Q2 2026 E Ink Holdings Inc Earnings Call

August 13, 2026

Speaker #1: Before we begin, I would like to remind you that due to the government air defense exercise taking place this afternoon, mobile networks may be temporarily reduced in certain areas.

Operator: Before we begin, I would like to remind you that due to the government air defense exercise taking place this afternoon, mobile network speeds may be temporarily reduced in certain areas, which could affect the audio or video quality of today's webcast. To ensure a stable connection, we recommend using Wi-Fi or wired internet connection and avoiding mobile data such as 4G or 5G. We appreciate your understanding should there be any temporary connection delays during the call.

Speaker #1: Which could affect the audio or video quality of today's webcast. To ensure a stable connection, we recommend using Wi-Fi or wired internet connection, and avoiding mobile data such as 4G or 5G.

Speaker #1: We appreciate your understanding should there be any temporary connection delays during the call. All participants are currently in a listen-only mode. After the presentation, we will open the floor for Q&A session.

Operator: All participants are currently in a listen-only mode. After the presentation, we will open the floor for a Q&A session. Today's conference is being recorded. The Webex replay will be available on E Ink's website after the conference. Joining us today are CFO Lloyd Chen and Finance Center Senior Director Patrick Chang. With that, I'll turn the call over to Lloyd for presentation.

Speaker #1: Today's conference is being recorded. The Webex replay will be available on E Ink's website after the conference. Joining us today are CFO Lloyd Chen and Finance Center Senior Director Patrick Zhang.

Speaker #1: With that, I'll turn the call over to Lloyd for presentation.

Speaker #2: Good afternoon, everyone. Before diving into the course themes out, considering that some of you may not have had a chance to visit our computer techs booth in person, so let me take this opportunity to give you a quick walkthrough of our key exhibition highlights and latest innovations.

Lloyd Chen: Good afternoon, everyone. Before diving into the quarterly results, considering that some of you may not have had a chance to visit our COMPUTEX booth in person, let me take this opportunity to give you a quick walkthrough of our key exhibition highlights and latest innovations. As you can see from the screen, on the upper left is the BMW iX Flow.

Speaker #2: As you can see from the screen, on the upper left is the BMW iX3 Flow. I'm sure you'll see a vehicle hood. Basically, that's a car featuring E Ink Prism black and white flexible E paper.

Lloyd Chen: I'm sure you see a vehicle hood. Basically, that's a car featuring E Ink Prism black and white flexible ePaper. It has passed BMW rigorous automotive qualification tests, and is the world's first vehicle to adopt E Ink Prism and move toward mass production. On the center left, the color concept car demonstrates the potential of Prism color ePaper for 3D surfaces and dynamic color changes.

Speaker #2: It has passed BMW rigorous automotive qualification tests and is the world's first vehicle to adopt E Ink Prism and move toward mass production. On the center left, the color concept car demonstrates the potential of Prism color E paper for 3D surfaces and dynamic color changes.

Speaker #2: In the center, background is the E Ink marquee, a large format outdoor color E paper display, scalable up to 136 inches. Featuring ultralow power consumption, white viewing angles, and wide temperature operation.

Lloyd Chen: In the center background is the E Ink Marquee, a large format outdoor color ePaper display, scalable up to 136 inches, featuring ultra-low power consumption, wide viewing angles, and wide temperature operation. On the very left is E Ink Spectra, offering vivid full color performance for indoor retail and commercial advertising, with adoption by LG, Samsung, Sharp, and other global brands.

Speaker #2: On the very left, is E Ink Spectra, offering vivid full color performance for indoor retail and commercial advertising with adoption by LG, Samsung Sharp, and other global brands.

Speaker #2: And let's take a few seconds on the safe harbor statement. All right, next page. Let me begin with an overview of our operating performance in the first half of 2026.

Lloyd Chen: Let's take a few seconds on the safe harbor statement. All right, next page. Let me begin with an overview of our operating performance in H1 2026. Revenue for H1 reached TWD 18.8 billion, representing year-over-year growth of approximately 1%. Operating profit was TWD 6.36 billion, with an operating margin of 34%. Net profit totaled TWD 6.52 billion. EPS were TWD 5.65.

Speaker #2: Revenue for the first half reached 18.8 billion NT, representing year-over-year growth of approximately 1%. Operating profit was 6.36 NT billion, with an operating margin of 34.

Speaker #2: Net profit totaled 6.52 billion NT, and EPS were 5.65 NT. The increase in non-operating income was mainly attributable to foreign exchange gains. The US dollar depreciated significantly last year, first half, due to the tariff impact.

Lloyd Chen: The increase in non-operating income was mainly attributable to foreign exchange gains. The US dollar depreciated significantly last year, H1, due to the tariff impact. This resulted in a massive favorable year-over-year impact. H1 of this year, we reached a record high revenue, operating profit, and net profit. Moving on to the next slide, we can see the trends in operating profit. Operating profit for H1, as mentioned earlier, was TWD 6.36 billion. The operating margin remained at approximately 34%. This was relatively flat compared with 2025 level. Basically, year-over-year performance was relatively flat, as mentioned earlier, mainly due to the tariff-driven pull-in last year, and higher memory cost this year. We definitely continue investing in R&D and talent development. Research development and innovation remain the key drivers of our growth and long-term success.

Speaker #2: So resulting a massive favorable year-over-year impact. So first half of this year, we reached a record high revenue operating profit and net profit. And moving on to the next slide, we can see the trends in operating profit.

Speaker #2: So operating profit for the first half, as mentioned earlier, was 6.36 billion NT. And the operating margin remained at approximately 34%, relatively flat compared with 25 level.

Lloyd Chen: The operating margin remained at approximately 34%. This was relatively flat compared with 2025 level. Basically, year-over-year performance was relatively flat, as mentioned earlier, mainly due to the tariff-driven pull-in last year, and higher memory cost this year. We definitely continue investing in R&D and talent development. Research development and innovation remain the key drivers of our growth and long-term success.

Speaker #2: So basically, year-over-year performance was relatively flat, as mentioned earlier, mainly due to the tariff-driven pooling. Last year, you know, and higher memory costs this year.

Speaker #2: And we definitely continue investing R&D and talent development, as research development and innovation remain the key drivers of our growth and long-term success. So on the asset side, our total assets surpassed 100 billion NT in the fourth quarter, last year, and continued to grow steadily reaching 120.9 billion in the second quarter of 2026.

Lloyd Chen: On the asset side, our total assets surpassed TWD 100 billion in Q4 last year and continued to grow steadily, reaching TWD 120.9 billion in Q2 2026, an increase of TWD 22.7 billion or 23% year-over-year. For the cash flow, cash and financial assets continue to increase in Q2, reaching approximately TWD 80.3 billion. This page presents the growth trends in terms of the sales revenue and operating profit for H1 in the past few years. Revenue H1 2026 reached TWD 18.8 billion, more than doubling from the same period in 2021, basically representing 6-year CAGR of 17%. This growth was primarily driven by the ongoing expansion of the applications such as color e-readers, eNotes, ESL, and digital signage.

