Q2 2026 Himax Technologies Inc Earnings Call

August 6, 2026

Operator: Hello, ladies and gentlemen. Welcome to Himax Technologies, Inc. Q2 2026 earnings conference call. At this time, all participants are in listen-only mode, and later we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Karen Tiao, Head of IR/PR at Himax. Ms. Tiao, please go ahead.

Speaker #1: Hello, ladies and gentlemen. Welcome to the Himax Technologies, Inc. Q2 2026 earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct the question-and-answer session.

Speaker #1: Instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Karen Tiao, Head of IR/PR at Himax.

Speaker #1: Ms. Tiao, please go ahead.

Speaker #2: Welcome, everyone. My name is Karen Tiao, Head of IR, PR at Himax. Joining me today are Jordan Wu, President and Chief Executive Officer; and Jessica Pan, Chief Financial Officer.

Karen Tiao: Welcome everyone. My name is Karen Tiao, Head of IR/PR at Himax. Joining me today are Jordan Wu, President and Chief Executive Officer, and Jessica Pan, Chief Financial Officer. After the company's prepared comments, we have allocated time for our questions in the Q&A section. If you have not yet received a copy of today's press release, please email himax_ir@himax.com.tw or himx@mcgroup.us or download a copy from Himax website. Before we begin the formal remarks, I would like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements that involve a number of risks and uncertainties that could cause the actual event or results to differ materially from those described in the conference call.

Speaker #2: After the company is prepared, comments. We have a section. If you have not yet received a copy of today's results release, please allocate time for our questions in the Q&A. Email hr_ir@himax.com.tw.

Speaker #2: Or download a copy from Himax's website. Before we begin the remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements.

Speaker #2: They involve a number of risks and uncertainties that could cause the actual results or events to differ materially from those described in the conference call.

Speaker #2: A list of risk factors can be found in the company's latest SEC filing. Form 20F, in the formal remarks, I would like to section titled Risk Factors, may be the company's full year of amended.

Karen Tiao: A list of risk factors can be found in the company's latest SEC filing, Form 20-F, in the section titled "Risk Factors," as may be amended. Except for the company's full year 2025 financials, which were provided in the company's 20-F and filed with the SEC on 27 March 2026. The financial information included in this conference call is unaudited, consolidated, and prepared in accordance with IFRS accounting. Such financial information is generated internally and has not been subjected to the same review and scrutiny and may vary materially from the audited consolidated financial information for the same period. On today's call, I will first review Himax consolidated financial performance for Q2 2026, followed by our Q3 outlook. Jordan will then give an update on the status of our business, and after which we will take questions.

Speaker #2: 2025 financials, which were provided in the company's 20F and filed with the SEC, are March 27, 2026. The financial information included in this Except for consolidated and prepared in accordance with IFRS accounting.

Speaker #2: Such financial information is generally generated internally and has not been subjected to the same review and scrutiny and may vary materially from the audited consolidated financial information for the same period.

Speaker #2: On today's call, I will first review Himax's consolidated financial performance for the second quarter 2026, followed by our third-quarter outlook. Jordan will then give an update on the status of our business, after which we will take questions.

Speaker #2: You can submit your questions online through the webcast or by phone. We will review our financials on an IFRS basis. The rapid rise in AI demand is placing unprecedented strength on memory chip supply and affecting many non-AI applications, creating a more challenging cost and capacity environment across the industry.

Karen Tiao: You can submit your questions online through the webcast or by phone. We will review our financials on an IFRS basis. The rapid rise in AI demand is placing unprecedented strain on memory chip supply and affecting many non-AI applications, creating a more challenging cost and capacity environment across the industry. Against this backdrop, we are pleased to report that our Q2 revenues, gross margin, and profits all exceeded the guidance we provided on 7 May 2026. Q2 revenues reached $227.4 million, representing a sequential increase of 14.2% and up 5.9% compared to the same period last year. Q2 revenues exceeded our guidance range of a 10% to 13% increase, primarily driven by better than expected automotive IC sales. Gross margin was 33.1%, substantially exceeding the guidance of around 32%, up from 30.4% in the previous quarter and 31.2% a year ago.

Speaker #2: Again, this backdrop, we are pleased to report that our second-quarter revenues gross margin and profit all exceeded the guidance we provided on May 7, 2026.

Speaker #2: Second-quarter revenues registered 227.4 million dollars. Representing a sequential increase of 14.2% and up 5.9% compared to the same period last year. Q2 revenues exceeded our guidance range of 10 to 13% increase, primarily driven by better-than-expected automotive IC sales.

Speaker #2: Gross margin was 33.1%, substantially exceeding the guidance of around 32%, up from 30.4% in the previous quarter and 31.2% a year ago. This is primarily due to a more favorable product mix, with increased sales from higher margin automotive IC products.

Karen Tiao: This is primarily due to a more favorable product mix, which increased the sales for higher margin automotive IC products. Q2 profits per diluted ADS was $0.114, significantly exceeding the guidance range of $0.086 to $0.103, up from $0.046 in the previous quarter, and $0.095 a year ago. Revenue for large display driver came in at $19.2 million, representing a decline of 21.0% from the previous quarter attributable to panel makers pulling forward their inventory purchases for high-end TDIC in prior quarters. In contrast, sales for both the monitor and notebook IC product increases quarter over quarter due to higher legacy product shipment to key customers. Sales of large panel driver IC accounted for 8.4% of total revenues for the quarter, compared to 12.2% last quarter and 11.6% a year ago.

Speaker #2: Q2 profit per diluted ADS was 11.4 cents, significantly exceeding the guidance range of 8.6 to 10.3 cents. This is up from 4.6 cents in the previous quarter and 9.5 cents a year ago.

Speaker #2: Revenue from large display drivers came in at 19.2 million dollars, representing a decline of the 21.0% from the previous quarter to beautiful to panel makers pulling forward their inventory purchases for high-end TV ICs in prior quarters.

Speaker #2: In contrast, sales for both the monitor and notebook IC products increases quarter over quarter due to higher legacy product shipment to key customers. Sales of large panel driver IC accounted for 8.4% of total revenues for the quarter, compared to 12.2% last quarter and 11.6% a year ago.

Speaker #2: Revenue from the small and medium-sized display driver IC segment totaled $162.3 million, reflecting an increase of 19.6% sequentially. Q2 automotive driver sales, including both traditional DDIC and TDDI, increased by double digits quarter over quarter, primarily driven by broad-based customer replenishment of TDDI and DDIC following seasonally lower shipments during the Lunar New Year in Q1.

Karen Tiao: Revenue from small and medium-sized display driver IC segment totaled $162.3 million, reflecting an increase of 19.6% sequentially. Q2 automotive driver sales, including both traditional DDIC and TDDI, increased by double digits quarter-over-quarter, primarily driven by broad-based customer replacement of TDDI and DDIC following seasonally lower shipments during the Lunar New Year in Q1. The ramp-up of new TDDI and DDIC projects for leading panel customers also contributed to a sequential increase. Customers continue to operate under a make to order model while maintaining lean inventory levels. Our automotive business, comprising DDIC, TDDI, T-Con, and OLED IC sales, remained our largest revenue contributor in the second quarter, representing well over 50% of total revenue.

Speaker #2: The rent up of new TDDI and DDIC projects for leading panel customers also contributed to the sequential increase. Customers continue to operate under a max-to-order model while maintaining inventory levels.

Speaker #2: Our automotive business, comprising DDIC, TDDI, TCON, and Olay IC sales, remained a largest revenue contributor in the second quarter, representing well over 50% of total revenue.

Speaker #2: Second-quarter tablet IC sales covering both LCD and Olay products also increases sequentially, attributable to customers' early pull-in demand against the backdrop of the rising memory price sentiment in the market.

Karen Tiao: Q2 tablet IC sales, covering both LCD and OLED products, also increases sequentially, attributable to customers' early pull-in demand against the backdrop of the rising memory price sentiment in the market, together with the continued shipment of customers' premium OLED model. In contrast, smartphone IC sales decreases sequentially following the initial ramp-up of an OLED IC for leading smartphone brand's mainstream model in Q1. The small and medium-sized driver IC segment accounted for 71.4% of total sales for the quarter, compared to 68.2% in the previous quarter and 67.3% a year ago. Q2 non-driver sales reached $45.9 million, a 17.7% increase from the previous quarter, attributable to robust automotive T-Con shipment supported by replacement across the board customer base. T-Con business accounted for over 10% of the total sales, with more than half contributed by automotive T-Con.

Speaker #2: Together with the continued shipment for customers' premium Olay model. In contrast, smartphone IC sales decreases sequentially following the initial rent up of an Olay IC for leading smartphone brands' mainstream model in Q1.

Speaker #2: The small and medium-sized driver IC segment accounted for 71.4% of total sales for the quarter, compared to 68.2% in the previous quarter and 67.3% a year ago.

Speaker #2: Q2 non-driver sales reached 45.9 million dollars, a 17.7% increase from the previous quarter, attributable to robust automotive T consumer supported by replenishment across the board customer base.

Speaker #2: TCON business accounted for over 10% of the total sales, with more than half contributed by automotive TCON. As the market leader in automotive TCON, particularly in solution featuring local DIMMY functionality, we expect strong growth momentum to continue into next year.

Karen Tiao: As the market leader in automotive T-Con, particularly in function featuring local dimming functionality, we expect strong growth momentum to continue into next year. Non-driver products accounted for 20.2% of total revenues as compared to 19.6% in the previous quarter and 21.1% a year ago. Q2 operating expenses were $15.7 million, an increase of 0.8% from the previous quarter, and 3.6% compared to the same period last year. The year-over-year increase was mainly attributable to higher payroll expenses. We will remain disciplined in managing costs while continuing to invest strategically in select non-driver IC business with compelling long-term growth potential. Q2 operating income was $24.6 million, representing an operating margin of 10.8% compared to 5.1% in the previous quarter and 8.4% for the same period last year. Both the quarter-over-quarter and year-over-year changes were primarily driven by higher revenues and gross margin.

