Himax Technologies, Inc.

Hello, ladies and gentlemen. Welcome to the HIMAX Technologies, Inc. First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. As a reminder, this conference call is being recorded. I would now like to hand the conference over to your host, Mr. Mark Schwalenberg from MZ Group.

Welcome, everyone, to HIMAC's first quarter 2023 earnings call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer, Ms. Jessica Pan, Chief Financial Officer, and Mr. Eric Lee, Chief IRPR Officer. After the company's prepared comments, we have allocated time for questions in a Q&A session. If you have not yet received a copy of today's results release, please email HIMX at mzgroup.us, access the press release on financial portals, or download a copy from HIMX's website at www.himx.com.tw. Before we begin the formal remarks, I'd like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements that involve a number of risks and uncertainties that could cause actual events or risks to differ materially from those described in this conference call. A list of factors can be found in the company's SEC filings. Form 20F for the year ended December 31, 2022, in the section entitled Risk Factors, as may be amended. Except for the company's full year of 2022 financials, which were provided in the company's 20F and filed with the SEC on April 6, 2023. The financial information included in this conference call is unaudited and 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, including internal auditing procedures and external audits by an independent auditor to which we subject our annual consolidated financial statements and may vary materially from the audited consolidated financial information for the same period. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. I would now like to turn the call over to Mr. Eric Lee. Eric, the floor is yours.

Thank you, Mark, and thank you, everyone, for joining us. My name is Eric Lee, Chief IR PR Office at IMAX. On today's call, I will first review the HI-MACS consolidated finance performance for the first quarter 2023, followed by our second quarter outlook. Jordan will then give an update on the status of our business, after which we will take questions. We will review our financials on both IFIS and non-IFIS basis. The non-IFIS financials is good share-based compensation, acquisition-related charges, and the cash award. Despite the challenges of ongoing macro headwinds and the seasonal effects, first quarter revenues and EPS both beat our guidance, while gross margin was within the guidance range issued on February 9, 2023. First quarter revenue registered to $244.2 million, a decrease of 6.9% sequentially, but marked better than our guidance of a decrease of 12% to 17% sequentially. The better than guidance sales were attributable to increased order momentum, particularly in the large display driver IC business and the smartphone and the tablet TDI segments. as well as our continuous effort to deplete inventory. IFI's gross margin came in at 28.1%, a decrease from 30.5% last quarter, but within the guidance range of 28% to 30%. Gross margin was impacted by several factors, first and primarily First, we incurred the high cost of our asset inventories that were sourced during a period when foundry and back-end prices peaked. Second, we had to write down certain unsought inventories due to market price decline. Finally, there was price erosion, a requisite part of ongoing inventory of loading process. IFIS profit per diluted ADS was 8.5 cents, surpassing our guidance of 3.5 cents to 7 cents. Non-IFIS profit per diluted ADS was 11.5 cents, beating our guidance of 6.5 cents to 10 cents. Revenue from large display driver was $53 million, an increase of 21.8% sequentially and substantially above our PI guidance of up high single digits from last quarter. Monitor IC sales grew remarkably as expected, increasing by a decent double-digit quarter-over-quarter. This increased momentum is primarily due to leading customers starting to replenish chips following several quarters of channel inventory reduction. Notebook sales were also better than guided due to demand from chip replenishment. We saw strong sequential growth of PVIC sales stemming from increasing order from customers preparing for upcoming China shopping festivals. Large panel driver IC sales accounted for 21.7% of total revenues for this quarter compared to 16.6% last quarter and 26.8% a year ago. Moving on to our small and immediate size of the display driver segment. Revenue was $154.7 million, a decrease of 12.8% sequentially, yet ahead of our guidance due to increasing shipment of smartphone and the tablet. especially TDDI products, to global leading brands after Lunar New Year holidays. Q1, automotive driver sales decreased mid-teens quarter over quarter as guided. Automotive DDI sales were better than expected due to customers' moderated inventory reduction majors. For automotive TDDI, Despite the widespread adoption of our products in the EV, sales unexpectedly declined as panel houses cut back their IT purchases while experiencing sudden order suspensions from their EV customers. The underlying