Speaker #2: And increase of 22.7 billion or 23% year over year. And for the cash flow, cash and financial assets continue to increase in the second quarter.

Speaker #2: Reaching approximately 80.3 billion NT. So this page presents the growth trend in terms of the sales revenue and operating profit. For the first half, in the past few years, revenue first half of 2026 reached 18.8 billion.

Lloyd Chen: This page presents the growth trends in terms of the sales revenue and operating profit for H1 in the past few years. Revenue H1 2026 reached TWD 18.8 billion, more than doubling from the same period in 2021, basically representing 6-year CAGR of 17%. This growth was primarily driven by the ongoing expansion of the applications such as color e-readers, eNotes, ESL, and digital signage.

Speaker #2: More than doubling from the same period in 2021. Basically representing six-year pager of 17%. This growth was primarily driven by the ongoing expansion of applications such as color e-readers, e-notes, ESL, and digital signage.

Speaker #2: And for operating profit, grew from 1.3 billion NT in first half 2021 to 6.4 billion in first half 2026. Basically, delivering six-year pager of 38%.

Lloyd Chen: For operating profit, it grew from TWD 1.3 billion in H1 2021 to TWD 6.4 billion in H1 2026, basically delivering 6-year CAGR of 38%. The reason behind, we continue to shift our strategy from module towards core ePaper materials, supplying this material to ecosystem partner to jointly expand the end application and market opportunities. Next, let's look at our assets and financial position over the same 6-year period. Cash and financial assets grew at CAGR approximately 21%, mainly supported by the steady cash flow generated from our core operation. This has allowed us to build a strong financial position to support future capacity expansion and capital expenditures. For total assets, basically grew at CAGR of approximately 19%, reflecting our continuing investment in new capacity and long-term growth initiatives.

Speaker #2: The reason behind we continue to shift our strategy from modal toward core E paper materials supplying these materials to ecosystem partners to jointly expand the end application and market opportunities.

Speaker #2: And next, let's look at our assets and financial position over the same six-year period. So cash and financial assets grew at pager approximately 21%, many supported by the steady cash flow generated from our core operation.

Lloyd Chen: Cash and financial assets grew at CAGR approximately 21%, mainly supported by the steady cash flow generated from our core operation. This has allowed us to build a strong financial position to support future capacity expansion and capital expenditures. For total assets, basically grew at CAGR of approximately 19%, reflecting our continuing investment in new capacity and long-term growth initiatives.

Speaker #2: This has allowed us to build a strong financial position to support future capacity expansion and capital expenditures. And for total assets, basically grew at pager of approximately 19%, reflecting our continued investment in new capacity and long-term growth initiatives.

Lloyd Chen: Basically, in closing, I would like to share with everyone that while the industry environment may experience short-term fluctuation, headwinds, unfavorable situation, the long-term growth trend of ePaper remain unchanged, still quite intact. We believe we will maintain solid expanding growth momentum moving forward. This page, let's look at some of the latest applications of large size color ePaper across commercial and public spaces. Firstly, at InfoComm 2026, North America largest professional audiovisual exhibition, we showcased our E Ink Marquee large format tiled ePaper display. We are seeing ePaper gradually expand beyond niche applications and become an increasingly important option for next generation digital signage. When you see the screen in the lower left image, that photo basically was taken in Taiwan. We can also see ePaper moving into real world public spaces.

Speaker #2: Basically, in closing, we'd like to share with everyone that while the industry environment may experience short-term fluctuation, headwinds and favorable situation, but the long-term growth trend of E paper remained unchanged, still quite intact.

Speaker #2: And we believe we will maintain solid expanding growth momentum moving forward. So this page let's look at some of the latest applications of large-size color E paper across commercial and public spaces.

Speaker #2: Firstly, at InfoCon 2026, North America's largest professional audio-visual exhibition. We showcased our E Ink Marquee large format tiles E paper display. We are seeing E paper gradually expand beyond niche applications and becoming increasingly important option for next-generation digital signage.

Lloyd Chen: Firstly, at InfoComm 2026, North America largest professional audiovisual exhibition, we showcased our E Ink Marquee large format tiled ePaper display. We are seeing ePaper gradually expand beyond niche applications and become an increasingly important option for next generation digital signage. When you see the screen in the lower left image, that photo basically was taken in Taiwan. We can also see ePaper moving into real world public spaces.

Speaker #2: And when you see the screen in the lower left, image that photo basically was taken in Taiwan. We can also see E paper moving into a real-world public spaces.

Speaker #2: Taiwan International Airport basically is in Taiwan, Terminal 2, has deployed 75-inch Kaleido color E paper advertising displays. So while waiting for their luggage, passengers can comfortably view advertisements and other information on the displays.

Lloyd Chen: Taoyuan International Airport, basically it's in Taiwan, Terminal 2, has deployed a 75-inch Kaleido color ePaper advertising display. While waiting for their luggage, passengers can comfortably view advertisement and other information on the displays. Since ePaper only consume power when the image is updated, it is especially well-suited for the places like airports, where information needs to remain visible for long period of time. This also demonstrate the potential of large size color ePaper in digital advertising and public information displays. Finally, in the retail and food service environment, ePaper can be used for menus, promotions, and brand advertising in many different locations because ePaper is thin, lightweight, and extremely power efficient. As you can see the image from very right-hand side, it does not require complex power wiring typically needed for conventional digital display.

Speaker #2: Since E paper only consumes power when the image is updated, so it is especially a well-suited for the places like airports where information needs to remain visible for long periods of time.

Lloyd Chen: This also demonstrate the potential of large size color ePaper in digital advertising and public information displays. Finally, in the retail and food service environment, ePaper can be used for menus, promotions, and brand advertising in many different locations because ePaper is thin, lightweight, and extremely power efficient. As you can see the image from very right-hand side, it does not require complex power wiring typically needed for conventional digital display.

Speaker #2: This also demonstrates the potential of large-size color E paper in digital advertising and public information displays. Finally, in the retail, and food service environments, E paper can be used for menus, promotions, and brand advertising in many different locations.

Speaker #2: Because E paper is thin, lightweight, and extremely power-efficient, as you can see in the image from very right-hand side, it does not require complex power writing, typically needed for conventional digital displays.

Lloyd Chen: This makes it much easier to hang or install throughout the store, opens up a new opportunity in spaces when traditional digital display may not have been practical before. And several new e-paper applications developed with our ecosystem partner during the recent quarter. At the upper left, this is very Asian thing, locally Taiwanese thing. It is a world's first e-paper blessing lights, bringing low power and heat-free technology into the traditional cultural application. Basically, those blessing lights are installed in a temple in Taiwan. That is quite unique and a new application that we have been exploring. At the top center, one of our partners, iPolish, their smart nail can switch among up to 400 colors within 5 seconds, expanding e-paper into digital beauty and wearables.

Speaker #2: This makes much more easier to handle or install throughout the store opens up a new opportunity in spaces when traditional digital displays may not have been practical before.