Speaker #2: Non-driver products accounted for 20.2% of total revenues, as compared to 19.6% in the previous quarter and 21.1% a year ago. Second-quarter operating expenses were 15.7 million dollars, an increases of 0.8% from previous quarter and 3.6% compared to the same period last year.

Speaker #2: The year-over-year increase was mainly attributable to higher tapout expenses. We remain disappointed in managing cost while continuing to invest strategically in select non-driver IC business with compelling long-term growth potential.

Speaker #2: Second-quarter operating income was 24.6 million dollars, representing an operating margin of 10.8%, compared to 5.1% in the previous quarter and 8.4% for the same period last year.

Speaker #2: Both the quarter over quarter and year-over-year changes were primarily driven by higher revenues and gross margin. Second-quarter asset tax profits was 19.9 million dollars, or 11.4 cents per diluted ADS, compared to 8.0 million dollars, or 4.6 cents per diluted ADS last quarter and up from 16.5 million dollars or 9.5 cents in the same period last year.

Karen Tiao: Second quarter after-tax profit was $19.9 million, or $0.114 per diluted ADS, compared to $8.0 million or $0.046 per diluted ADS last quarter, and up from $15.5 million or $0.095 in the same period last year. Turning to the balance sheet. We had $298.7 million of cash equivalents, and other financial assets as of 13 June 2026. This compared to $332.8 million at the same time last year and $287.6 million a quarter ago. The sequential increase was mainly driven by operating cash flow of $17.5 million in the second quarter. Before moving on, I would like to highlight one point regarding this quarter's cash flow. As is our usual practice, income tax payments are made in the second quarter. Under a new Taiwan government policy, we are entitled to defer approximately $11.0 million of this payment for 1 year without interest.

Speaker #2: Turning to the balance sheet, we had a 298.7 million dollars of cash, cash equivalents, and other financial assets as of the June 13, 2026.

Speaker #2: This compared to 332.8 million dollars at the same time last year and 287.6 million a quarter ago. The sequential increase was mainly driven by operating cash flow of 17.5 dollars, million dollars in the second quarter.

Speaker #2: Before moving on, I would like to highlight one point regarding this quarter's cash flow. This is our usual practice. Income tax payments are made in the second quarter.

Speaker #2: Under a new Taiwan government's policy, we are entitled to defer approximately 11.0 million dollars of this payment for one year without interest. Excluding this deferral, second-quarter operating cash flow would have been approximately 6.5 million dollars.

Karen Tiao: Including this deferral, second quarter operating cash flow would have been approximately $6.5 million. Looking ahead to Q3, we anticipate a decline in cash equivalent, and other financial assets, primarily due to a payment of the $44 million for the annual dividend to shareholders made on 10 July. In addition, subject to the final board decision, we will distribute around $11.7 million, the immediately vested portion of this year's employee bonus awards at the end of Q3. On our quarter end inventory as of 13 June 2026, were $151.5 million, about the same as the $151.7 million last quarter, but higher than the $134.6 million in the same period last year. After maintaining lean inventory levels for several years, we proactively adjusted our inventory strategy about 1 year ago, selectively building inventory in anticipation of the tightening supply across the industry.

Speaker #2: Looking ahead to Q3, we anticipate a decline in cash, cash equivalent, and other financial assets, primarily due to the payment of the 44 million dollars for the annual dividend to shareholder made on July 10.

Speaker #2: In addition, subject to the final board decision, we will distribute a round 11.7 million dollars, the immediately best portion of this year's employee bonus award, at the end of the Q3.

Speaker #2: Our quarter-end inventory as of June 13, 2026, was $151.5 million, about the same as the $151.7 million from last quarter, but higher than the $134.6 million in the same period last year.

Speaker #2: After maintaining lean inventory levels for several years, we proactively adjust our inventory strategy about a year ago. Selectively building inventory in anticipation of the tightening supply across the industry.

Karen Tiao: Accounts receivable at the end of June was $220.3 million, up from $190.9 million last quarter and $219.0 million 1 year ago. DSO was 93 days at the quarter end as compared to 86 days last quarter and 92 days 1 year ago. Second quarter capital expenditure, primarily for R&D related equipment for our IC design business, was $4.3 million, versus $2.9 million last quarter and $4.6 million 1 year ago. As of 13 June 2026, Himax had 174.4 million ADS outstanding, unchanged from last quarter. On a fully diluted basis, the total number of ADS outstanding for the second quarter was 174.4 million. During the quarter, on 1 July, we announced the proposed divestiture of investment in one of our equity method investees.

Speaker #2: Accounts receivable at the end of the June was 220.3 million dollars, up from 190.9 million dollars last quarter and 219.0 million dollars a year ago.

Speaker #2: DSO was 93 days at the quarter-end, as compared to 86 days last quarter and 92 days a year ago. Second-quarter capital expenditure primarily for R&D-related equipment for our IC design business was 4.3 million dollars, versus 2.9 million dollars last quarter and 4.6 million dollars a year ago.

Speaker #2: As of the June 13, 2026, Himax had a 174.4 million ADS outstanding on 10th from last quarter. On the fully diluted basis, the total number of ADS outstanding for the second quarter was 174.4 million.

Speaker #2: During the quarter, on July 1, we announced the proposed divestiture of investment in one of our equity market investees. Based on the information provided by the said investee company, we expect to recognize a pretext scan of approximately 23 million dollars to 24 million dollars, upon closing.

Karen Tiao: Based on the information provided by the said investee company, we expect to recognize a pre-tax gain of approximately $23 to 24 million upon closing. The transaction is expected to close in the fourth quarter of this year subject to customary closing conditions and regulatory approval. We will provide more updates as appropriate as the transaction progresses. Now turning to our Q3 2026 guidance. We expect Q3 revenue to increase 7% to 11% sequentially. Gross margin is expected to be around 34%, depending on the product mix. Q3 profit attributable to shareholders is estimated to be in the range of $0.080 to $0.100 per fully diluted ADS. As we have done historically, we will grant employees annual bonus, including RSUs and cash awards, on or around 13 September this year.

Speaker #2: The transaction is expected to close in the fourth quarter of this year, subject to customary closing condition and regulatory approval. We will provide more updates as appropriate as the transaction progresses.

Speaker #2: Now, turning to our third-quarter 2026 guidance. We expect Q3 revenue to increase to 7% to 11% sequentially. Gross margin is expected to be around 34%, depending on the product mix.

Speaker #2: Q3 profit attributable to shareholder is estimated to be in the range of the 8.0 to 10.0 cents per fully diluted ADS. As we have done historically, we will grant employees annual bonus including RSUs and cash awards on or around September 13 this year.

Speaker #2: The third-quarter guidance for profit per diluted ADS has taken into account the expected. 2026 annual bonus, which subject to board approval, is now estimated to be around 13 million dollars, out of which 11.7 million dollars will be vested and expenses immediately under grant state.

Karen Tiao: The third quarter guidance for profit per diluted ADS has taken into account the expected 2026 annual bonus, which, subject to board approval, is now estimated to be around $13 million, out of which $11.7 million will be vested and expensed immediately on the grant date. As a reminder, the total annual bonus amount and the immediately vested portion are our current best estimate only, and the actual amount could vary materially depend on, among other things, our Q4 profit expectations and the final board decision for the total bonus amount and the vesting scheme. Worth noting that the $30 million expected annual bonus does not yet include the above-mentioned, again, investment from divestiture of the equity-method investee as the transaction is pending regulatory approval and has not yet closed.

Speaker #2: As a reminder, the total annual bonuses amount an immediately vested portion of our current best estimate only, and the actual amount could vary materially depend on among other things, our Q4 profit expectation and the final board decision for the total bonus amount and its vesting scheme.

Speaker #2: It is also worth noting that the 13 million dollar expected annual bonus does not yet include the above-mentioned again on investment from divestiture of an equity market investee.

Speaker #2: As a transaction is pending regulatory approval and has not yet closed. As is the case for previous years, we expect the annual bonus grant in 2026 to lead to higher third-quarter operating expenses compared to the other quarters of the year.

Karen Tiao: As is the case for previous years, we expect the annual bonus grant in 2026 to lead to higher Q3 operating expenses compared to the other quarters of the year. In comparison, the annual bonus for 2025 and 2024 were $7.7 million and $12.5 million, respectively, of which $7.5 million and $11.2 million vested immediately. In providing our Q3 financial guidance, the Q3 expense related to the employee bonus is estimated to be $11.8 million, representing $0.068 per diluted ADS before tax, comprising of the $11.7 million of the immediately vested portion of this year's bonus, as stated above, and the $0.1 million of the amortized portion of the unvested bonuses from previous years. By comparison, employee bonus expenses in each of the last 3 quarters was around $0.2 million. I will now turn the call over to Jordan to discuss our Q3 outlook.

Speaker #2: In comparison, the annual bonus for 2025 and 2024 was 7.7 million dollars and 12.5 million dollars, respectively, of which 7.5 million dollars and 11.2 million dollars vested immediately.

Speaker #2: In providing our Q3 financial guidance, the Q3 expense related to the employee bonus is estimated to be 11.8 million dollars, representing 6.8 cents per diluted ADS before tax, comprising of the 11.7 million of the immediately vested portions of this year's bonus as stated above.

Speaker #2: And 0.1 million dollars of the amortized portion of the unvested bonuses from previous years. By comparison, employee bonus expenses in each of the last three quarters was around 0.2 million dollars.

Speaker #2: I will now turn the call over to Jordan to discuss our Q3 outlook. Jordan, the floor is yours.

Karen Tiao: Jordan, the floor is yours.

Speaker #1: Thank you, Karen. The ongoing search in the equity brand continues to impact non-AI applications. This has rippled across the broader semiconductor supply chain resulting in capacity constraints as boundary packaging and testing facilities on the material processed nodes where many of our products are manufactured.

Jordan Wu: Thank you, Karen. The ongoing surge in AI demand continues to impact non-AI applications. This has rippled across the broader semiconductor supply chain, resulting in capacity constraints at foundry, packaging, and testing facilities on the mature process nodes where many of our products are manufactured. Consequently, we are experiencing higher manufacturing and procurement costs, extended lead times, and increased difficulty in securing sufficient capacity across a broad range of our product lines. We expect the supply environment to remain challenging in the near term. To enhance our production flexibility and secure the capacity needed to meet our customer needs and support our upcoming production ramps, we continue to leverage our established supply chain in Taiwan, while further strengthening our presence across China, Singapore, Korea, Japan, and Malaysia. In parallel, as we mentioned last quarter, we've been working closely with customers on pricing adjustments to share these increased costs.

