to order model.
Speaker #6: And maintaining lean inventories in response to a murky demand outlook. The absence of traditional seasonal shortage momentum coupled with customers pulling forward purchases in previous quarters is expected to drive declines across all three product lines in the large panel driver IC segment for Q3.
Speaker #6: In the notebook sector, we continue to focus on the growing trend among premium models to adopt OLED displays and advanced touch features. This shift is driven in part by the rise of AI PCs and increasing demand for more interactive technologies that enhance user experience boost productivity and support creative applications.
Speaker #6: Himax is well positioned to capitalize on this trend by offering a comprehensive range of ICs for both LCD and OLED notebooks. Including TDIC, THON, touch controllers, and TDDI.
Speaker #6: In addition, we are expanding our high-speed interface product portfolio to support faster data transmission, low latency, and improved power efficiency. Features that are critical for next-generation displays.
Speaker #6: Turning to the small and medium-sized display driver IC business. In Q3, small and medium-sized display driver IC business is expected to decline single-digit from the last quarter.
Speaker #6: Q3 automotive driver IC sales including TDDI and other traditional TDIC are set to decline slightly quarter-over-quarter. As customers adopt a cautious stance. Delaying orders amid ongoing tariff negotiations.
Speaker #6: Despite near-term headwinds, global adoption of automotive TDDI continues to expand. Fueled by growing demand for intuitive interactive and cost-effective touch features in modern vehicles.
Speaker #6: Himax remains the leader in this market. With cumulative shipments already exceeding 100 million units. Representing a market share well above 50%. Far outpacing those of our competitors.
Speaker #6: To date, we have secured around 500 design projects across a wide range of global automotive brands and tier ones. Spanning entry level to high-end vehicle models.
Speaker #6: Supported by a continuous flow of new project pipelines and widespread design winds. We are well positioned to maintain our growth momentum and reinforce our leadership in the market.
Speaker #6: While traditional automotive TDIC sales declined in Q3, due to partial replacement by TDDI. The transition remains gradual. As many automotive displays such as dashboard agilities, and rare and side-view mirrors do not require touch functionality.
Speaker #6: And typically have long product life cycles. Himax holds a solid 40% market share in the traditional TDIC and remains the go-to supplier for both legacy and next-generation automotive display applications.
Speaker #6: Himax also continues to lead in automotive display IC innovation. By pioneering solutions across a wide range of panel types. Addressing diverse design needs and cost considerations.
Speaker #6: For ultra-large touch displays, we offer a LTDI where we let the industry by introducing the technology and commencing its mass production in Q3 2023.
Speaker #6: Additional LTDI projects with multiple leading global brands are track to enter mass production in the third quarter. With small programs expected to follow as we move into 2026.
Speaker #6: For smaller displays, with tight form factor and budget requirements. We provide single-chip designs that combine TDDI and low-dim THON. This enables advanced low-dimming in small-sized displays reduces overall system costs.
Speaker #6: And improves power efficiency. Meanwhile, Himax is recognized for its dominance in low-dimming THON technology which I will elaborate on in a few minutes. We continue to automotive display market with a 40% share in TDIC.
Speaker #6: Over 50% in TDDI. And even higher market share in low-dimming THON. Moving to smartphone and tablet IC sales, we expect revenues for both segments to decline quarter-over-quarter.
Speaker #6: As customers pull forward purchases in five quarters, excuse me, next for an update on our OLED business. In the automotive OLED market, we have established strategic partnerships with leading panel makers across Korea, China, and Japan.
Speaker #6: As OLED technology gains broader adoption for premium vehicles, Himax is well positioned to become the partner of choice. Leveraging our nearly two-decades of experience and strong foothold in the automotive display market.
Speaker #6: Capitalizing on our first mover advantage, we offer a comprehensive suite of solutions. Including TDIC, THON, and on-sale touch controllers. Our automotive OLED driver and THON solutions began production for EVs of leading car makers a few years ago.
Speaker #6: We now also offer standard ICs ready for broader deployment. Imperial we are collaborating with leading panel makers of custom ASIC developments. In addition, our advanced OLED on-sale touch control technology features an industry-leading signal to knowledge ratio.