cost is exacerbated EV price compensation, which has led major Chinese automakers to drastically cut production and enforce stringent cost control measures. Yet automotive driver business still represented the largest revenue contributor for us with 30% of total sales in the first quarter. We remain optimistic about our automotive DDIC growth potential in the coming years as we have secured about around 300 design wings, a number which is still growing as we speak, which puts us significantly ahead of our peers. At this moment, only one-third of the acquired design wings have commenced production, indicating enormous upside potential in the coming years after the remaining design wings enter mass production. Small and media-sized driver IC segment accounted for 63.3% of total sales for the quarter, compared to 67.6% in the previous quarter and 62.6% a year ago. First quarter non-driver sales also exceeded guidance with revenue of $36.5 million, down 11.8% from a quarter ago. Our TCOM business was up single-digit in the first quarter, markedly surpassing the guidance of meeting decline, bolstered by decent shipment of automotive TCOM as well as better-than-expected shipment of large-size display TCOM. TCOM business represented over 9% of our total sales in the first quarter. It's worth highlighting that our automotive local dimming TCOM technology was recently awarded Gold Medal Award at Touch Taiwan 2023, another illustration of our leading position in cutting-edge technology for automotive display. Jordan will elaborate on this later. For automotive TCOM, backed by strong-order pipeline, we anticipate business momentum to accelerate with rapid expanding design wins across the board. Non-driver products in Q1 accounted for 15% of total revenues as compared to 15.8% in the previous quarter and 10.6% a year ago. Our IFIS operating expenses for the first quarter were $51 million a decline of 2.9% from the previous quarter and a down 1% from a year ago. Amidst the prevailing macroeconomy headwinds, we continued to tighten our expense control. Now, IFI's operating expenses were $44.5 million for the first quarter, down 2.5% from the preceding quarter and up 1.1% from a year ago. First quarter IFIS operating income was $17.6 million or 7.2% of sales versus 10.5% of sales in the last quarter and 34.5% of sales from a year ago. Now IFIS operating income was $24.2 million or 9.9% of sales compared to 13.1% last quarter and 36.3% same quarter last year. IFIS after-tax profit was $14.9 million, or 8.5 cents per diluted ADS, compared to $42.2 million, or 24.1 cents per diluted ADS last quarter. First quarter non-IFI's after-tax profit was $20.1 million or 11.5 cents per diluted ADS compared to $47.7 million or 27.3 cents in the previous quarter. Turning to the balance sheet, we had $223.8 million of cash, cash equivalents, and other financial assets as of March 31, 2023, compared to $447.1 million at the same time last year and the $229.9 million a quarter ago. The decrease in cash was a result of cash outflow from investing activities, which was mainly used to make final payment for a major AMOLED capacity agreement for smartphones that we had signed. in 2021, offset by $66.4 million of operating cash inflow in the first quarter. We had $45 million of long-term unsecured loans at the end of the first quarter, of which $6 million was current portion. dollars inventory, wires still higher than $253.1 million a year ago were markedly lower than $370.9 million last quarter. Accounts receivable at the end of March 2023 was $252.2 million, down from $261.1 million last quarter and down from $442.2 million a year ago. DSO was 93 days at the quarter end, as compared to 96 days a year ago and 79 days last quarter. First quarter capital expenditure was $2.8 million versus $2.3 million last quarter and $3.6 million a year ago. The first quarter CapEx was mainly for our IC design business. Just prior to today's call, we announced an annual cash dividend of $0.48 per ADS, totaling approximately $83.7 million and payable on July 12, 2023. The payout ratio is 35.4%. We have decided on the relatively low payout ratio in light of a prevailing macroeconomic uncertainty. We are grateful for the continuous support of our shareholders as we continue to execute our business objectives and strive to deliver sustainable long-term growth while maintaining a healthy balance sheet. As of March 31, 2023, HyMax has 174.4 million ADS outstanding unchanged from last quarter. On a fully diluted basis, total number of ADS outstanding for the first quarter was 174.8 million. Now, turning to our second quarter 2023 guidance, we expect the second quarter revenue to be in the range of flat to down 9% sequentially. IFI scores margin is expected to be around 20% to 21%. depending on the final product mix. The second quarter IFRS profit attributable to shareholders is estimated to be in the range of minus 2.9 to 0.6 cents per basic ADS. Now IFRS profit attributable to shareholders is expected to be in the range of 0.1 to 3.6 cents per fully diluted ADS. I will now turn the call over to Jordan to discuss our Q2 outlook. Jordan, the floor is yours.