Speaker #1: Consequently, we are experiencing higher manufacturing and procurement costs, extended lead times, and increased difficulty in securing sufficient capacity across a broad range of our product lines.

Speaker #1: We expect the supply environment to remain challenging in the near term. To enhance production sustainability, and secure the capacity needed to build our customer needs and support our upcoming production reps, we continue to leverage our established supply chain in Taiwan for our further strengthening our presence across China, Singapore, Korea, Japan, and Malaysia.

Speaker #1: In parallel, as we mentioned last quarter, we have been working closely with customers on pricing adjustments to share this increased cost. Some adjustments took effect in the second quarter with additional pricing adjustment possibly implemented over time as the market conditions warrant.

Jordan Wu: Some adjustments took effect in Q2, with additional pricing adjustment possibly implemented on time as the market conditions warrant. Though we stand in this industry-wide supply constraints, we remain optimistic about the long-term growth prospects of our automotive display IC business. We continue to view automotive as one of the industry's most attractive, secular growth markets, driven by rapid advancements in smart vehicle interiors. This trend is characterized by, among other things, the growing number of displays per vehicle now averaging more than three and continuing to rise, along with larger, higher-resolution displays, and more diverse vehicle cabin configurations, including curved, integrated, multi-display, and pillar-to-pillar designs. Himax is well-positioned to capitalize on these industry trends through our comprehensive automotive display portfolio, spanning both LCD and OLED technologies, a broad and diversified global customer base, and a robust design-win pipeline.

Speaker #1: Now, withstanding this industry-wide supply constraints, we remain optimistic about the long-term gross profits prospects of our automotive display IC business. We continue to view automotive as one of the industry's most attractive secular gross markets, driven by rapid advancements in smart vehicle materials.

Speaker #1: This trend is characterized by among other things, a growing number of averaging more than 3, and continuing to rise, along with larger high-resolution displays and more diverse vehicle cabin configurations.

Speaker #1: Including curved, integrated, multi-display, and pillar-to-pillar designs. Himax is well-positioned to capitalize on this industry trends through our comprehensive automotive display portfolio spanning both LCD and OLED technologies.

Speaker #1: A broad and diversified global customer base and a robust design impact line. We further differentiate ourselves by continuously introducing next-generation automotive display technologies including LTDI solutions for ultra-large displays, advanced TCON solutions for head-up displays, OLED driver and touch controller ICs, and micro LED display technologies.

Jordan Wu: We further differentiate ourselves by continuously introducing next-generation automotive display technologies, including LTDI solutions for ultra-large displays, advanced T-Con solutions for head-up displays, OLED driver and touch control ICs, and microLED display technologies. Our portfolio also includes platform display solutions and capacitive physical buttons where customer interest continues to grow, driven in part by regulatory and vehicle safety initiatives in key automotive markets, including China and Europe, where greater emphasis is being placed on intuitive physical controls to enhance driving safety and reduce driver distraction. The industry's ongoing pursuit of richer user experiences is driving adoption of a broader range of our display technologies. This not only increases Himax's dollar content per vehicle, but also creates multiple long-term growth opportunities.

Speaker #1: Our portfolio also includes not only display solutions and capacitive physical buttons, where customer interest continues to grow driven in part by regulatory and vehicle safety initiatives in key automotive markets including China and Europe, where greater emphasis is being placed on intuitive physical controls to enhance driving safety and reduce driver's distraction.

Speaker #1: The industry's ongoing pursuit of richer human-machine interfaces immerses infotainment and enhancing cabin user experiences is driving the adoption of a broader range of our display technologies.

Speaker #1: These are not only increases Himax's dollar content per vehicle, but also creates multiple long-term gross opportunities. In addition, our well-established global supply chain provides us with greater flexibility to navigate the current supply environment while securing the capacity needed to support both existing projects and upcoming production reps.

Jordan Wu: Our well-established global supply chain provides us with greater flexibility to navigate the current supply environment, while securing the capacity needed to support both existing projects and upcoming production ramps. We also see an important trend in the automotive industry with automakers introducing new vehicle models at an accelerated pace and intensifying competition. As a result, product life cycles are becoming shorter, creating greater pressure to improve engineering efficiency, reduce development costs, and shorten time to market for new car models. These challenges are driving broader adoption of platform standardization across multiple vehicle models, favoring suppliers with comprehensive and validated technology portfolios and proven track records. Himax is one such supplier, hosting the industry's most competitive automotive display IC offerings, market-leading positions across automotive VVIC, VDDI, and T-Con, and continued leadership in next-generation technologies such as LTDI and OLED technologies.

Speaker #1: We also see an important trend in the automotive industry with automakers introducing new vehicle models and accelerating pace and intensifying competition. As a result, product lifecycles are becoming shorter creating greater pressure to improve engineering efficiency, reduce development costs, and shorten time to market for new car models.

Speaker #1: These challenges are driving broader adoption of platform standardization across multiple vehicle models favoring suppliers with comprehensive and validated technology portfolios and proven track records.

Speaker #1: Himax is one such supplier boasting the industry's most competitive automotive display IC offerings. Market-leading positions across automotive DVIC, TVDI, and TCON and continued leadership in next-generation technologies such as LTDI and OLED technologies.

Speaker #1: By adopting Himax solutions as part of their standardized platforms, customers can quickly deploy validated display IC products across multiple new vehicle developments, reducing engineering efforts, lowering system costs, and shortening the development cycle of each project.

Jordan Wu: By adopting Himax solutions as part of their standardized platforms, customers can quickly deploy validated display IC products across multiple new vehicle developments, reducing engineering efforts, lowering system costs, and shortening development cycle of each project. In addition to automotive, we are also making solid progress across several strategic growth areas, including smart glasses, ultra-low-power AI, and CPOs. These emergent businesses diversify our revenue base into markets with attractive long-term growth prospects and margin profiles, while strengthening our overall competitive position. We believe they are poised to become increasingly meaningful contributors to our future growth. First, on smart glasses, an area we remain particularly optimistic about. Himax is one of the few companies offering both ultra-low-power AI sensing and microdisplay technologies, both critical building blocks for next-generation smart glasses.

Speaker #1: In addition to automotive, we are also making solid progress across several strategic growth areas, including smart glasses, actual power AI, and CPO. These emerging businesses diversify our revenue base into markets with attractive long-term growth prospects and margin profiles, while strengthening our overall competitive position.

Speaker #1: We believe they are poised to become increasingly meaningful contributors to our future growth. First, on smart glasses, an area we remain particularly optimistic about.

Speaker #1: Himax is one of the few companies offering both ultra-low power AI sensing and micro display technologies both critical building blocks for next-generation smart glasses.

Speaker #1: On the AI sensing front, YSI enables ultra-low power outward and inward sensing supporting and expanding range of AI use cases including contextual awareness, real-time visual assistance, and personalized user experiences.

Jordan Wu: On the AI sensing front, WiseEye enables ultra-low-power, always-on outward and inward sensing, supporting an expanding range of AI use cases, including contextual awareness, real-time visual assistance, and personalized user experiences. Recently, a leading global brand just launched a smart glasses product powered by our WiseEye technology, and we continue to see strong design-in momentum across customers worldwide. In particular, we are seeing growing engagement with leading global brands, technology platform providers, ODMs, as well as hyperscalers who traditionally do not offer hardware products, but are now entering smart glasses market, with some projects poised to enter mass production as we move into 2027. On the display side, our Front-lit LCoS microdisplay delivers an optimal balance of size, weight, resolution, image quality, power consumption, and cost. It can also be configured to operate in a high brightness, ultra-low-power, green-only mode, and seamlessly switch to full-color operation as needed.

Speaker #1: Recently, a leading global brand just launched a smart glasses product powered by our YSI technology. And we continue to see strong design momentum across customers worldwide.

Speaker #1: In particular, we are seeing growing engagement with leading global brands, technology platform providers, ODMs, as well as hyperscalers, who traditionally do not offer hardware products.

Speaker #1: But are now entering smart glasses market. With some projects poised to end mass production as we move into 2027. On the display side, our front lead aircraft micro display delivers an optimal balance of size, weight, resolution, image quality, power consumption, and cost.

Speaker #1: It can also be configured to operate in a high brightness ultra-low power green-only mode and seamlessly switch to full color operation as needed. This flexibility differentiates our solution from alternative display technologies.

Jordan Wu: This flexibility differentiates our solution from alternative display technologies, letting customers optimize power efficiency while maintaining visual performance and meeting their system design cost targets. Together, these capabilities make our Front-lit LCoS a compelling display platform for next generation AR glasses equipped with see-through displays. Currently, we are working closely with multiple waveguide partners across Asia, Europe, and North America to deliver integrated AR display solutions that simplify system integration and shorten customers' development cycles. This is driving broader customer engagement and positioning us to convert more opportunities into design wins. As for production shipments, we are well-positioned to support the next generation of AR glasses. Now, I would like to provide a brief update on progress in CPO. Customer development timelines remain aggressive, with demand showing no sign of slowing.

Speaker #1: Meeting customers optimized power efficiency while maintaining visual performance and meeting their system design and cost targets. Together, these capabilities make our front lead aircraft a competing display platform for next-generation AI glasses equipped with.

Speaker #1: Through displays. Currently, we are working closely with multiple web guide partners across Asia, Europe, and North America to deliver integrated AI display solutions that simplify system integration and short-term customers development cycles.

Speaker #1: This is driving broader customer engagement and positioning us to convert more opportunities into design wins, backed by well over a decade of aircraft expertise and a proven track record of successful production shipments.

Speaker #1: We are well positioned to support the next generation of AI glasses. Now, I would like to provide a brief update on our progress in CPO.