Speaker #2: And several new E paper applications developed with our ecosystem partners during the recent quarter. At the upper left, this is very ancient thing. Locally, Taiwanese thing, it's a word first E paper flashing light, bringing low power and heat-free technology into the traditional cultural application.

Lloyd Chen: It is a world's first e-paper blessing lights, bringing low power and heat-free technology into the traditional cultural application. Basically, those blessing lights are installed in a temple in Taiwan. That is quite unique and a new application that we have been exploring. At the top center, one of our partners, iPolish, their smart nail can switch among up to 400 colors within 5 seconds, expanding e-paper into digital beauty and wearables.

Speaker #2: Basically, those flashing lights are installed in the temple. In Taiwan. So that's quite unique. And new application that we have been exploring. And also, at the top center, one of our partners, iPolish, their SmartNail, can switch among up to 400 colors within 5 seconds.

Speaker #2: Expanding E paper into digital beauty and wearables. At the lower left, once again, E Ink Prism, color-changing E paper is expanding from transportation and consumer products into architecture and smart services.

Lloyd Chen: At the lower left, once again, E Ink Prism color changing e-paper is expanding from transportation and consumer products into architecture and smart surfaces. You can see at the lower right, color e-paper digital frames combine a natural paper-like appearance with ultra-low power consumption for home and art display. So from culture, beauty, to transportation, lifestyle, and art, these applications demonstrate the expanding possibilities of e-paper and our strategy of going new markets together with our ecosystem partners. We also would like to take this opportunity to share a video featuring LG's latest e-paper signage product. So let us take a look. All right. Let us go to the next page. As highlighted in our opening slides, we participated in COMPUTEX for the first time this year, joining hands with over 40 ecosystem partners.

Speaker #2: Also, you can see at the lower right, color E paper digital frames combine a natural paper-like appearance with ultra-low power consumption. For home and art displays.

Speaker #2: So from culture, beauty, to transportation, lifestyle, and art, this application demonstrates the expanding possibilities of E paper in our strategy of going new markets together with our ecosystem partners.

Speaker #2: We also would like to take this opportunity to share a video featuring LG's latest E paper signage product. So let's take a look. All right.

Lloyd Chen: We also would like to take this opportunity to share a video featuring LG's latest e-paper signage product. So let us take a look. All right. Let us go to the next page. As highlighted in our opening slides, we participated in COMPUTEX for the first time this year, joining hands with over 40 ecosystem partners.

Speaker #2: Let's move to the next page. So as highlighted in our opening slides, we participated in Computex for the first time this year. Joining hands with over 40 ecosystem partners.

Speaker #2: So extremely honored that our Spectra 6 E paper display system won the Computex Best Choice Award this year. In the smart city category. And also, we made our debut at InfoCon as mentioned earlier, North America's largest and most influential professional audio-visual and integrated experience exhibition.

Lloyd Chen: Extremely honored that our Spectra 6 E paper display system won the COMPUTEX Best Choice Award this year in the smart city category. We made our debuts at InfoComm. As mentioned earlier, North America's largest and most influential professional audiovisual and integrated experience exhibition. Our latest and greatest technology, Marquee, Spectra 6, Kaleido 3, and Prism, being recognized by the global brands such as BOE, NuFACE, and Sharp. Among them, Marquee also won at InfoComm, Best of Show award in the digital signage categories. Recognized for its vivid colors, wide operating temperatures range, paper-like texture, and ultra-low power consumption. Of course, carbon reduction advantages. Last but not least, I would like to highlight our continued ESG performance over the past quarter.

Speaker #2: So our latest and greatest technology marquee Spectra 6 and Kaleido 3 in Prism. And being recognized by the global brands such as BOE, New Face, and Sharp.

Speaker #2: And among them, marquee basically also won at InfoCon Best of Show Award in the digital signage categories recognized for its vivid colors, white operating temperatures range, paper-like texture, and ultra-low power consumption.

Lloyd Chen: Among them, Marquee also won at InfoComm, Best of Show award in the digital signage categories. Recognized for its vivid colors, wide operating temperatures range, paper-like texture, and ultra-low power consumption. Of course, carbon reduction advantages. Last but not least, I would like to highlight our continued ESG performance over the past quarter.

Speaker #2: Of course, carbon reduction advantages. And last but not least, I would like to highlight our continued ESG performance over the past quarter. So as you can see from the screen, we were included in the S&P Global Sustainability Yearbook 26 for the fifth consecutive year and also ranked as the world's top sustainability performer in the electronic equipment, instruments, components, industry, with second consecutive year.

Lloyd Chen: As you can see from the screen, we were included in S&P Global Sustainability Yearbook 2026 for the fifth consecutive year, and also ranked as the world's top sustainability performer in the electronic equipment, instruments, components industry for a second consecutive year. We achieved a significant improved Fujirasu ESG score. Received 100% green revenue recognition. Also remained a constituent of the FTSE4Good ESG Index Series. For CDP, double A rating for climate change and water security, basically both in A list. We maintain our supplier engagement leader rating. Its carbon reduction pathway also continue to be recognized by the TIPS initiative, the local rating institution, basically aligned with the Paris Agreement's net zero pathway and 1.5 degrees Celsius targets. Last but not least, for the local recognition, we ranked in the top 5% of Taipei Exchange listed company in Taiwan corporate governance evaluation.

Speaker #2: Also, we achieved the significant improved Fujiwara ESG score received 100% green revenue recognition. Also, remains as constituent of the Fuji Fudou ESG Index series.

Speaker #2: For CDP, AA rating, or climate change, and water security, basically both in A list, we maintain our supplier engagement leader rating its carbon reduction pathway also continue to be recognized by the TRIPS initiative the local rating institution basically aligned with the parish agreements net zero pathway and 1.5 sales degree targets.

Lloyd Chen: We maintain our supplier engagement leader rating. Its carbon reduction pathway also continue to be recognized by the TIPS initiative, the local rating institution, basically aligned with the Paris Agreement's net zero pathway and 1.5 degrees Celsius targets. Last but not least, for the local recognition, we ranked in the top 5% of Taipei Exchange listed company in Taiwan corporate governance evaluation.

Speaker #2: So last but not least, for the local recognition, we ranked in the top 5% of Taipei Exchange listed company in Taiwan corporate governance evaluation.

Speaker #2: This is the fourth consecutive year and if combined Taiwan Exchange and Taipei Exchange, we remain in the top 10 companies especially in the category of capital exceeding 10 billion NT this is the second consecutive years representing the highest evaluation tiers.

Lloyd Chen: This is the fourth consecutive year. If combined, Taiwan Stock Exchange and Taipei Exchange, we remain in the top 10 companies, especially in the category of capital exceeding TWD 10 billion. This is the second consecutive year, representing the highest evaluation tiers. Okay. Basically that is my update for the Q2. We can move to the Q&A session. Feel free to ask questions then.

Speaker #2: Okay. So basically that is my update for the second quarter. So we can move to the Q&A session. Feel free to ask questions then.