Speaker #6: Ensuring reliable performance even in challenging conditions, such as glass use or wet figures. The OLED on-sale touch ICs entered mass production in 2024. And are being increasingly adopted by major global automotive brands for the upcoming car models.
Speaker #6: Looking ahead, we expect OLED panel adoption in automotive displays to accelerate starting in 2027. Himax is well positioned to be a key beneficiary unlocking a new growth engine that further strengthens our leadership in the automotive display market.
Speaker #6: We have also expanded our comprehensive OLED portfolio into the tablet and notebook markets. Covering TDIC, THON, and touch controllers. Through partnerships with leading OLED panel makers in Korea, and China.
Speaker #6: Several new projects are slated to enter mass production with top-tier brands later this year. Meanwhile, we are developing new technologies for value-added features such as active stylus, partial slim bezel, design, and gaming models to further differentiate our products and reinforce our competitive edge.
Speaker #6: In the smartphone OLED market, we are making solid progress in our collaborations with customers in Korea, and China, with mass production on track starting the end of this year.
Speaker #6: I would like to now turn to our known driver IC business update. Where we expect the third quarter revenue to decline double-digit sequentially. First, for an update on our THON business.
Speaker #6: We anticipate Q3 THON sales to decrease by double-digit sequentially. By increase by single-digit over year-over-year. The serial decline is primarily a result of customers pulling forward inventory purchases of THON for monitor and notebook and TV products.
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Combining power and facial recognitions.
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Moving on to our latest advancements in, of course, space technology.
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Customers across the board are eagerly anticipating samples of our newly introduced, are for solution, targeted for, uh, release in September for their new see, through our glasses projects.
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we provide more updates as they come about.
That concludes my report for this quarter. Thank you for interested RX. We appreciate your joining today for now already to take questions.
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Uh, I actually have uh,
uh, a couple of questions.
Uh, related to our CPO status.
Uh,
the questions are about the
You know, some of this from last quarter, our mass production time table. Uh, Next Generation progress, uh, sales contribution Etc. So I think I will, I will combine the questions together and give
uh, uh, give provide the answer to get
And we, I mean, we really don't have a whole lot of progress for update. So together, with our partner 4C, we are focused on getting the first generation product validated. So, uh, 2025 this year will be a year for engineering meditation with only sample shipments for us.
So the sample shipment certainly, in terms of Revenue contribution will be rather Limited.
Uh, and uh, you know, likelihood mass production will come in next year.
uh,
but at this point, we will not comment on effective when in 2026
So, as far as the new generation is concerned, uh, we are actually developing more than 1 generation of future products.
Uh I mean obviously I cannot give details of the future generation design. What I can say is that, uh, this products
Uh, when successful uh, were um, represent much higher V revenue for us on a per unit basis or per FAU basis.
Because, uh, our new design will cover a wider much wider scope of Optics. Inside the FAU,
while, at the same time enable uh,
Uh, higher transmission bandwidth and lower the overall module cost for our customers.
Uh, I've actually, uh, commented on, uh, the revenue potential, uh, in my last, uh,
uh, 1 or 2 on this call, so
I think I, I would just quickly go through that again. So, again, uh, this series, uh, next year 2010 2026 exactly to be the first year of mass production,
but uh,
it's still too early to give a very, very education for the year because uh,
As I just said exactly when MP will commence is yet to be determined by our customer.
I've said in the Q&A, uh,
of us, uh, earnings calls that our annualized, CPO Revenue could reach over 100 million dollars in so-called early stage of mass production.
And I'm still holding the same to you.
So, uh,
uh, buyid stage. I'm thinking the early stage of MP when only maybe, uh, mostly AI switches.
Uh, data centers are equipped with CPO.
Uh and actually as the technology is more, CPO will be adopted by more and customers and penetrate further to also cover uh XP use uh, for a data center.
Now, if you look further ahead, uh,
Uh, I I I believe, uh, automotive and humanoid robot.