Speaker #1: Customer development timelines remain aggressive, with demand showing no sign of slowing. Together with our strategic partner FOSSEE, we continue to deepen customer engagement by offering a flexible portfolio of solutions, including customized designs tailored specifically for our customers’ needs, as well as a standardized technology platform developed in collaboration with the leading foundry partner.

Jordan Wu: Together with our strategic partner, FOCI, we continue to deepen customer engagement by offering a flexible portfolio of solutions, including customized designs tailored specifically for our customers' needs, as well as a standardized technology platform developed in collaboration with a leading foundry partner. Our solutions support both co-packaged and pluggable packaging architectures to address diverse customer needs. Our primary focus for H2 of this year remains on achieving mass production readiness, including key customer qualification milestones. We are continuing to improve manufacturing yields and establish stable mass production capabilities. We have already made encouraging progress towards these objectives. Both our Gen 1 product supporting 1.6T and 3.2T transmission bandwidths, and Gen 2 product designed for 6.4T bandwidths, have begun engineering production ramps as scheduled in Q3.

Speaker #1: Our solutions support both core packaged and pluggable packaging architectures to address diverse customer needs. Our primary focus for the second half of this year remains on achieving mass production readiness, including key customer qualification milestones while continuing to improve manufacturing yields and establish stable mass production capabilities.

Speaker #1: We have already made encouraging progress towards this objectives. Both our Gen 1 product supporting 1.6T and 3.2T transmission bandwidths and Gen 2 product designed for 6.4T bandwidths have begun engineering production ramps as scheduled in the third quarter.

Speaker #1: These products are expected to drive sequential shipment growth quarter over quarter. Laying the foundation for a more meaningful volume shipment beginning in 2027. The official mass production timing remains subject to customer deployment schedules.

Jordan Wu: These products are expected to drive sequential shipment growth quarter-over-quarter, laying the foundation for a more meaningful volume shipment beginning in 2027. The official mass production timing remains subject to customer deployment schedules. Nevertheless, we expect our shipments in 2027 to be significantly higher than in 2026, starting to make meaningful contributions to our financials. At the same time, we are also co-developing next-generation optical solutions with customers, featuring higher fiber count architectures, enhanced optical precision, and increasingly sophisticated designs such as CWDM or coarse wavelength division multiplexing to address the explosive bandwidth demands of HPC and AI data center applications. With that, I will now begin with an update on the large panel driver IC business. In Q3, large display driver IC sales are expected to decline by single digits from last quarter.

Speaker #1: Nevertheless, we expect our shipments in 2027 to be significantly higher than in 2026. Starting to make meaningful contributions to our financials. At the same time, we are also co-developing next-generation optical solutions with customers.

Speaker #1: Featuring higher fiber count architectures, enhanced optical precision, and increasingly sophisticated designs such as CWDM or coarse wavelength division multiplexing. To address the explosive bandwidth demands of WPC and AI data center applications.

Speaker #1: With that, I will now begin with an update on the large panel driver IC business. In Q3, large display driver IC sales are expected to decline by single digit from last quarter.

Jordan Wu: Monitor IC sales are expected to decline quarter-over-quarter as customers already pull forward inventory purchases in prior quarters. In contrast, TDIC sales are poised for sequential increases, driven by higher legacy product shipments to key customers. Looking ahead in the notebook market, we are seeing encouraging design momentum, particularly in OLED notebooks, with several industry trends creating favorable tailwinds. DRAM memory prices are accelerating the shift from entry-level to premium notebook models. Further schedule ramp-up of new Gen 8.6 OLED fabs in China later this year and into 2027 is expected to further drive OLED penetration in the notebook market. Himax is well-positioned to capitalize on this favorable industry trend with our comprehensive notebook display, OLED IC portfolio, spanning DDIC, T-Con, power management IC, and touch controllers. This one-stop offering lets us serve customers with a complete solution while increasing our value content per device.

Speaker #1: Monitor IC sales are expected to decline quarter over quarter as customers already pull forward inventory purchases in prior quarters. In contrast, TV IC sales are poised for sequential increases.

Speaker #1: Driven by higher legacy product shipments to key customers. Looking ahead in the notebook market, we are seeing encouraging design momentum particularly in OLED notebooks with several industry trends creating favorable tailwinds.

Speaker #1: Writing memory prices are accelerating the shift from entry-level to premium notebook models while the scheduled ramp-up of new Gen 8.6 OLED fabs in China later this year and in 2027 is expected to further drive OLED penetration in the notebook market.

Speaker #1: Himax is well positioned to capitalize on this favorable industry trends with our comprehensive notebook supply notebook display OLED IC portfolio. Spanning DDIC, TCOM, power management IC, and touch controllers.

Speaker #1: This one-stop offering lets us serve customers with a complete solution while increasing our value content per device. Turning to the small and medium-sized display driver IC business.

Jordan Wu: Turning to the small and medium-sized display driver IC business. In Q3, small and medium-sized display IC business is expected to increase by high single digits from last quarter. Q3 automotive driver IC sales, including TDDI and traditional DDIC, are set to increase by a solid double-digit quarter-over-quarter. This increase reflects broader customer demand for DDIC and TDDI products, together with the mass production of multiple LTDI projects across car brands worldwide. Strong sequential growth underscores the accelerated adoption of larger and more sophisticated automotive displays. Customer demand supported by multiple new projects entering mass production in the coming quarters.

Speaker #1: In Q3, small and medium-sized display IC business with expected to increase by high single digits from last quarter. Q3 automotive driver IC sales including TDDI and traditional DDIC are set to increase by a solid double digit quarter over quarter.

Speaker #1: This increase reflects broader customer demand of DDIC and TDDI products. Together, with the mass production of multiple LTDI projects across car brands worldwide. Strong sequential growth underscores the accelerated adoption of larger and more sophisticated automotive displays with Chinese automakers leading the charge.

Speaker #1: We continue to see healthy underlying customer demand supported by multiple new projects entering mass production in the coming quarters. We expect our full year 2026 automotive IC sales automotive driver IC sales to grow by double digits from last year with strong growth momentum extending into next year as adoption of smart car interiors continue to drive increases in the number, size, and sophistication of displays in both electric and conventional vehicles.

Jordan Wu: We expect our full year 2026 automotive IC sales, automotive driver IC sales, to grow by double digits from last year, with strong growth momentum expanding into next year as adoption of our smart car interiors continue to drive increases in the number, size, and sophistication of displays in both electric and conventional vehicles. As I noted earlier, the industry's shift towards platform standardization is creating meaningful opportunities for Himax. This is evidenced by the growing number of customers adopting our industry-pioneering LTDI and low VDDI T-Con solutions as the standard platform for their ultra-large automotive displays. Following years of customer engagement, several of these projects are now entering mass production across multiple car brands. These ultra-large display panels typically require four or more LTDI chips, and in some cases, more than 10, together with at least one low VDDI T-Con per panel.

Speaker #1: As I noted earlier, the industry shift towards platform standardization is creating meaningful opportunities for Himax. This is evidenced by the growing number of customers adopting our industry pioneering LTDI logo dimming TCOM solutions as the standard platform for their ultra-large automotive displays following years of customer engagement.

Speaker #1: Several of these projects are now entering mass production across multiple car brands. These ultra-large display panels typically require four or more LTDI chips. And in some cases, more than 10.

Speaker #1: Together with at least one logo dimming TCOM per panel, as customers increasingly adopt our solution across multiple ultra-large display platforms, this not only strengthens customer stickiness and maxes more difficult for competitors to compete with us.

Jordan Wu: As customers increasingly adopt our solution across multiple ultra-large display platforms, this not only strengthens customer stickiness and makes it more difficult for competitors to compete with us, but also increases our content value on a per panel and per vehicle basis. Looking ahead, the accelerating adoption of OLED displays in automotive presents a compelling long-term growth opportunity and is poised to become a key pillar of our automotive business. For several years, we've been collaborating closely with leading OLED panel makers in Korea and China, and our comprehensive portfolio of DDIC, T-Con, touch controller ICs, and customized basic solutions gives customers the flexibility to select the solutions that best meet their specific requirements. This broad product coverage and our early customer engagements have already translated into numerous development programs, providing a solid foundation for future growth as premium automotive displays transition from LCD to OLED.

Speaker #1: But also increases our content value on a per panel and per vehicle basis. Looking ahead, the accelerating adoption of OLED displays in automotive presents a competitive long-term growth opportunity and is poised to become a key pillar of our automotive business.

Speaker #1: For several years, we have been collaborating makers in Korea and China. And our comprehensive portfolio of DDICs, TCOMs, touch controller ICs, and customized ASIC solutions gives customers the flexibility to select the solutions that best meet their specific requirements.

Speaker #1: This broad product coverage and our early customer engagements have already translated into numerous development programs providing a solid foundation for future growth as premium automotive displays transition from LCD to OLED.

Speaker #1: With OLED adoption on the way, we continue to introduce innovative ID solutions to address evolving customer needs. For example, our latest TED or TCOM embedded driver IC solution which integrates DDIC and TCOM into a single chip.

Jordan Wu: With OLED adoption on the way, we continue to introduce innovative ID solutions to address evolving customer needs. For example, our latest TDE or T-Con embedded driver IC solution, which integrates DDIC and T-Con into a single chip, offers a cost-effective, flexible, and highly integrated solution ideal for smaller, lower-resolution automotive displays. Our TDE technology is now being adopted across a diverse range of applications, including automotive, robotics, and IT applications, with several projects involving customized basic solutions co-developed with leading global tech customers. Moving to smartphone IC sales, we expect Q3 smartphone revenue to increase quarter-over-quarter, driven by continued shipments for leading smartphone brands' mainstream models and inventory build-up for its upcoming premium models. For HV ICs, Q3 sales are expected to decrease sequentially as capacity constraints limit our ability to support additional shipments.

Speaker #1: Offers a cost-effective flexible and highly integrated solution ideal for smaller lower resolution automotive displays. Our TED technology is now being adopted across a diverse range of applications including automotive robotics and IT applications.

Speaker #1: With several projects evolving, customized ASIC solutions are being co-developed with leading global end customers. Moving to sales, we expect Q3 smartphone revenue to increase quarter over quarter, driven by continued shipments for leading smartphone brands’ mainstream models and inventory build-up for upcoming premium models.