Thank you, Eric. Self-consumer consumption coupled with recession fears continue to present challenges to market demand and amplify uncertainties throughout the tech world. The semiconductor industry appears to have come to a consensus to some degree, with the expectation that inventory digestion will extend longer than previously projected. In the display market, M brands remain cautious toward their panel procurements, while panel makers implement stringent output controls and rigorous procurement scrutiny. Amidst ongoing macroeconomic uncertainty, our visibility remains limited as panel customers continue to shorten the duration of their forecasts. However, our inventory has been reduced to a comfortable level after several quarters of aggressive destocking. While our current inventory level is still somewhat above the historical norm, the good news is that the remaining stocks are comprised of IC products which have a solid customer design base and long expected lifetimes. Moreover, after quarters of write-downs, the book costs of the stocks are at least equal to, and in many cases, much lower than the prevailing market prices. In light of the better-than-expected inventory of loaded We stand by our expectation the inventory will revert to historical levels no later than the third or fourth quarter of this year. In an effort to improve our cost structure for new waiver starts and maintain competitiveness, we have strategically terminated certain high-cost foundry capacity agreements recently prior to their expiration dates. This, however, has resulted in a significant one-time early termination expense incurred in the second quarter and hit our Q2 gross margin. In fact, this is the predominant factor for the second quarter gross margin contraction on top of the price pressure incurred from this stocking. Termination of the aforementioned capacity agreements is a crucial operational strategy for us, whereby making the short-term sacrifice can help us achieve long-term gains. Moving forward, for those terminated contracts, our new waiver starts will not be subject to minimum fulfillment requirements and fixed contractual prices set at a time of severe industry capacity shortage. This also gives us the flexibility to diversify suppliers. Given the significant contract termination expense, Q2 will mark the trial of our gross margin with sequential expansion expected throughout the second half of 2023. As an important side note, we have retained necessary capacity to support the growth of our AMOLED business, which we believe will be a major growth driver in the coming years as the OLED displays gain traction in a wide range of applications. Next, on to the Q2 sales guidance. Sudden demand drop in automotive business is among the main reasons causing the sequential sales decline. As we have talked about previously, automotive has been our largest business contributor for many quarters. accounting for over 30% of total sales, a far greater contribution than our peers. The sudden decline in the automotive demands, therefore, has a heavier impact on our total sales. Automotive sales are being adversely impacted by recent price turbulence in Chinese EV market, as we reported earlier. However, we view the current setback as a temporary and short-term phenomenon. Our outlook for the automotive business remains positive, given the megatrend of increasing quantity and sophistication of displays inside vehicles, and backed by our disputed leading market share, as well as new design wind pipelines. This is particularly true for automotive TVDI, where we have already achieved a global market share leadership position. Our TDDI sales are already on track to resume rapid growth momentum, and we remain confident in its potential to be a primary driving force for our long-term business growth. Last but not least, we remain committed to our strategy of expanding in high value-added areas, including TDDI and TCAN for automotive, OLED, and AI, whereas secular trends of growth remain intact. And in some of these areas, we have already achieved a leading market position. This not only warrants much higher content value, but also establishes higher barriers of entry for latecomers. With that said, we are going through a challenging second quarter in terms of both sales and gross margin, but believe This will be a short-term phenomenon with a rebound around the corner starting in the second half. Excuse me. I will now begin with an update on the large panel driver IC business. Our second quarter 2023 large display driver IC revenue is projected to be down double digits sequentially. We expect TVIC business to decline double-digit quarter over quarter as customers