Operator: We will now begin the Q&A session. If you would like to ask a question, please click the Raise Hand icon on the sidebar. When it is your turn, please unmute yourself before speaking. We will take our first question from Rob from Schroders.

Speaker #1: We will now begin the Q&A session. If you'd like to ask a question, please click raise hand icon on the sidebar. When it is your turn, please unmute yourself before speaking.

Speaker #1: It will take our first question from Rob from Shoulders.

Speaker #3: Yeah. Hi there. I just wanted to ask on your revenue run rate I understand there's a lot of exciting products that the your E paper is going into but your run rate of revenues this year is negative year to date.

[Analyst] (Schroders): Yeah. Hi there. I just wanted to ask on your revenue run rate. I understand there is a lot of exciting products that your e-paper is going into, but your run rate of revenues this year is negative year to date. I know there is a low base in the Q4, but it seems like your growth targets of 15% to 20% seem very difficult to achieve now. I just wanted to check in and understand what that top-line revenue outlook is for 2026 and 2027, and if it has changed.

Speaker #3: I know there is a low base in the fourth quarter but it seems like your growth targets of 15 to 20 percent seem very difficult to achieve now.

Speaker #3: So I just wanted to check in and understand what that sort of top line revenue outlook is for 2026 and 2027 and if it's changed.

Speaker #2: Right. Rob, thanks for the questions. So we just finished our earning Chinese session. 30 minutes ago. So we basically gave a new guidance in terms of the sales revenue.

Lloyd Chen: Right. Rob, thanks for the questions. We just finished our earning conference in the Chinese session, 30 minutes ago. We basically gave a new guidance in terms of the sales revenue. I think last quarter, we gave the guidance for the whole year sales revenue. The year-over-year growth is around 20% to 25%, stay around about 20%. But due to the increased memory cost, that basically affects the year-over-year growth of our CE business segment. Originally, we thought we could have grown higher single digit for the whole year. But currently, the way we see it is we will not expect a growth. Basically, we will expect a decrease. Single-digit decrease. With these changes, we believe the whole year sales revenue guidance will be adjusted. Still, we will be growing. From 10% to 15% year-over-year growth.

Speaker #2: I think last quarter we gave the guidance for the whole year sales revenue the year-over-year growth is around 20 to 25 percent. Stay around about 20 percent.

Speaker #2: But due to the increased memory cost so that basically affect the year-over-year growth on our CE business segment. So originally we thought we could have grown higher single digit for the whole year but currently the way we see it is we will not expect a growth.

Lloyd Chen: Originally, we thought we could have grown higher single digit for the whole year. But currently, the way we see it is we will not expect a growth. Basically, we will expect a decrease. Single-digit decrease. With these changes, we believe the whole year sales revenue guidance will be adjusted. Still, we will be growing. From 10% to 15% year-over-year growth.

Speaker #2: So basically we'll expect a decrease so single digit decrease. So with this changes we believe the whole year sales revenue guidance will be adjusted still we will be growing.

Speaker #2: So from 10 to 15 percent year-over-year growth. So that's the first thing I would like to answer your first question. And your second question given the uncertainty in the CE market it's a bit hard to anticipate what will be happening probably we'll still be relatively slow but we are still quite confident on the IoT segments.

Lloyd Chen: So that is the first thing I would like to answer your first question. Your second question, given the uncertainty in the CE market, it is a bit hard to anticipate what will be happening. Probably will still be relatively slow. But we are still quite confident on the IoT segments. That includes ESL plus signage. Overall, it may still be too early to say what will be happening next year. But I personally believe we can still be expecting a year-over-year growth next year. But to what extent, it is hard to say at this moment.

Speaker #2: That includes ESL plus signage so overall it may still be too early to say what will be happening next year but I personally believe we can still be expecting a year-over-year growth next year but to what extent is hard to say at this moment.

Speaker #3: Okay. Thank you.

[Analyst] (Manulife): Okay. Thank you.

[Analyst] (Schroders): Okay. Thank you.

Speaker #2: All right. Thank you.

Lloyd Chen: All right. Thank you.

Operator: We will take our next question from David from Merrill Lynch.

Speaker #1: We will take our next question from David from Manulife. Go ahead.

Lloyd Chen: Hi, David.

Operator: Go ahead.

Speaker #3: Yeah. Yeah. Hi. Thank you for the call. Just a sort of a question on the sort of the memory cost for the Kindle. So as I understand it the sort of standard Kindle uses the 16 gigs of NAND and maybe half a gig of DRAM.

[Analyst] (Manulife): Yeah. Hi, thank you for the call. Just a question on the memory cost for the Kindle. As I understand it, the standard Kindle uses just 16 GB of NAND and maybe half a gig of DRAM. Just on that basis, the memory cost of a Kindle is maybe TWD 10 to 15 on the increased memory price. That seems to be quite manageable in comparison to the sales price of TWD 140. Why are you seeing such a big impact on the sales of Kindles this year? In terms of passing on the extra memory cost, are you managing to pass on the extra memory cost, or are you taking a gross margin hit? Thank you.

Speaker #3: So just on that basis the sort of the memory cost of a Kindle is maybe sort of 10 to 15 dollars. On the increased memory price so that seems to be sort of quite manageable in comparison to the sort of the sales price of 140 dollars.

[Analyst] (Manulife): That seems to be quite manageable in comparison to the sales price of TWD 140. Why are you seeing such a big impact on the sales of Kindles this year? In terms of passing on the extra memory cost, are you managing to pass on the extra memory cost, or are you taking a gross margin hit? Thank you.

Speaker #3: So why are you sort of seeing a sort of such a big impact on the sales of Kindles this year and in terms of passing on the extra memory cost are you managing to pass on the extra memory cost or are you taking a gross margin hit?

Speaker #3: Thank you.

Speaker #2: Right. David. I kind of agree with you in the sense the first tier player such as Amazon they would be less affected in terms of the memory cost since they are relatively big player the way they prepare the inventory should be very robust.

Lloyd Chen: Right, David. I agree with you in the sense the first-tier player, such as Amazon, would be less affected in terms of the memory cost since they are relatively a big player. The way they prepare the inventory should be very robust. Let me put it in this way. For those players, it comes with the entry-level products and non-entry-level products. If the memory cost, the incremental portion against their total BOM cost is relatively higher, I think for that part, definitely will be affected. Apart from the first-tier CE players, customers, we also have the second-tier customers. Since the way they prepare the inventory or the resilience of the memory cost, the level of the resilience of memory cost, may be relatively lower. For that part, our sales revenue will be affected.

Speaker #2: But let me put it in this way. For those players it comes with the entry level products and non-entry level products. So if the memory cost the incremental portion against their total bond cost is relatively higher I think for that part definitely will be affected.

Speaker #2: And then apart from the first tier CE players customers we also have the second tier customers since the way they prepare the inventory or the resilience of the memory cost the level of the resilience of memory cost maybe relatively lower.