Speaker #1: For tablet ICs, Q3 sales are expected to decrease sequentially as capacity constraints limit our ability to support additional shipments. I would like to now turn to our non-driver IC business update.

Jordan Wu: I would like to now turn to our non-driver IC business update, where we expect Q3 revenue to increase by low-teens sequentially. First, for an update on our T-Con business. We anticipate Q3 T-Con sales to increase by low-teens quarter-over-quarter. Our automotive T-Con business is expected to deliver decent double-digit growth in Q3, extending the strong momentum from Q2 and far outpacing our corporate average. This growth is driven by continued legacy product shipments across a broad, diversified customer base, along with several new projects entering mass production. Despite ongoing industry-wide capacity constraints, we are confident in the strong growth trajectory of our automotive T-Con business. With hundreds of design wins already secured and new design wins continuing to expand, we are well-positioned for another robust growth year in the automotive T-Con as we move into 2027.

Speaker #1: Where we expect Q3 revenue to increase by low teens sequentially. First, for an update on our TCOM business, we anticipate Q3 TCOM sales to increase by low teens quarter over quarter.

Speaker #1: Our automotive TCOM business is expected to deliver decent double-digit growth in Q3 extending the strong momentum from Q2 and far outpacing our corporate average.

Speaker #1: This growth is driven by continued legacy product shipments across a broad diversified customer base. Along with several new projects entering mass production. Despite ongoing industry-wide capacity constraints, we are confident in the strong growth trajectory of our automotive TCOM business.

Speaker #1: With hundreds of design wins already secured, and new design wins continuing to expand, we are well positioned for another robust growth year in automotive TCOM as we move into 2027.

Speaker #1: During the quarter, we are pleased to announce that our T2000 TCOM has been adopted into E Inc's next generation coloring paper platform. Himax proprietary parallel processing architecture is at the core of this ASIC product enabling simultaneous display refresh and data transmission.

Jordan Wu: To announce that our T2000 T-Con has been adopted into E Ink's next generation color e-paper platform. Himax's proprietary parallel processing architecture is at the core of this ASIC product, enabling simultaneous display refresh and data transmission, significantly enhancing dynamic display performance, while preserving the ultralow-power advantage of e-paper technology. This breakthrough enables smoother display of dynamic content on large format e-paper displays, helping accelerate the transition from traditional static signage to dynamic applications such as retail advertising, public information displays, and smart commercial environments. Switching gears to the WiseEye product line, a cutting-edge, ultralow-power, AI sensory solution, targeting battery-powered endpoint devices. WiseEye differentiates itself with an industry-leading ultralow-power architecture, consuming only a few milliwatts while delivering on-device AI inferences, 24 seven always-on image and voice sensing, and an exceptionally compact form factor.

Speaker #1: Significantly, enhancing dynamic display performance while preserving the ultra-low power advantage of e-paper technology. This breakthrough enables smoother display of dynamic content on large format e-paper displays helping accelerate the transition from traditional stacked signage to dynamic applications such as retail advertising public information displays and smart commercial environments.

Speaker #1: Switching gears to the Wi-Fi product line, a cutting-edge ultra-low power AI-sensitive total solution. Targeting battery-powered endpoint devices Wi-Fi differentiates itself with an industry-leading ultra-low power architecture consuming only a few milliwatts while delivering on device AI inferencing.

Speaker #1: 24/7 always-on image and voice sensing. And an exceptionally compact form factor. This unique combination enables endpoint AI devices that were previously impractical due to power and size constraints.

Jordan Wu: This unique combination enables endpoint AI devices that were previously impractical due to power and size constraints, driving broad adoption across applications, including notebooks, surveillance systems, access control, PalmVein authentication, smart office, and smart glasses. With design activities continuing to expand across leading customers worldwide. On the WiseEye module front, design activities continue to expand, driven by its plug-and-play architecture, ultralow-power consumption, and on-device AI capabilities. During the quarter, we were pleased to announce that our WiseEye biometric PalmVein modules achieved the verification of TÜV Rheinland. One of the world's leading and most credible independent testing, inspection, and certification organizations. This assessment validated our recognition accuracy, response speed, and liveness detection. This verification, together with our earlier achievement of GDPR compliance, one of the world's strictest data privacy standards, reinforces the privacy, security, and performance of our biometric authentication solutions.

Speaker #1: Drawing broad adoption across applications including notebooks, surveillance systems, access control, power-van authentication, smart office, and smart glasses, with design activities continuing to expand across leading customers worldwide.

Speaker #1: On the Wi-Fi module front, design activities continue to expand driven by its 45 architecture ultra-low power consumption and on-device AI capabilities. During the quarter, we are pleased to announce that our Wi-Fi biometric power van modules achieved the verification of TUV Redland one of the world's leading and most credible independent testing inspection and certification organizations.

Speaker #1: The assessment validated our recognition accuracy response speed and liveness detection. This verification together with our earlier achievement of GDPR compliance one of the world's strictest data privacy standards reinforces the privacy security and performance of.

Speaker #1: Biometric authentication solutions. Giving customers great confidence to accelerate development across security-sensitive applications. We are seeing expanding design in activities from our power van modules across smart access workforce management, smart door locks, and more.

Jordan Wu: Giving customers greater confidence to accelerate development across security-sensitive applications. We are seeing expanding design-in activities from our PalmVein modules across smart access, workforce management, smart door locks, and more. More recently, computer monitors and smart office solutions. Built on the same core hardware platform as the WiseEye technology, our WiseGuard module is specifically designed for security applications, delivering ultralow-power operation, a wide field of view, long-range detection, and exceptional low light performance. WiseGuard accurately detects and continuously tracks multiple individuals, including their presence, location, and movement. Substantially reducing the false triggers commonly associated with traditional PIR-based solutions. Its proactive, 24/7 sensing capability enables security systems to detect and continuously track activity from the outset. Capturing the full sequence of events rather than only the moment motion is detected. Providing a significant advantage over traditional reactive solutions.

Speaker #1: And more recently, computer monitors and smart office solutions. Build on the same core hardware platform as the Wi-Fi technology. Our white scarf module is specifically designed for security applications.

Speaker #1: Delivering ultra-low power operation for white field of view, long-range detection, and exceptional low light performance. White scar accurately detects and continuously tracks multiple individuals including their presence, location, and movement.

Speaker #1: Substantially reducing the force triggers commonly associated with traditional PR-based solutions. Its proactive 24/7 sensing capability enables security systems to detect and continuously track activity from the outset.

Speaker #1: Capturing the full sequence of events rather than only the moment motion is detected. Providing a significant advantage over traditional reactive solutions. White scar delivers up to five years of battery life.

Jordan Wu: WiseGuard delivers up to 5 years of battery life while maintaining high-precision detection over long distances, even in environments with illumination as low as 1 lux. Since its debut just 6 months ago, WiseGuard has seen encouraging customer engagement across a wide range of applications, including surveillance cameras, access control, IoT, and wildlife monitoring. We are also pleased to share that WiseGuard has already been adopted by a US customer for surveillance applications, with mass production scheduled to begin towards the end of this year. As mentioned earlier, WiseEye is gaining broad market recognition for smart glasses as a compact, ultralow-power, always-on AI perception front end. WiseEye supports our facing environmental sensing, first through scene understanding by analyzing the user's contextual surroundings and environment. Followed by object classification to recognize and identify specific objects physically associated with the identified scene.

Speaker #1: while maintaining high-precision detection over long distances, even in environments with illumination as low as one lux. Since its debut just six months ago, White Scar has seen encouraging customer engagement across a wide range of applications.

Speaker #1: Including surveillance cameras, access control, IoT, and wildlife monitoring. We are also pleased to share that white scar has already been adopted by US customers for surveillance applications with mass production scheduled to begin the world's the end of this year.

Speaker #1: As mentioned earlier, Wi-Fi is gaining broad market recognition for smart glasses as a compact ultra-low power always-on AI perception front end. White eye supports our facing environmental sensing.

Speaker #1: First through seeing understanding by analyzing the user's contextual surroundings and environment. Followed by object classification to recognize and identify specific objects physically associated with the identified scene.

Speaker #1: We also support inward-facing capabilities, including eyeball tracking for intuitive gaze-based interaction and iris authentication for secure identity verification. Together, these capabilities enable AI glasses to continuously capture visual snapshots of the real world and allow intelligent, responsive, low-latency human-machine interaction while consuming only a few milliwatts of power.

Jordan Wu: We also support inner-facing capabilities, including eyeball tracking for intuitive gaze-based interaction, and iris authentication for secure identity verification. Together, these capabilities enable AI glasses to continuously capture visual snapshots of the real world and enable intelligent, responsive, low-latency human machine interaction, while consuming only a few milliwatts of power. With a leading global brand launching WiseEye powered smart glasses this fall, we are seeing growing engagement from platform providers, ODMs, and consumer electronics companies worldwide. Some of these projects are expected to enter mass production in the coming quarters. 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.

Speaker #1: With the leading global brand launching Wi-Fi powered smart glasses this fall, we are seeing growing engagement from platform providers ODMs and customer electronic and consumer electronics companies worldwide.

Speaker #1: Some of these projects are expected to enter mass production in the coming quarters. That concludes my report for this quarter. Thank you for your interest in Himax we appreciate your journey today's call and are now ready to take questions.

Speaker #1: Yes. Thank you, Jordan. And ladies and gentlemen, we are now in question and answer session. If you would like to ask a question, please press star key and number one on your telephone keypad.

Operator: Yes. Thank you, Jordan. Ladies and gentlemen, we are now in question-and-answer session. If you would like to ask the question, please press star key and number 1 on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it's your turn to speak, you may press star key and number 2 to cancel the question. In addition to submitting questions via phone, you may also submit questions through the webcast, where the checkbox is available on the right-hand side of the screen. Thank you. Now for dialing participants, if you would like to ask questions, please press star 1 on your telephone keypad. Thank you. Our first question will be coming from Donnie Teng, Nomura. Go ahead, please.

Speaker #1: And you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before your turn to speak, you may press the star key and the number two to cancel the question.

Speaker #1: In addition to submitting questions via phone, you may also submit questions through the webcast, where the checkbox is available on the right-hand side of the screen.