have pulled forward demand in preparation for the upcoming seasonal shopping sales. Replenishing our chips over the past two quarters. Monitor IC sales in the second quarter are set to decline single-digit sequentially following the strong order replenishment we saw last quarter. while notebook driver segment is expected to slightly decline. Turning to the small and medium-sized display driver IC business, we expect Q2 revenue for this segment to be down single-digit, frequently. However, there are indications of business momentum recovery for smartphone and tablet in the second quarter, particularly in TDDI products. Both are projected to increase mid-teens sequentially, fueled by resumed customer orders following several quarters of downturn. Importantly, our inventory depletion for smartphone and tablet TDDi is progressing nicely and improving as we speak. As such, we have initiated new web stars for select products which will enjoy better margins starting Q2. Automotive IT sales are anticipated to be down low teens sequentially, a result of weakening demand in China, which is prompting automotive panel houses to implement cost reduction measures and to recalibrate inventory levels. Having said that, Our position as the market share leader in both DDIC and TDDI for automotive remains intact. Looking at the longer-term perspective, while only moderate growth is anticipated for automotive DDIC, our TDDI business is projected to expand explosively, backed by the fast-expanding DDDI adoption for new generation vehicles. and are dominating new project design wind status. Hymex also continues to lead the industry with the launch of its LTDI, or Large Touch and Display Driver Integration, automotive display solution, specifically designed for the next generation extra large automotive displays, typically 30 inches or larger. Our cutting edge LTD technology enables ultra-high resolution displays and high precision touch sensitivity, catering to the growing demand for large, seamless, and intuitive in-car experiences. We are scheduled to start mass production this quarter, which is well ahead of the competition. Concurrently, we are working on several design collaborations for some of the modish automotive vehicles with major panel makers. As we have repeatedly said before, the trend for automotive interiors continues to evolve towards more stylish and diverse designs, such as free form and curvature, with ever-improving image quality, made possible with panels equipped with advanced technologies. HIMAX is the frontrunner in automotive display IC market, offering a comprehensive product portfolio covering the entire spectrum of specifications and technologies to address varying design needs, including traditional DDIC, TDDI, local dimming TCAM, LTDI, and AMOLED. We are encouraged by our progress, having expanding design win coverage across panel makers and engaging more TO1s and OEMs to incorporate new technologies into their new vehicle models. This implies we not only have been able to reinforce much higher content value on a per panel basis, but we also enjoy better profit margin. We are confident that the automotive driver business will continue to be our primary sales moving forward. Next, for an update on AMOLED, HIMAX offers both DDIC and TCAN for AMOLED display and has commenced production for tablet and automotive applications jointly with global leading panel makers. For automotive AMOLED display, we continue to see robust design-in activities as well as increasing project awards with both conventional car makers and LEV vendors across different continents. Additionally, we continue to gear up for AMOLED drive IC development, strategically partnering with major Korean and Chinese panel makers on various applications covering smartphone, notebook, and TV. For smartphone AMOLED display driver, We already have secured meaningful capacity and expect to commence production toward the end of 2023. Our AMOLED business, including display driver and TCAN, is slated for strong growth in the next few years. Now let me share some of the progress we've made on the non-driver IC businesses. Starting with an update on timing controller, we anticipate Q2 TCAN sales to decrease by low teens sequentially, hampered by decreased demand for both large display panels and AMOLED displays for tablet. On a positive note, we continue to solidify our leadership in the automotive TCAN market, particularly in local deeming technology. As Eric mentioned earlier, Hymex Automotive Novotainment T-Con was awarded the Gold Panel Award by Touch Taiwan 2023, another great recognition by the industry after our years of strenuous work on this high-entry barrier technology. Let