Lloyd Chen: Apart from the first-tier CE players, customers, we also have the second-tier customers. Since the way they prepare the inventory or the resilience of the memory cost, the level of the resilience of memory cost, may be relatively lower. For that part, our sales revenue will be affected. For entry level, I think regardless of the first tier or second tier players, it will be affected. That is kind of the situation I would like to explain.

Speaker #2: So for that part it also our sales revenue will be affected. So for entry level I think regardless of the first tier or second tier players it will be affected.

Lloyd Chen: For entry level, I think regardless of the first tier or second tier players, it will be affected. That is kind of the situation I would like to explain.

Speaker #2: So that's kind of the situation I would like to explain if.

Speaker #3: Okay. Thanks very much indeed. And just maybe if I could ask another question. Could you sort of give guidance on the sort of gross margin for this year and then maybe your guess for next year as well?

[Analyst] (Manulife): Okay. Thanks very much indeed. Just maybe if I could ask another question. Could you give guidance on the gross margin for this year, then maybe your guess for next year as well?

Speaker #2: Right. I think historically this year the gross profit margin stayed around I think 50.9 percent. And for second half since CE business will be affected so the portion of the module business will be relatively lower.

Lloyd Chen: Right. I think historically this year, the gross profit margin stayed around I think 59%. For H2, since CE business will be affected, the portion of the module business will be relatively lower. However, our signage business will be also growing. Net-net, it is a bit hard to say the module and material product mix in H2. But I would say, the whole year would be staying around 55% to 59%. That is how I see it this year. Next year, I think, if CE business will be picking back up, if we will be selling more module business, our gross profit margin will be relatively lower. However, our gross profit dollar will be increasing. Once again, it is hard to say the gross profit margin for next year, but we believe the gross profit dollar will still be healthily growing next year.

Speaker #2: However our signage business will be also growing. So net net it's a bit hard to say the module and material product mix in the second half.

Speaker #2: But I would say the whole year would be staying around 55 to 59 percent. That's how I see it this year. And next year I think if CE business will be picking up picking back up if we will be selling more module business that basically will our gross profit margin will be relatively lower.

Lloyd Chen: That is how I see it this year. Next year, I think, if CE business will be picking back up, if we will be selling more module business, our gross profit margin will be relatively lower. However, our gross profit dollar will be increasing. Once again, it is hard to say the gross profit margin for next year, but we believe the gross profit dollar will still be healthily growing next year.

Speaker #2: However our gross profit dollar will be increasing. So once again it's hard to say. The gross profit margin for next year but we believe we believe the gross profit dollar will still be healthily growing next year.

Speaker #2: I mean don't get tied up too much in terms of the gross profit margin. I think we always aim to open up the e-paper market share.

Lloyd Chen: Do not get tied up too much in terms of the gross profit margin. I think we always aim to open up the e-paper market share. If the demand from CE is stronger, basically, we would go for it. CE, the gross profit margin is relatively lower, so we do not spend efforts on that. As long as the demand is there, we can open up our market share. We basically go for it.

Speaker #2: So if the demand from CE is stronger basically we will go for it. We will not just CE the gross profit margin is relatively lower so we don't spend efforts on that.

Speaker #2: So as long as the demand is there we can open up our market share. We basically go for it. Yeah.

Speaker #3: Understood and thank you.

[Analyst] (Nomura): Understood and thank you.

[Analyst] (Manulife): Understood and thank you.

Speaker #2: All right. Thank you.

Lloyd Chen: All right. Thank you.

Operator: We will take our next question from Kenny from Nomura.

Speaker #1: We will take our next question from Kenny from Nomura.

Lloyd Chen: Hi, Kenny.

Speaker #2: Hi Kenny.

[Analyst] (Nomura): Hi, Lloyd. Thanks for squeezing me in again. I knew in the mandatory session you are not going to give very precise gross margin outlook. Can you give us some more color on? There are a lot of moving parts for cost of goods sold, gross margin, but I wanted to try to understand that in the H2 of this year, you said CE will be having some negative pressure, because of the memory. How would you manage more on that? Can you lower the percentage of module, but increase the percentage of material? Because material won't be having the negative impact from memory, right? The pure impact should be coming from module assembly. Is that correct?

Speaker #4: Oh. Hi Lloyd. Thanks for sticking with me in again I just have a I knew in the mandatory session you are not going to give very precise gross margin outlook but can you give us some more color on there are a lot of moving parts for cost of goods gross margin but I want to try to understand that in the second half of this year you said CE will be having some negative pressure because of the memory but how would you manage more on that?

[Analyst] (Nomura): How would you manage more on that? Can you lower the percentage of module, but increase the percentage of material? Because material won't be having the negative impact from memory, right? The pure impact should be coming from module assembly. Is that correct?

Speaker #4: I mean can you lower the percentage of module but ship more increase the percentage of material? Because material won't be having the negative impact from memory right?

Speaker #4: The pure impact should be coming from module assembly. Is that correct?

Speaker #2: Correct. So Kenny as I mentioned earlier CE business will not be that good in the second half. I think we will talk about that.

Lloyd Chen: Right. Kenny, as I mentioned earlier, CE business will not be that good in the H2. I think we would talk about that. ESL, we believe, the growing momentum is still there. In our Mandarin session, our CEO also gave guidance. The year-over-year growth for this year, still 20% to 25%. Basically continue to grow. For signage, it will be growing. What I'm trying to say is, if the signage is growing relatively stronger, that would slightly affect our gross profit margin in the H2. However, our gross profit dollar will be increased. That's what I'm trying to say. The capacity is already there. If we have more demand from the signage business. I think currently we still have a little bit room for the signage module business.

Speaker #2: And ESL we believe the growing momentum is still there. And in our mandatory y session our CEO also gave guidance the year over year growth for this year.

Speaker #2: Still 20 to 25 percent. So basically continue to grow. And for signage it will be growing. So what I'm trying to say is if the signage is growing relatively stronger so that would slightly affect our gross profit margin in the second half.

Lloyd Chen: For signage, it will be growing. What I'm trying to say is, if the signage is growing relatively stronger, that would slightly affect our gross profit margin in the H2. However, our gross profit dollar will be increased. That's what I'm trying to say. The capacity is already there. If we have more demand from the signage business. I think currently we still have a little bit room for the signage module business.

Speaker #2: However our gross profit dollar will be increased. So that's what I'm trying to say. So the capacity is ready there. So if we have a more demand from the signage business I think currently we still have a little bit room for the signage module business.

Speaker #2: So if that part is going well and even higher than our expectation so from the gross profit margin perspective it would be affected a bit.

Lloyd Chen: If that part is going well and even higher than our expectation. From the gross profit margin perspective, it would be affected a bit. However, the ASP for signage module will be higher. That's still very healthy and helpful from the gross profit dollar perspective. That's how we see it. In general, the way I see it for the whole year gross profit margin, I think it would be staying within the range of 55% to 59%. I think we didn't talk about this, but I think in this session, I kind of can give you a range. Yeah.