Speaker #1: Thank you. Now for dialing participants if you would like to ask questions, please press star one on your telephone keypad. Thank you. And our first question will be coming from Donnie 10 Nomura.

Speaker #1: Go ahead, please.

Speaker #3: Oh, thank you, Jordan, for taking my question. My first question is regarding to the CPO revenue outlook into 2027. As you mentioned about the revenue could be more meaningful for next year.

Donnie Teng: Thank you, Jordan, for taking my question. My first question is regarding the CPO revenue outlook into 2027. As you mentioned the revenue could be more meaningful for next year. Can you classify how do you define meaningful for 2027? Maybe you can also provide us with the overall business outlook in 2027 as well. Thank you.

Speaker #3: Can you classify how do you define meaningful for 2027? And maybe you can also provide us with the overall business outlook in 2027 as well.

Speaker #3: Thank you.

Speaker #2: All right. Thank you, Donnie. Perhaps let me start with your second question. The outlook for next year. As you know, we don't usually provide guidance beyond one quarter.

Jordan Wu: All right. Thank you, Donnie. Perhaps let me start with your second question, the outlook for next year. As you know, we don't usually provide guidance beyond one quarter, but we are well-positioned, I think, to see robust sales growth for next year, with continuously improved gross margin. As you know, our gross margin this year has improved from last year. We believe the trend is likely to continue next year. Before I elaborate further, there is one important thing for clarification. As you mentioned in your question, Donnie.

Speaker #2: But we are positioned, I think, to see robust sales growth for next year. With continuously improved gross margin. As you know, our gross margin this year has improved from last year.

Speaker #2: And we believe the trend is likely to continue. Next year. Before I elaborate further, there is one important thing for clarification. And as you mentioned in your question, Donnie, we are going to for the time being, and before CPO starts mass production officially, it's a good idea that we kind of separate our CPO for our outlook discussion because part of CPO is arguably a once in a lifetime opportunity for Himax at the pre-mass production stage.

Jordan Wu: We are going to, for the time being, and before CPO starts mass production officially, it's a good idea that we kind of separate our CPO for our outlook discussion because, while CPO is arguably a once-in-a-lifetime opportunity for Himax, at the pre-mass production stage, its outlook will be too uncertain to qualify, at least for the purpose of outlook comments. What I'm about to say below does not include contributions from CPO. I will leave the comments on CPO for the next question, which you already just raised. We start now back to our view on to 2027. I think a very important trend for next year, our financials, is that the non-driver areas will likely outgrow driver ICs, with revenue contribution approaching 30% from around 20% at present.

Speaker #2: Its outlook will be two uncertain to quantify at least for the purpose of outlook comment. So what I'm about to say below does not include contributions from CPO.

Speaker #2: And I will leave the comments on CPO for the next question which you already just raised. So we start now back to our view on 2027.

Speaker #2: I think a very important trend for next year, our financials is that the non-driver areas will likely outgrow driver ICs. With revenue contribution approaching 30% from around 20% at present.

Jordan Wu: This is driven mainly by automotive key accounts, which will enjoy another year of very strong growth, thanks to our robust design pipeline. The Wi-Fi product line for new applications such as smart glasses, WiseEye module, and PalmVein authentication, which I mentioned in my prepared remarks, are well-positioned to contribute to growth momentum. As to our kind of mainstream automotive business, now over half of our sales, it will continue to grow as well on top of a year of double-digit growth this year. In saying so, we are assuming a flattish year for global vehicle shipment, which I think is a fair assumption, implying our confidence to outperform the auto market again like we do this year and actually the last few years. Our positive outlook is driven by two factors.

Speaker #2: This is driven mainly by automotive T-cons which will enjoy another year of very strong growth. Thanks to our robust design impact plan. And the Wi-Fi product line for new applications such as smart glasses or scar module and pump vent authentication which I mentioned in my prepared remarks.

Speaker #2: Are all well positioned to contribute to gross momentum. As to our kind of mainstream automotive business. Now over half of our sales. It will continue to grow as well on top of a year of double digit growth this year.

Speaker #2: In saying so, we are assuming a fetish year for global vehicle shipment. Which I think is a fair assumption. Implying our confidence to outperform the auto market again like we do this year and actually the last few years.

Speaker #2: Our positive outlook is driven by two factors. One, the continuous growth of number of displays per vehicle. Which has already exceeded three this year.

Jordan Wu: One, the continuous growth of number of displays per vehicle, which has already exceeded three this year from almost 15 years back. Two, more importantly, the fast rising IC content per automotive display. In other words, both the number of display and content value per display will continue the favorable trend that we've experienced over the last few years. I'll take HUD as an example. We mentioned about HUD in our prepared remarks. HUD used to be a tiny niche market that did not use LCD for image projection. Starting just a few years ago, HUD has become one of the strongest growth segments within our design win pipeline. Now we have many such design wins for HUD waiting for lineup for mass production starting this year and over the next few years.

Speaker #2: From almost now 15 years back. And two, more importantly, the fast rising IC content per display per automotive display. In other words, both the number of display and content value per display will continue to will continue the favorable trend that we have experienced over the last few years.

Speaker #2: So I'll take HUD as an example. We mentioned about HUD in our prepared remarks. HUD used to be a tiny niche market that did not use the LCD for image projection.

Speaker #2: Starting just a few years ago, HUD has become one of the strongest segments, growth segments within our design wind pipeline. Now we have many, many such design winds for HUD within for lineup for mass production.

Speaker #2: Starting this year and over the next few years. Every new HUD in the car represents net increase in number of LCD displays per vehicle as almost all new HUDs now use LCD.

Jordan Wu: Every new HUD in a car represents an increase in number of LCD displays per vehicle, as almost all new HUDs now use LCD for image projection, and i.e., requiring our solution. Himax has been leading the charge in supporting the industry's new HUD designs, which require not only traditional DDIC, but also very sophisticated TCADs for what we so-call dewarping and the elimination of so-called postcard effect. Perhaps for those who are not familiar with this, dewarping is a feature in our HUD TCAD that kind of mathematically counteracts optical distortion caused by the curved surface of windshield. Okay, that's dewarping. Postcard effect is a visual artifact, so to speak. A visual artifact where the rectangular borders of the projection become kind of illuminated and visible by the driver, which is bad, right? Our TCAD can get rid of that artifact.

Speaker #2: For image projection and IE requiring our solution. Himax has been leading the charge in supporting the industry's new HUD designs which require not only traditional DDIC but also very sophisticated T-cons for what we so-called the walk-in.

Speaker #2: And the elimination of so-called post-car effect. Perhaps for those who are not familiar with this, the walk-in is a feature in our HUD T-con that kind of mathematically counteracts optimal distortion caused by the curved surface of windshield.

Speaker #2: Okay, that's the walk-in. And post-car effect is a visual artifact, so to speak. A visual artifact where the rectangular borders of the projection become kind of illuminated and visible by the driver who is back, right?

Speaker #2: So our T-con can get rid of that artifact. Such advanced features add significantly to our IC content value and have become a strong moat that helps spend of competitors.

Jordan Wu: Such advanced features add significantly to IC content value and have become a strong moat that helps fend off competitors. I would say LTDI, which again, we also mentioned in our prepared remarks, is also a good example where we pioneered the technology concept a few years back, targeting ultra-large size automotive displays requiring touch functionality. We are now the exclusive supplier of the solution in the market right now, which numbers at least five chips per panel, including one T-Con. For higher-end designs, more than 10. Our LTDI solution is ramping nicely this year across several leading auto brands with a solid and still expanding design win pipeline. Perhaps the last, but certainly not the least important example is the higher value for display content for ICs, the OLED display for automotive.

Speaker #2: And I would say LCDI which again we also mentioned in our prepared remarks is also a good example where we pioneer the technology concept a few years back.

Speaker #2: Targeting ultra-large size automotive displays requiring touch functionality. We are now the exclusive supplier of the solution in the market right now which numbers at least five ships per panel including one T-con.

Speaker #2: And for higher-end designs more than 10. Our LTDI solution is ramping nicely this year. Across several leading auto brands with a solid and still expanding design wind pipeline.

Speaker #2: Perhaps the last but certainly not the least important example is the higher value per display content for IC is the OLED display. For automotive.

Speaker #2: There we offer DDIC T-con, TED, and discrete touch controller each of them having higher SP compared to low CLC LCD panels. Because of the more complicated features required of OLED displays.

Jordan Wu: There we offer DDIC, TCAD, TET, and discrete touch controller, each of them having higher ASP compared to those LCD panels because of the more complicated features required of OLED displays. Because OLED is now projected to replace LCD over time, over the next few years, for high-end auto displays, we are working closely with several leading OLED panel makers in Korea and China, with major ramp expected starting from probably H2 next year and certainly well into 2028. In short, while again, we don't give our vision guidance for next year, so I'm not going to be able to quantify the growth, but we are quite positive about the prospect of our automotive business for next year. Having said that, the industry supply will remain tight, which literally all major foundries indicated further price hikes next year.

Speaker #2: And because OLED is not projected to replace LCD over time, over the next few years, for high-end auto displays, we are working closely with several leading OLED panel makers in Korea and China, with major ramping expected starting from probably the second half of next year and certainly well into 2028.

Speaker #2: So in short, while again we don't give our official guidance for next year so I'm not going to be able to quantify the growth but we are quite positive about the prospect of our automotive business.

Speaker #2: For next year. Having said that the industry supply will remain tight with literally all major foundries including indicated further price hikes next year. Certainly all foundries in Taiwan and to a great extent major foundries in China as well.

Jordan Wu: Certainly, all foundries in Taiwan and to a great extent, major foundries in China as well. It's just something we will need to continue to manage like we have done so far this year. I hope that addresses your second question for next year's outlook. Your first question about the CPO sales indication, sales outlook for next year. Again, I will not be able to quantify that. Qualitatively, what I can say is that for sure, CPO will see very significant growth next year. We'll be comparing it with the low base this year. The extent of CPO's contribution to our overall financials next year will depend on when the end customers kick off mass production, and obviously, the revenue curve. For now, it is too early to say.