You know, Automotive humanoid robot are too likely uh, new major markets where Advanced high bandwidth, AI are also needed.
And because our W Optics is a critical element of uh CPO. We are seeing this business as a major game changer for himx.
So it's something we will certainly committed to for uh many many years.
So, uh, regarding the product question, when this word starts ramping up to me. This is not really a question, or even when you will have a rather.
How fast and how much the CPO technology will penetrate?
Uh, and we believe we always see obvious benefits, like raising transmission bandwidth and substantially reducing power consumption of data transmission.
You know, and all at the, you know, pretty low cost compared to those of the company system.
The CPO technology has the potential of Rapid very quickly.
Uh with high Market penetration. But ultimately, this is a decision again to be made by our end customers.
So what we can do is, uh, get ourselves prepared for any rapid plan and equally important.
Uh, aggressively push, the boundaries of the technology.
uh,
And I guess, lastly, I think it's important to point out that the progress of collaboration with our customers uh are not affected and not deterred.
the prevailing macro uncertainty, or
the Tariff situation.
so, our customer slash partner,
this uh, forward expand
So I again, that's my answer to a few questions related to CPL.
uh, there's actually another question about again about CTO product generation,
and whether they are currently in preparation for validation,
the validation is now being focused on the the current generation only.
Is uh, the Next Generation.
you know, going through, uh,
uh,
Uh, uh, design with collaboration of with, for see the design example in stage.
uh, and uh,
and uh, the number of plane CPU product generation. I I'm not sure exactly what this means. Actually, I can tell you there's a
longer term rather than fundamental like important. Uh,
uh,
advancement of CPI technology that we are working on, uh, which if successful could cover a few generations of products.
uh, it's uh
Is is is successful. It's going to be a major breakthrough uh for what uh,
We are doing right now, but I mean, obviously, I I'm not allowed to disclose too much, so I guess, uh, there's this current generation which is, I think, you know, uh, validation uh, year Improvement. And so on, is this stage? And we are either for uh, mass production next year. And there's the Next Generation with a Specs coming from the customers, collaboration close collaboration with our sales and policy as they are future. Generate for future generation, further ahead uh technology developments
That could.
Uh, uh, fundamentally improve, uh, the uh, the cost and efficiency of, uh, of CPL, uh, and that can cover.
Several generations to come if successful.
Uh, why is Timex lose money? Q3 we certainly Lost based on our guidance. We are going to we are, we we, we, we are projected to lose, uh,
uh, 2 to 4 cents a share in 2 3. And as I just mentioned, in my prepared remarks, that is because of our
uh, pretty peculiar way of, uh,
of, uh,
Expensing our uh, employee bonuses.
Uh, and we have been doing that.
uh, almost 20 years ago, ever since we got this, the 2026
uh,
and, uh, so I'm sure for those energies or investors following us,
Uh, I already familiar with this. So in short, what happens is our
Employee bonus or I see the expenses.
In every year were Rich of peak in Q3. And uh, and uh, um, we must much much smaller amount during q1 2 and 4.
it has been a pattern for 20 years or so uh, because of our
of our, uh,
our approach of, uh, issuing employee bonuses whereby. We basically announce employee bonus every year at the, uh,
End of September of 30th of September, right? So
so, um,
And and uh, and we are just strictly following accounting rules. And I wish we we can based on our accounting practice. We can more our as in expenses, uh, even the distributed across 4 Seasons but we are not allowed to
so,
But that's just the way we do our accounting.
But, I mean, naturally, uh, we are not doing well, uh, in Q3 overall. Uh, as I just mentioned the automotive now Automotive or sectors limited visibility and Terry and whatnot. I'm because I'm not going to repeat that. But there's a particular reason for our, uh, 23. Uh,
uh,
projected loss.
So I guess there's no further question at this number of my
List. So it's a final note, Karen, our head of IPR will maintain Mr. Marketing activities, and continue to attend, investor conferences, and we're not the details as they come about. Thank you. And have a nice day.
Yes. Thank you. Jordan and ladies and gentlemen, this concludes second quarter 2025 earnings conference. You may now disconnect. Thank you again goodbye.