Speaker #2: However the ASP for signage module will be higher. So that still very healthy and helpful from the gross profit dollar perspective. So that's how we see it.

Speaker #2: But in general the way I see it for the whole year gross profit margin I think it would be staying within the range of 55 to 59 percent.

Speaker #2: I think we didn't talk about this but I think in this session I kind of can give you a range. Yeah.

Speaker #4: I see. I see. It's very helpful. And I just have another follow up on the signage again. During the mandatory session you mentioned the mid-size seemed to have relatively stronger momentum compared with large size.

[Analyst] (Nomura): I see. It's very helpful. I just have another follow-up on the signage again. During the mandatory session, you mentioned the mid-size seemed to have relatively stronger momentum compared with large size. My understanding is that your utilization rate will be highly dependent on the total area you are producing. Mid-size theoretically has average smaller size compared with large size. Will this delay the pace that you fulfill the capacity of your H5 or even H6, or you see the total area still growing, so that's not even an issue?

Speaker #4: But my understanding is that your utilization rate will be highly depending on the total area you are producing. So mid-size theoretically has average smaller size compared with large size.

Speaker #4: Would this delay the pace that you fulfill the capacity of your H5 or even H6 or you see the total area still being growing?

Speaker #4: So that's not even an issue.

Speaker #2: Kenny I think the for the capacity plan capacity expansion I think is ongoing task. So basically it will not be slowing down. And we do see the potential demand there.

Lloyd Chen: Kenny, I think for the capacity plan, capacity expansion, it is an ongoing task. Basically, it will not be slowing down. We do see the potential demand there. Mid-size signage or large-size signage, it is hard for us to comment which one is more favorable. Basically, as long as we can open up the market share, we would go for it. Coming back to your question, for the signage, I think eventually we will go for the material sales business. Why? Because for the signage, module capacity is limited. Eventually we will just simply supply the mother sheet, the big mother sheet, and leave our SI and their module partner to cut into the sizes they prefer. We see a positive growing momentum for signage business. Yeah.

Speaker #2: So mid-size signage or large size signage is hard for us to comment which one is more favorable. But basically as long as we can open up the market share we will go for it.

Speaker #2: So coming back to your question for the signage for the signage I think eventually we will go for the material sales business. Why? Because for the signage module capacity is limited.

Lloyd Chen: Coming back to your question, for the signage, I think eventually we will go for the material sales business. Why? Because for the signage, module capacity is limited. Eventually we will just simply supply the mother sheet, the big mother sheet, and leave our SI and their module partner to cut into the sizes they prefer. We see a positive growing momentum for signage business. Yeah.

Speaker #2: So eventually we will just simply supply the mother sheet the big mother sheet and leave our SI and their module partner to cut into the sizes they prefer.

Speaker #2: So we see a positive growing momentum for signage business. Yeah.

Speaker #4: Okay. Okay. Understood. Thank you very much. I'll get back to the queue.

[Analyst] (Nomura): Okay. Understood. Thank you very much. I will get back to the queue.

Speaker #2: All right.

Lloyd Chen: All right.

Operator: We will take our next question from Rob from Schroders.

Speaker #1: We'll take our next question from Rob from Shoulders.

Speaker #4: Yeah. Hello. Just a follow up. Yeah. You talked about the CE business and the sort of the difference in sort of tier one and tier two and inventory sort of memory inventory management which I guess makes complete sense.

[Analyst] (Schroders): Yeah. Hello. Just a follow-up.

Lloyd Chen: Sure.

[Analyst] (Schroders): You talked about the CE business and the difference in tier 1 and tier 2 and inventory, memory inventory management, which I guess makes complete sense. Amazon would proactively manage inventory, and obviously smaller players probably won't, and they are probably struggling to get hold of memory, let alone dealing with the price hikes. What is your split in CE between, say, tier 1 and tier 2?

Speaker #4: Amazon would proactively manage inventory and obviously smaller players probably won't and they're probably struggling to get hold of memory let alone dealing with the price hikes.

Speaker #4: But what's your split in CE between say tier one and tier two?

Lloyd Chen: For CE, let me put it this way. We have e-reader and e-note. For e-reader, still relatively higher. Amazon definitely sits in that category. For the e-note, few major players. reMarkable and other second-tier players in China. What I am trying to say is, I would say most of the customers in the e-note, in terms of the size, they are still relatively smaller than Amazon. So their inventory management capability, I wouldn't use the word weaker, but Amazon definitely is more superior than the rest of the players in this category. I think I am not able to disclose a very precise percentage split, but I would say first tier, second tier. I think second tier is still a bit more compared with the first-tier players. Yeah.

Speaker #2: For CE let me put in this way. We have e-reader and e-note. So for e-readers still relatively higher. So Amazon definitely sit in that category.

Speaker #2: For the e-note few major players remarkable and other second tier players in China so what I'm trying to say is I would say most of the customers in the e-note in terms of the size they are still relatively smaller than Amazon.

Speaker #2: So their inventory management capability I wouldn't use the word weaker but Amazon definitely is more superior than the rest of the player in this category.

Lloyd Chen: So their inventory management capability, I wouldn't use the word weaker, but Amazon definitely is more superior than the rest of the players in this category. I think I am not able to disclose a very precise percentage split, but I would say first tier, second tier. I think second tier is still a bit more compared with the first-tier players. Yeah.

Speaker #2: So I think I'm not able to disclose a very very precise percentage split but I would say first tier second tier I think second tier still a bit more compared with the first tier players.

Speaker #2: Yeah.

Speaker #4: Okay. No. That's helpful. I guess just as the follow up to that is there is concern in the market that memory will be even tighter next year.

[Analyst] (Schroders): Okay. No, that is helpful. I guess just as the follow-up to that is, there is concern in the market that memory will be even tighter next year than it is this year.

Speaker #4: Than it is this year. So I guess those players that are struggling may I guess may continue to struggle. You talked about CE recovering next year.

Lloyd Chen: Right.

[Analyst] (Schroders): So I guess those players that are struggling may continue to struggle. You talked about CE recovering next year. If that's to do with memory, then that actually may not be the case, right? It could get worse.

Speaker #4: If that's to do with memory then that actually may not be the case. Right? It could get worse.

Speaker #2: Right. It could get worse. But what we are hoping for is I think at the initial stage our signage business relatively will be more on the module.

Lloyd Chen: Right. It could get worse. But what we are hoping for is, I think at the initial stage, our signage business relatively will be more on the module. So hopefully, the shortfall from the CE business, maybe in the H2 or in the next year, can be made up from the signage module business as much as possible. Yeah.

Speaker #2: So hopefully the shortfall from the CE business maybe in the second half or in the next year can be made up from the signage module business as much as possible.

Speaker #2: Yeah.

Speaker #4: And what sort of memory content does a signage product need relative to sort of e-readers and e-notes?

[Analyst] (Schroders): What sort of memory content does a signage product need relative to e-readers and e-notes?

Lloyd Chen: They do need the memory, but since they are industrial purpose, so it's a bit different, and the level of the shortage is relatively okay. Yeah.