Speaker #2: So it's just something we will need to continue to manage like we have done so far this year. So I hope that is that addresses your second question for next year's outlook.

Speaker #2: And about CPO sales indication, right? Sales outlook. For next year. Again, I will not be able to quantify that. But so qualitatively what I can say is that the for sure CPO will see very significant growth next year.

Speaker #2: But will be comparing with the low base this year, right? But the growth will be very significant. The extent of CPO's contribution to our overall financial next year will depend on when the end customer kickoff mass production and obviously the rapid curve.

Speaker #2: For now it is too early to say. But as I said earlier, even in the most conservative scenario, CPO will make a meaningful contribution to our financials, especially the bottom line.

Jordan Wu: As I said earlier, even in the most conservative scenario, CPO will make a meaningful contribution to our financials, especially the bottom line, starting 2027. We saw this growth quarter-over-quarter, starting from this quarter, next quarter, and throughout the whole of next year. While the volume indication from end customers is actually extremely high. The main goal for us this year is still, for us and our partner FOCI, is still to complete a validation of our products by key customers/partners in terms of both quality and manufacturability. As I said earlier, revenue contribution during this year will still be limited. However, we are seeing quite significant growth this quarter, and another very significant growth next quarter out of engineering runs.

Speaker #2: Starting 2027. With volume growth quarter over quarter starting from this quarter and next quarter and throughout the whole next year. While the volume indication from end customers is actually extremely, extremely high.

Speaker #2: So we start the main goal for us this year is still for us and our partner forces is still to complete the validation of our products by key customers slash partner in terms of both quality and manufacturability.

Speaker #2: But as I said earlier, revenue contribution during this year will still be limited. However, we are seeing quite significant growth this quarter. And another very significant growth next quarter.

Speaker #2: Out of engineering rounds. Again, while we don't comment on the exact time in the mass production, because the ecosystem is far too complicated for us to even speculate.

Jordan Wu: Again, while we don't comment on the exact timing of mass production, because the ecosystem is far too complicated for us to even speculate the exact timing of mass production. We should be able to see meaningful top and bottom line contribution from the CPO product starting in 2027. Actually, even before we share mass production, early shipments for engineering runs will already have positive impact on our financials starting 2027. Now, you asked me to quantify what is meaningful. I guess meaningful means meaningful, right? Meaningful means it's not going to be low single-digit percentage. Certainly nothing for the far bottom line, right? Meaningful is something we can actually, when it happens, we can categorize it and elaborate further. It's not going to be marginally negligible addition to our financials.

Speaker #2: The exact timing of mass production we should be able to see meaningful top and bottom line contribution from the CPO product starting in 2027.

Speaker #2: And actually even before official mass production, early shipments for engineering rounds will already have positive impact on our financial starting

Speaker #1: Is now . You asked me to quantify , you know , what is meaningful . I guess meaningful means meaningful , right ? , , meaningful means that it's not going to be like , you know , no single digit percentage , certainly , , , , certainly not for the bottom line , right .

Speaker #1: So , , meaningful is something we can actually , when it happens , we can . Categorize it and elaborate further . , it's not going to be like marginally , you know , negligible .

Speaker #1: , addition to our , , financials , , but again , you know , whereas some early education , , for next year's volume has been kind of provided by customers , I think it's , again , this year , we should focus on validation and , , and once we are , we have a solid footing on that , , with customers , , firmer , you know , indication of multiple timetable and wrapping curve , hopefully in not too distant future , we'll be able to better quantify the , , the impact to our financials , But I guess , , it is fair to say that our confidence level towards successful mass production continues to rise .

Jordan Wu: Again, while some early indication for next year's volume has been provided by end customers, I think it's, again, this year we should focus on validation. Once we have a solid footing on that with customers, a firmer indication of mass production timetable and revenue curve, hopefully, in not too distant future, we'll be able to better quantify the impact to our financials. I guess it is fair to say that our confidence level towards successful mass production continues to rise. Our confidence level continues to rise. It has surely risen to another level compared to even just a quarter ago. I guess the last point I want to say is that in close collaboration with a few top customers, FOCI us. We are focusing on what we call Gen 2 product right now, which is a high-end product supporting 6.4T bandwidth or higher.

Speaker #1: Our confidence level continues to rise . And it has surely risen to another level compared to even just a quarter ago . , and , , I guess the last point I want to say is that , , , in close collaboration , collaboration with a few top customers , , forces us , , we are focusing on , , how we call gentle products right now , which is , , a high end product supporting 6.4 T bandwidth or higher , , and it is a spec for the time being that is , , position for the market with the biggest potential .

Jordan Wu: It is a spec for the time being, that is positioned for the market with the biggest volume potential. Actually, we will continue to make innovative designs for our optics to meet the ever-rising needs of higher transmission bandwidth, with the next target, next goal being 12.8T. It's going to be a long road ahead. Again, I said earlier, I think it's once in a lifetime opportunity for Himax, this CPO opportunity. I hope that addresses your question, Tommy.

Speaker #1: , and actually we will continue to make , , innovative designs for optics to meet the ever rising needs of higher sense bandwidth with less , , target next goal being , , 12.8 T .

Speaker #1: So it's going to be a long road ahead . , and again , I said earlier , I think it's , , once in a lifetime opportunity for Himax is CT opportunity .

Speaker #1: I hope that is question .

Speaker #2: Okay . Thank you . Jordan

Donnie Teng: Okay. Thank you, Jordan.

Speaker #3: Thank you Next one . Tiffany . Morgan Stanley . Go ahead please .

Operator: Thank you. Next one, Ting Yun Ye, Morgan Stanley. Go ahead, please.

Ting Yun Ye: Thanks, Jordan. Thanks, Karen, for taking my question. I would like to follow up on the CPO front. I think there are many peers or emerging players that want to tap into this FAU or I would say WLO market. May I ask how you would address this competition and what are Himax key advantages over the peers? Yeah. Thank you.

Speaker #4: Thanks , Jordan . Thanks , for taking my question . , so , , I would like to follow up on the CPO front .

Speaker #4: I think there are many , , peers or , emerging players that want to tap into this . , for you or I would say , , well , market , , may I ask your how you would address this competition and what are himax key advantages over the peers Yeah .

Speaker #5: Thank you . Okay . Thank you . Tiffany .

Jordan Wu: Okay. Thank you, Ting Yun Ye. It's a good question. I think, as far as we know, we're probably the only one providing optics using Wafer-Level Optics, or other-based solution, or traditional molding glass type of technology. I think there's a key difference. We certainly believe our technology offers a lot of advantages, but nobody has proven itself by having a big volume mass production yet. I think we just have to prove it by actually doing it successfully. Having said that, I think our technologies together with FOCI, is much more mature compared to the peers as far as we can tell. Having said that, I think, again, our focus for now is the mindset for now, for us, is not to worry too much about competition, but we are the enemy. We are our own enemy.

Speaker #1: It's a good question . , I think , , as far as we know , we are the , we're probably the only one providing optics using , , , available optics .

Speaker #1: , , or whatever based , , solution or , , , , , , the , the so-called competition actually use traditional , , molding glass type of technology .

Speaker #1: So I think there's a key difference . And we certainly believe our technology offers a lot of advantages , but okay , nobody has , , has , proven itself by having , , big body mass production yet .

Speaker #1: So I think it's , , we just have , we just have to prove it by actually , , , doing it successfully Now .

Speaker #1: Having said that , I think , , we are our technology is together with , , is much more mature compared to the peers as far as we can tell , so we , I , , but having said that , I think , , again , our , our focus for now is we , the mindset for now , , for us is not to worry too much about competition , but , you know , we are the , we are our , own enemy .

Speaker #1: , for the time being , , we , we focus on getting our , you know , our products very , this solidly and , , and we , our customers , , requests for volume , you know , try to wrap the volume successfully with good year with outcome , , to meet their demands .

Jordan Wu: For the time being, we focus on getting our products validated this year solidly and with customers' requests for volume, try to ramp the volume successfully with good yield and good outcome, to meet their demands. I think, again, it's also a policy for us not to comment about our competition. I think for the time being, the most important thing for us is to focus on sales efforts for successful mass production. Having said that, I think, again, I said, this is a market, is a once-in-a-lifetime opportunity kind of market. The market is so big. I can't imagine a few years down the road, Himax and FOCI will be the only player, the only vendor in the market. It's just unthinkable because the market is so big, and I don't think anybody can take 100% of the market, right?

Speaker #1: And I think , , so again , we , we , you know , I , I , I guess , , also it's a policy for us not to comment about our competition .

Speaker #1: , but I think for the time being , the most important thing for us is , , is , , to focus ourselves efforts for successful mass production , having said that , I think , , you know , again , I said , , this is the market .

Speaker #1: It's a once in a lifetime opportunity kind of market . The market is so big , I can't imagine a few years down the road .

Speaker #1: Himax Technologies, Inc. will be the only player , the only vendor in the market . It's just unthinkable because the market is so big .

Speaker #1: And I don't think anybody can can , , take 100% of the market . Right . So , so for us , I think it's , , it's , , the mindset again is , , focus on our own efforts .

Jordan Wu: For us, I think the mindset again, is focus on our efforts, bring successful mass production, and hoping we'll be one of the earliest and we'll be serving among the best customers. We'll take it from there. I think, lastly, certainly, we have a lot of analysis on the pros and cons of our technology versus others, but again, I'm not going to comment on that publicly. Last but not least, the market is too big for anybody to try to take it 100%, and it's a market big enough for actually quite a few players to prosper tremendously, I think. Now the important thing is to bring it up successfully and to prove it. It's a real technology. It's a real deal.

Speaker #1: Bring successful mass production and hoping will be the one of the earliest and , , we'll be serving , you know , among the best customers and we'll take it from there , , , and I think I , I , lastly , I certainly , we have a lot of analysis on the pros and cons of our technology versus others , but again , I , am not going to comment on that .

Speaker #1: , publicly , , and , , and , and last , but , but not , , last but not least , the market is too big .

Speaker #1: , for anybody to , , try to take it on . And it's a market big enough for actually quite a few players to , to prosper tremendously .