me take a few seconds to elaborate on our award-winning Novotainment T-Con. The adoption of low dimming TCAN not only dramatically improves contrast ratio of the display, but also provides enhanced power efficiency, both of which are crucial, especially for EV displays. Our industry leading low dimming TCAN offerings support super high frame rate and a wide range of resolutions from Full HD up to 8K. Additionally, when two T-cars are paired, the solution can even accommodate up to 16K resolution. We see rapidly increasing adoption by all leading panel makers, tier ones, and car makers, starting from premium new car models and, in some cases, extending to mentoring models. Tremendous progress has been made with numerous project awards already. Similar to that of TDDI for automotive, only a small number of design awards of automotive TCAN have commenced mass production starting last year. We therefore expect a strong growth trajectory for automotive TCAN starting 2023 and in the coming years. Switching gears to the YSI Smart Image Sensing total solution, which incorporates HIMAX proprietary ultra-low-power AI processor, OS on CMOS image sensor, and CNN-based AI algorithm. We continue to support the mass production of DAIL's notebook, along with other endpoint AI applications, such as video conference device, shared bike parking, door lock, smart agriculture, among others. We are unwavering in our commitment to Wi-Fi as we look to proliferate our industry-leading ultra-low-power AI solution by fostering innovation in a broad spectrum of endpoint AI applications across the globe. Furthermore, we remain dedicated to fostering development in the domain of energy-efficient AI processors and AI image sensors for endpoint AI applications to maintain our top-ranked status in the space. The home surveillance application, such as doorbell, door lock, and security camera, showcases another successful deployment of ultra-low power Wi-Fi technology. Wi-Fi offers embedded context-aware AI that accurately identifies humans to reduce excessive force triggers, avoiding unnecessary SOC processing, and leading to efficient power usage for the surveillance system. This facilitates the transition of conventional surveillance systems from wired to battery-powered ones, broadening real-time adoption. Furthermore, YSI features ultra-low-power pre-roll AI to enable always-on full-color negative time image recording before a classified event, resulting in a complete video stream and pre-roll clips of what happened before the said event. This also illustrates another significant improvement compared to existing surveillance solutions. In March this year at ISC West, the leading security industry trade show. Hymex joined forces with various ecosystem partners and customers to unveil a broad array of battery-operated home surveillance devices, like Embed, our Wi-Fi technology. The adoption of Wi-Fi in surveillance areas is quickly proliferating, and we are seeing more active design activities and broad inquiries after the event. Moreover, for the upcoming China shopping festivals, Himex is teaming up with a leading door lock vendor in China, specializing in smart home and security, to debut a smart door lock solution with advanced security and low power consumption. This is yet another confirmation of the Wi-Fi technology in the rapidly emerging endpoint actual low power image AI era. Now next for an update on our next generation W2 AI processor which builds upon our industry-leading W1 processor and performs contextual awareness AI particularly in detecting user engagement levels based on more subtle presence or movements. WE2 is designed with advanced computer vision engines that can recognize images over a longer distance at much enhanced accuracy, speed, power efficiency, and inferencing performance. Based on its superb AI processing capabilities, WE2 can enable more comprehensive and detailed types of objects detection, such as facial landmark, hand landmark, and body skeleton to perceive complex human body movement, enabling high-precision AI detection for a wide range of applications and use cases in real life. It has gained significant traction for next-generation smart notebook targeting to hit the market starting 2024. where we are making solid design progress with leading laptop brands as well as CPU and APS-OC partners to jointly work on the enrichment of new AI features of notebooks. The breadth of business activities is also expanding with IoT players specializing in various domains to meet different demands. that were previously unknown to us. We are thrilled to be at the forefront of these innovative developments that lie ahead in the near future. Supported