Speaker #2: They do need the memory but since they are industrial purpose so it's a bit different and the level of the shortage is relatively okay.

Speaker #2: Yeah.

Speaker #4: Okay. Yeah. Thank you.

[Analyst] (Schroders): Okay. Yeah. Thank you.

Speaker #2: Thank you.

Lloyd Chen: Thank you.

Operator: We will take our next question from Katherine from Macquarie.

Speaker #1: We'll take our next question from Catherine from Macquarie.

Lloyd Chen: Hi, Katherine.

Speaker #2: Hi Catherine.

[Analyst] (Macquarie): Hi. Sorry, can you hear me?

Speaker #5: Hi. Sorry. Can you hear me?

Speaker #2: Yes. Very well.

Lloyd Chen: Yes, very well.

Speaker #5: Yeah. Thank you. Thank you for taking my questions. I joined a little bit late so I'm not sure if any other peers have asked this questions.

[Analyst] (Macquarie): Yeah, thank you. Thank you for taking my questions. I joined a little bit late, so I am not sure if any other peers have asked these questions. I just want to figure out how our gross profit margin is going to trend. We mentioned earlier that we will ship more large signage in the future, but currently, I am sensing that large signage is putting some pressure on our gross profit margin because the ESL or the e-readers is probably getting higher margin than signage. I am just wondering, with more signage revenue contribution, if our gross profit margin can keep at this high level or is there any pressure on this? Thank you.

Speaker #5: But I just want to figure out how our gross profit margin is going to trend. Because we mentioned earlier that we will ship more large signage in the future but currently I'm sensing that large signage is putting some pressure on our gross profit margin because the ESL is getting or the e-readers is probably getting higher margin than signage.

[Analyst] (Macquarie): We mentioned earlier that we will ship more large signage in the future, but currently, I am sensing that large signage is putting some pressure on our gross profit margin because the ESL or the e-readers is probably getting higher margin than signage. I am just wondering, with more signage revenue contribution, if our gross profit margin can keep at this high level or is there any pressure on this? Thank you.

Speaker #5: I'm just wondering with more signage revenue contribution if our gross profit margin can keep at this high level or is there any pressure on this?

Speaker #5: Thank you.

Speaker #2: Yeah. Catherine I think we believe the demand from the signage will be higher and higher but during the initial stage we still have some room for the signage module.

Lloyd Chen: Yeah, Katherine. I think we believe the demand from the signage will be higher and higher. But during the initial stage, we still have some room for the signage module. But once it is full, basically, we will change our business model from the module business to the material business. I think at the current stage, it is sort of like a mixed mode. Some of the customer, they want us to supply the material for the signage. The other want us to supply the module. That is the reason, in the H1, it is a mixed mode. Even signage business, some of them, we still supply the material. The other is a module. It is hard to say what will be happening. But in the long run, definitely it will be switched from the module business to the material.

Speaker #2: But once it's full basically we will change our business model. From the module business to the material business. So I think at the current stage it's sort of like a mixed mode.

Lloyd Chen: I think at the current stage, it is sort of like a mixed mode. Some of the customer, they want us to supply the material for the signage. The other want us to supply the module. That is the reason, in the H1, it is a mixed mode. Even signage business, some of them, we still supply the material. The other is a module. It is hard to say what will be happening. But in the long run, definitely it will be switched from the module business to the material.

Speaker #2: Some of the customer they want us to supply the material for the signage. The other want us to supply the module. So that is the reason.

Speaker #2: In the first half it's a mixed mode. Even signage business some of them we still supply the material. The other is in module. So it's hard to say what will be happening.

Speaker #2: But in the long run definitely it will be switched from the module business to the material. I think for the second half I would reckon more module than material.

Lloyd Chen: I think for the H2, I would reckon more module than material, even compared with the H1. So even in H2, our CE business will be affected. However, our signage module, I think will be gradually growing. I think the H2, it is a bit hard to predict what will happen in the H2. But the whole year, the gross profit margin for the whole year, I would say ranging from 55% to 59%, around this range.

Speaker #2: Even compared with the first half. So even in second half our CE business will be affected however our signage module I think will be gradually growing.

Speaker #2: So yeah. I think the second half the I mean it's a bit hard to predict what will happen in the second half. But the whole year the gross profit margin for the whole year I would say ranging from 55 to 59 percent.

Speaker #2: Around this range. Yeah.

Speaker #5: Got it. Thank you.

[Analyst] (Macquarie): Got it. Thank you.

Speaker #2: So that said the second half the gross profit margin compared with the first half would be relatively lower. Yeah.

Lloyd Chen: That said, the H2, the gross profit margin compared with the H1, would be relatively lower.

Speaker #5: Got it. Thank you. And my second question goes to maybe how do we think about the signage trend next year? Will it keep at the high growth rate like this year or even higher?

[Analyst] (Macquarie): Got it. Thank you. My second question goes to maybe how do we think about the signage trend next year? Will it keep at the high growth rate like this year or even higher? Or because of the relatively higher base, are we expecting the growth rate to relatively slowing down?

Speaker #5: Or because of the relatively higher base are we expecting the growth rate to relatively slowing down?

Lloyd Chen: I think in our Mandarin session 1 hour ago, the guidance for the signage, compared with the total sales revenue, the guidance we gave is higher single digit. I believe ranging from 5% to 10%. One of the question being raised, when do we think it can grow to the double digit? Johnson, our CEO, just said probably next year. I think that can give you a good flavor how the growth can go.

Speaker #2: I think in our Mandarin session one hour ago the guidance for the signage the compared with the total sales revenue the guidance we gave is higher single digit.

Speaker #2: I believe ranging from 5 to 10 percent. And one of the question being raised when do we think it can grow to the double digit.

Speaker #2: Johnson our CEO just said probably next year. So I think that can give you a good flavor how the growth can go.

Speaker #5: I see. Got it. Thank you. So my final question because we mentioned earlier that our CE is having some hiccup this year and because of the high memory prices but it's actually a transitioning into more 2B business.

[Analyst] (Macquarie): I see. Got it. Thank you. My final question, because we mentioned earlier that our CE is having some hiccup this year because of the high memory prices, but it is actually transitioning into more B2B business. Are we thinking of this as a chance that maybe later we have more B2B business, so the overall either revenue or gross margin will be stabler? We have more focus on the future revenue, but not totally on the CE business. Can we think of this as this way?

Speaker #5: So are we thinking of this as a chance that maybe later we have more 2B business so the overall either revenue or gross margin will be stabler so we have more focus on the future revenue but not totally on the CE business?

Speaker #5: Can we think of this as this way?

Speaker #2: Yeah. I think it's possible because as I mentioned earlier for CE they are two major components in there. One is reader. I mean of course reader is relatively more relevant to the consumer.