Speaker #1: I think . And now the important thing is to bring it up successfully and to prove it is a it's a real technology .

Speaker #1: It's a real deal

Speaker #4: All right . Very clear . I have a question regarding the overall CPU industry . Yes . As you guys have been working with Fozzy on all these production , , preparations for so many years .

Ting Yun Ye: All right, Barry. Great. I have a question regarding the overall CPO industry. As you guys have been working with FOCI on all these mass production preparations for so many years, I think you're also in talk with other guys in the supply chain. What do you think are the biggest bottlenecks for CPO mass production right now? You think how much time it would take for this to be conquered? Thank you.

Speaker #4: , I think you also talk with other guys in the supply chain . , what do you think are the biggest bottleneck for CPO mass production right now ?

Speaker #4: And , , , you think how much time it would take for this to be conquered . Thank you .

Speaker #1: , we are very , very upstream , right . So , I mean , you probably asked the wrong person to make a comment for the so-called bottleneck throughout the entire ecosystem .

Jordan Wu: We are very upstream, right? You probably ask the wrong person to make a comment for the so-called bottleneck throughout the entire ecosystem. What I can say, what I want to emphasize is that the ecosystem admittedly is actually quite complicated. Our focus for now is to, again, make sure we are not going to be the bottleneck, right? We don't want to be the bottleneck ourselves, technology-wise, that's point 1. Once the mass production gets started, we don't want to be the bottleneck for capacity as well. That's the goal. As to the bottleneck of the whole ecosystem, to be honest, I really don't know because. Well, what I can say is, the software engineers, which will have some meaningful volume by us at FOCI by the end of this year.

Speaker #1: I mean , what what I can say , I want to I want to emphasize is that , , the ecosystem admittedly is actually quite complicated .

Speaker #1: And , , and our focus for now is to , again , make sure we are not going to be the bottleneck , right ?

Speaker #1: So we don't want to be the bottleneck ourselves technology wise . That's step one . And once the mass production , , get started , we don't want to be the bottleneck for , , capacity as well .

Speaker #1: And that's the goal . , as to , The bottleneck of the whole ecosystem , to be honest , I really don't know because , , you know I can say is , , , the engineering , the so-called engineering roles , which will have some meaningful body , right by us at foresee , , over the next , , or by the end of this year , let's say by the end of this year , it's not just to validate our solution , but also to validate the whole ecosystem .

Jordan Wu: It's not just to validate our solution, but also to validate the whole ecosystem. Our technology will be used, will be taken to validate our end customers, the major GPU and CPU makers of the world, their total solution. With that, they will also take their solution to their server customers, and certainly the backend house, all OSAT houses too have to put the covers or whatnot. The FAU together with TSMC's CoWoS solution and all that, right? By the end of this year at least, I think there will be a lot of effort. For that, our optics, we did FAU first. Our FAU has to be validated in itself.

Speaker #1: So our technology will be used , will be taken to validate our customers , , , the major , you know , GPU and CPU makers of the world , they are , they are called solution .

Speaker #1: And we start , they will also take their solution to their server customers . And certainly the back end house or outside houses still have to put the , , the Cold War or whatnot .

Speaker #1: Right ? The , the , the four together with , , the , the , the TSMC's scope solution and all that , right .

Speaker #1: So , , over the next , , by the end of this year , at least , I think there will be a lot of efforts in this regard .

Speaker #1: But we've been the very upstream we have to provide our value . And for that , our optics within four first , , and our four has to be validated in itself .

Speaker #1: Then we could have a . You , , the ecosystem can start to validate the , the packaging , the assembly of the , the whole module .

Jordan Wu: With good FAU, the ecosystem can start to validate the packaging, the assembly of the whole module, all the way down to servers, and eventually, probably change of algorithm too, because transmission methodology will be different, right? Compared to traditional metal-based transmission. I think, to be honest, it's far too complicated for me to comment. All I can say is, we don't want to be the bottleneck ourselves. That's the goal.

Speaker #1: And then the , , all the way down to , you know , , servers and eventually , you know , probably change of algorithm to because transmission methodology will be different , right ?

Speaker #1: Compared to traditional , , , metal face transmission . So I think , , to be honest , it's far too complicated for me to comment .

Speaker #1: , I , and all I can say is we don't want to be the bottleneck ourselves . That's the , the goal

Speaker #4: Got it . Thank you . Jordan .

Operator: Okay. Thank you, Jordan.

Speaker #5: Thank you . Tiffany

Jordan Wu: Thank you.

Speaker #3: Thank you

Operator: Thank you.

Jordan Wu: One question from online box. How do you expect your smart glasses revenue to trend in 2027? Do you expect smart glasses revenue to be large next year? We have recently evolved WiseEye, right? Which we are not going to repeat it. We have mentioned, elaborated in our prepared remarks. AR LCOS will be for the future, right? AR LCOS for now is too thick design win, so that is not going to be a mass production story for next year. WiseEye, however, will very much a story for next year, for smart glasses. We mentioned, there's a major customer, which has launched its product a while back, with our WiseEye, serving the function of always-on visual understanding of the surroundings. We actually asked the major end customer about volume potential, and the response from them is, they're just getting it started, right, promotion-wise.

Speaker #1: , one question from online box . How do you expect your smart glasses revenue to trend in 27 ? Do you expect smart glasses revenue To be lost next year , we , , we are talking about wildlife , right ?

Speaker #1: Which we are not going to repeat it . We have mentioned , , evaporated in our prepared remarks . , of course , will be for the future , right ?

Speaker #1: Of course , for now is to seek , , design with . So that is , , not going to be a mass production story for next year .

Speaker #1: . However , we're very much a story for next year . , for smart glasses . , we mentioned , , there's a major customer , , which just launched its product , , a while back , , with , , with our website .

Speaker #1: Serving the function of always long visual , , understanding of the surroundings , , we actually asked the , the , the , the , the magic and customer above all the potential and the response from them is , , is , is , , they're just getting it started , right ?

Speaker #1: Promotion wise . So they , they have to wait a while for us , for them to give us a more meaningful feedback .

Jordan Wu: They have to wait a while for them to give us a more fitting, meaningful feedback. We are not getting one or the other conservative or pessimistic or positive feedbacks from them yet, for understandable reasons. I think what's equally exciting is that there are quite a number of major design in or design win projects in the pipeline that we certainly haven't announced because the customer is not fully ready yet. They involve, in some cases, major hyperscalers who have not been known to be offering hardware devices like smartphone as part of their business portfolio. They are very much into smart glasses because they all see smart glasses as a very good counter tool for their AI models, right, to get useful data, useful information of the actual users.

Speaker #1: , so , so we are not getting , you know , one or the other . You know , conservative or pessimistic , , or positive feedbacks from them .

Speaker #1: Yet for understandable reasons , , I think what's , , equally exciting is that there are , , quite a number of , , major design in or design win projects in the pipeline that we certainly , we haven't announced because the customer is not fully ready yet .

Speaker #1: , they involve , , in some cases , , major hyperscalers who have not known to be offering like hardware devices like smartphones .

Speaker #1: Right . , it's , , it's part of their business portfolio , but they are very much into , , smart glasses because , , you know , they are all seeing smart glasses as a very good , , contour for , to , for , for their AI models , right to , to , to , to get , , you know , to get , , useful data , useful information , , of , , of the actual users .

Speaker #1: So I think we are seeing very strong design momentum and which each major customer they are , how they use , , we see , , not totally identical , you know , everybody is trying to be innovative and in our prepared remarks , what we mentioned is , broadly speaking , a typical like usage concept where we are always , you know , watching the , , the surroundings on a continuous basis .

Jordan Wu: I think we are seeing very strong design momentum. Each major customer, how they use WiseEye are not totally identical. Everybody is trying to be innovative. In our prepared remarks, what we mentioned is broadly speaking, a typical like in this concept where we are always on, watching the surroundings on a continuous basis. First we determine the scene that you are standing in, we then do object classification. With that you can have AI interaction, right? That is a common theme. All I can say is, probably give us two or more quarters, we should be able to quantify it better.

Speaker #1: And then , , first we determine the see that you are standing in and then we start to then , , do object classification and we start , you can have , , AI interaction , right ?

Speaker #1: So that is , , it's a common theme . , so all I can say is , , probably give us two or more quarters .

Speaker #1: We should be able to quantify it better , but for now , we , we can see the momentum , but even with the first customer mentioned them with a very , , high profile launch , we are not really getting feedback yet in terms of , , in terms of , , number of ships , they , they need for next year or the year after .

Jordan Wu: For now, we can see the momentum, even with the first customer, a major name with a very high-profile launch, we are not really getting feedback yet in terms of number of ships they need for next year or the year after. The momentum is very strong. I am afraid it is too early for me to give a quantitative comment yet. Hopefully, in a few quarters time, we will be able to provide better answers.

Speaker #1: So the momentum is very strong , but it's , I'm afraid it's too early for me to give a quantitative comment yet . Hopefully in a few quarters time , we will be able to provide better answers

Speaker #3: Yes . Thank you . Jordan . There are no questions at the moment . We thank you for all your questions , and I'll pass the call back to Mr. Jordan Wu .

Operator: Yes. Thank you, Jordan. There are no questions at the moment. We thank you for all your questions. I'll pass the call back to Mr. Jordan Wu. Please proceed. Thank you.

Speaker #3: Please proceed . Thank you .

Speaker #5: Thank you .

Jordan Wu: Thank you. As a final note, Karen Tiao, our Head of IR/PR, will attend investor marketing activities and continue to attend investor conferences. We'll announce the details as they come about. Thank you. Have a nice day.

Speaker #1: , as a final note , Karen Tiao , our head of PR will maintain , , investor marketing activities and continue to attend investor conferences .

Speaker #1: We will announce the details as they come about. Thank you, and have a nice day.

Speaker #3: Thank you . Jordan . And ladies and gentlemen , this concludes second quarter 2020 Earnings Conference . You may now disconnect . Thank you again .

Operator: Thank you, Jordan. Ladies and gentlemen, this concludes Q2 2026 Earnings Conference. You may now disconnect. Thank you again. Goodbye.

Q2 2026 Himax Technologies Inc Earnings Call

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