by fast expanding customer adoption from various domains, we are committed to the development of the YSI product line while leveraging broad ecosystem partners to capture the vast endpoint AI opportunities. We believe our wide-side product line will be a significant long-term growth driver for us. Lastly, for an update on our optical-related product lines, including WO, 3D sensing, and . Himex is one of the few companies in the technology industry with a wide array of optical-related product lines that play a vital role in immersive technologies development and realization of the metaverse. Our technology leadership and manufacturing expertise are evidenced by the growing list of AR slash VR cargo device customers and ongoing engineering projects. We continue to work on strengthening our optical-related technology suite while collaborating with global technology leaders in the space. Now to review some of our recent progress. First, on 3D sensing. On 3D gesture control, we are delighted to share that we will commence modern production of our WL technology to one leading North American customer for their next generation VR devices starting Q2 this year. Our WL technology is deployed to empower VR devices with 3D perception sensing for precise controller-free gesture recognition. Separately, we are expanding our 3D processor offerings to offer time-of-flight or TOS 3D, in addition to structuralized 3D decoding. Well, we are already a market leader. with a proven track record in mass production. This will enable us to meet the diverse use case of 3D sensing, where TOF is more effective for long range 3D perception, while structured light excels in high precision 3D detection for shorter distance. All our 3D processors are equipped with advanced sensor fusion offering industry-leading physics response rates, a characteristic that makes our processors a perfect fit for high-precision spatial reality applications. Next, on Aircos. We are delighted to announce that we will unveil our state-of-the-art color sequential front-end Aircos technology at the display week 2023 in LA, one of the world's most renowned display industry symposiums and trade shows. Our proprietary aircoast design offers unrivaled performance and functionality, featuring a lightweight and compact form factor with a total volume that includes the illumination optics and aircoast panel of around 0.5 cc. as well as high illumination efficiency, delivering brightness of up to 100k nits. These outstanding characteristics make it the perfect micro-display solution to meet the stringent specifications of the most advanced AR glasses, deploying 2D exit pupil expansion waveguides that support greater than 50 degrees field of view. We are honored to be invited to give a deep-dive presentation of our color sequential front-lead air cost technology to industry experts at the symposium. Additionally, one-on-one meetings with literally all major tech names are in, AR goggles have also been lined up. We will provide updates on our progress for this exciting new technology as they come about. We remain steadfast to strengthening our optical-related technology suite and forging strong partnerships with the world's leading technology companies that are deeply committed in investing in its development. As the metaverse and immersive technologies continue to develop, we believe that HIMAX is well positioned to capitalize on its growth with years of research and development. a unique product portfolio, production history, and key partnerships. For non-driver IT business, we expect revenue to remain flattish sequentially in the second quarter. That concludes my report for this quarter. Thank you for your interest in HIMAX. We appreciate your joining today's call, and we are now ready to take questions.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. As a reminder, to ask a question, please press star 1 1 on your telephone. Our first question goes from Jerry Su with Credit Suisse. You may proceed.

Thanks for taking my question. Just want to follow up on your previous comment about the second quarter guidance, which shows the gross margins that was impacted by the termination of the deferred contracts. Can you give us an idea of what is the impact on the margin? penalties that you are recognizing in the second quarter? That's the first question. And secondly, when I look at your large-size driver IC outlook, it seems like that you are a little bit different from the industry because I look at the panel makers or back-end or your driver IC peers all are expecting a sequential growth. Can you give us an idea what is the discrepancy between your guidance versus the industry trend? Thank you.