Lloyd Chen: Yeah. I think it is possible because, as I mentioned earlier, for CE, there are two major components in there. One is reader. Of course, reader is relatively more relevant to the consumer. For eNote, some of them is being used in education. I would say, it will fit into the category of the B2B you just mentioned. So, more and more eNotes will be used as a B2B basis. I believe that is possible. I personally believe in the future, there will be a thin line between eReader and eNote. So, yeah, I think more and more maybe eReader devices can be used for the education purposes. The scenario you just mentioned, I think is possible. Yeah.

Speaker #2: But for e-note some of them is being used in education. I would say it will fit into the category of the B2B you just mentioned.

Speaker #2: So more and more e-note will be used as a B2B basis. So I believe that that's possible. That's possible. And I personally believe in the future there will be a very there will be a thin line between e-reader and e-note.

Lloyd Chen: So, more and more eNotes will be used as a B2B basis. I believe that is possible. I personally believe in the future, there will be a thin line between eReader and eNote. So, yeah, I think more and more maybe eReader devices can be used for the education purposes. The scenario you just mentioned, I think is possible. Yeah.

Speaker #2: So yeah. I think more and more maybe e-reader devices can be used for the education purposes. So the scenario you just mentioned I think is possible.

Speaker #2: Yeah.

[Analyst] (Macquarie): Got it. Thank you.

Speaker #5: Got it. Thank you.

Operator: Next, we will take questions from Simon from Tundra.

Speaker #1: Next we will take questions from Simon from Tundra.

Speaker #2: Hi Simon.

Lloyd Chen: Hi, Simon.

Speaker #3: Hi. I also have a question on the ramp up of the H5 line and also how kind of the construction of the H6 line is progressing.

[Analyst] (Tundra): Hi. I just have a question on the ramp-up of the H5 line and also how the construction of the H6 line is progressing. Any updates there?

Speaker #3: Any updates there?

Speaker #2: Right. So basically H5 has been performing better and better. So basically contributing now in terms of the sales revenue. So not to worry too much.

Lloyd Chen: Well, H5 has been performing better and better, basically contributing now in terms of the sales revenue. Not to worry too much. For H6, we believe it would be ready by end of next year and start. We may need a quarter or two to make it better. That is the timeline for H6. Yeah.

Speaker #2: And for H6 we believe it would be ready by end of next year and start we may need a quarter or two to make it better.

Speaker #2: So that's sort of the timeline for H6.

Speaker #3: Understood. And for the H5 line then regarding the yield rate is that like reached has that reached kind of your target by now or?

[Analyst] (Tundra): Understood. For the H5 line, regarding the yield rate, has that reached your target by now?

Speaker #2: Yeah. I think from the large size perspective I think it's satisfactory now. But if you compare with rate there's still a little bit room to catch up.

Lloyd Chen: Yeah. I think from the large size perspective, I think it is satisfactory now. If you compare with the small size yield rate, there is still a little bit room to catch up. I do not think we can make an apple-to-apple comparison like that, because normally, large size yield rate and small size yield rate, to some extent, there should be some variances. Yeah.

Speaker #2: But I don't think it's we can make an apple to apple comparison like that because large normally large size yield rate and small size yield rate to some extent there should be some variances.

Speaker #2: Yeah.

Speaker #3: Understood. Thank you.

[Analyst] (Tundra): Understood. Thank you.

Speaker #2: All right. Thank you. And we sell a few questions online. Hold on a second. So two questions from Ben. A follow up on question to what someone asked earlier within CE.

Lloyd Chen: All right. Thank you. We saw a few questions online. Hold on one second. Two questions from Ben, a follow-up on question to what someone asked earlier. Within CE, what is the split between eReader versus eNotes? I think eReader is still relatively higher, and more on first tier players in eReader categories. Can you talk a bit more around ESL penetration? How has it trended through 2026 versus 2025? What are your ecosystem partner communicating to you in terms of adoption and their expectation over the next 6 to 12 months? For ESL, I believe the penetration is ranging from 20% to 25% globally. The year-over-year growth for 2026 basically is 20% to 25%.

Speaker #2: What's brought split between e-reader versus e-note? I think e-reader still relatively higher. And more on first tier players in e-reader categories. And can you talk a bit more around ESL penetration?

Lloyd Chen: Can you talk a bit more around ESL penetration? How has it trended through 2026 versus 2025? What are your ecosystem partner communicating to you in terms of adoption and their expectation over the next 6 to 12 months? For ESL, I believe the penetration is ranging from 20% to 25% globally. The year-over-year growth for 2026 basically is 20% to 25%.

Speaker #2: How has it trended through 26 versus 25? What are your ecosystem partner communicating to you in terms of adoption and their expectation over the next 6 to 12 months?

Speaker #2: So for ESL I believe the penetration is ranging from 20 to 25 percent globally. And the year over year growth for 26 basically is 20 to 25 percent.

Speaker #2: It's a bit hard to comment what will be happening in 27. But I think we for the time being we probably can use the similar growing growth rate as we use for 26 for 27.

Lloyd Chen: It's a bit hard to comment what will be happening in 2027, but I think for the time being, we probably can use the similar growing growth rate as we used for 2026 for 2027. There's another question from Josie about the H6. It's about the cost. Do you target to produce signage at lower cost versus H5? What is your target timing to achieve that? I think for H6, when the yield rate achieves a reasonable level, definitely the unit cost for H6 will be more competitive than H5, no doubt. Given the lesson learned from H5, we believe that the period to ramp up can be shortened. The target time, I think it's a bit hard to say, but we should get H6 ready first. We may need a quarter or two to get ready.

Speaker #2: Yeah. And there is another question from Josie. About the H6. It's about the cost. Do you target to produce signage at lower cost versus H5?

Speaker #2: What is your target timing to achieve that? I think for H6 yeah. When the yield rate achieve the reasonable level definitely the unit cost for H6 will be more competitive than H5 no doubt.

Lloyd Chen: I think for H6, when the yield rate achieves a reasonable level, definitely the unit cost for H6 will be more competitive than H5, no doubt. Given the lesson learned from H5, we believe that the period to ramp up can be shortened. The target time, I think it's a bit hard to say, but we should get H6 ready first. We may need a quarter or two to get ready.

Speaker #2: And given the lesson learned from H5 we believe the period to ramp up can be shortened. The target time I think it's a bit hard to say.

Speaker #2: But we should get H6 ready first and we may need a quarter or two to get ready. And there's a last question. Want to confirm the revenue growth guidance moving from 20 to 25 percent to 10 to 15 percent for 26.

Lloyd Chen: There's a last question. I want to confirm the revenue growth guidance moving from 20% to 25% to 10% to 15% for 2026. That's correct. I confirm back. I believe there's no question, and I believe I answered all the online question already. Thank you.

Speaker #2: That's correct. I confirm back. Okay. So I believe there's no question and I believe I answer all the online question already. Thank you.

Speaker #1: Okay. Thank you for joining us today. This concludes E Ink's second quarter earnings conference call. You may now disconnect. Have a good day.

Operator: Thank you for joining us today. This concludes E Ink's second quarter earnings conference call. You may now disconnect.

Lloyd Chen: Thank you.

Operator: Have a good day.

Lloyd Chen: Bye.

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