Thank you, Jerry. On the first question, our last quarter gross margin was about 28%, just about 28%. And for this quarter, we are guiding for 22%. 20% to 21% if we take the midpoint, about 28.5%. So there's a differential of about 7%. So the impact or from the termination of long-term contract, the impact is we said in the prepared remarks the predominant factor. That means far greater than half. That means far greater than half, meaning with the third percent differential, far greater than half difference actually came from this termination. Without the termination, our margin would have been much closer to that of the previous quarter of 28.2%, I think. Now, the remaining difference, I think, comes primarily from the fact that in the second quarter, the automotive business was hit. by what we describe as certain global turbulence, especially in the EV market in China, which actually is related to your second question. Because our automotive market exposure is far greater than those of our peers, at more than 35% historically over the last, I don't know how many quarters, many quarters already. the impact, especially TDI, which is presumably on the fast track of growth every single quarter. But I mean, we unexpectedly in Q2, we are now seeing some sequential decline, which we believe will be a short-term surprise. And we emphasize in our prepared remarks that growth will resume. probably strongly in the second half for automotive business, especially for TDTI, where we are very, very confident that this temporary setback will be a short-term phenomenon. So, because the weighting of sales coming from automotive is so high for Hymex, and there is a short-term how we call market turbulence in automotive markets. So that is why we are probably harder hit than our peers during the second quarter. So I think that covers both part of the first question as well as the second question. The difference primarily comes from automotive. We said earlier in our prepared remarks, actually, if you look at our smartphone, you know, tablet, yeah, they will be actually growing. And the non-driver will be flattish to certain small growth, as now we expect, and others. So I think automotive is the main difference. But again, I think... Among all the applications for display, we are happy. We are betting big on automotive because in the long term, I'm talking about next several years, automotive is still on track to outgrow the rest in our view. And so having such high exposure to automotive where it's actually negative news for Q2, I think looking forward it's going to be very good news, especially given our dominant position in new project design wins, covering both TDDi and the local deeming TCOMs, who are, you know, I mentioned in my prepared remarks, of the 100 also design win process for TDDi, only about one-third 300 designing projects, only about 100, i.e. one-third, is going to mass production, with the rest, you know, will start mass production over the next one or two years. Even more so, a lot more so for local demand T-con, which is of very high value and high margin, and it has appeared to be becoming a major trend becoming trendy for automotive makers and panel makers to adopt our Novo T-min T-con, which is right now still the only choice in the industry. So starting mass production in 2023, but only a small portion. I think we will expect a very strong growth of Novo T-min T-con going forward. So, again, the difference for Q2 comes from low-term, but we are quite positive on low-term, you know, low-term.

All right. Thank you. I think my previous question regarding the revenue trend for this quarter was mainly on the large-side driver IC because I think you guided that the large-side driver IC would decline double-digit quarter-by-quarter. But when we look at the guidance from, you know, the panel makers, or your peers, apparently that they are guiding for some sort of growth, right, for large-size business. So the question was actually more related to this front. And then the other one, the automotive, just a follow-up. Can you elaborate a little bit about what is your end customer mix for automotive? Is it more Chinese customers or is it more global customers? Thank you.

You mean end customer?

Do you mean end customer? Yeah, end customer, panel end customers, if possible. Thank you.

Okay, okay. I will probably give you an overview of the customer base. Now, on the first question, I apologize for misunderstanding your question. Yes, we're guided for some decline for last panel, where you see some of our peers have, for last panel, where some of our peers have guided for an upside. I think it comes primarily from TV, the difference for TV. I think TV for most of our peers, including Himex, is the largest sector by far in the large display space. Now, yes, we do see recovery for TV market. And we have actually enjoyed over the past few quarters steady growth. for TV driver and also another good news is panel price through panel makers various measures has been stabilizing and even going up a little bit going forward but in this quarter in particular we don't get a full benefit because of the difference in customer base our customer base TV panels are supplied primarily by Chinese makers, largely by Chinese makers, and followed by Taiwanese panel makers. Our customer base are much more exposed in China than in Taiwan, where for certain reasons, leading end customers' panel allocation decision hopefully it's a short-term decision, but has swarmed from bigger focus on China to more focus on Taiwan. And so it's really our end customers panel education that causes our probably different direction compared to our peers because we are our exposure is more towards Chinese panel makers, a lot more than Taiwanese panel makers, where the current trend is, the short-term trend is for the occasion to go to Taiwanese panel makers more. So I think that is the main reason. But we are discussing extensively with end customers who have a very direct technical and business relationship with us. I think various measures are on the way, including our getting into more exposure to Southern Taiwanese panel makers, and also their longer-term strategy towards allocation among these two markets. will be on track studying the second half for TV panels market. As far as your second question is concerned about our customer base for automotive, with our market share, every single customer, every single panel maker is our customer. And in most cases, we are In many cases, we are actually the predominant supplier. In some other cases, we are number one or number two suppliers. So I'm talking about every single panel makers, and that is the easy question. Now, with the panel makers, then you have tier one makers and ultimately two end-user OEMs. We have also very comprehensive global reach. We realize... First, the number of brands are many, and with the global diversification, you have North American brands, Korean brands, Japanese, European, Chinese, et cetera. So we need to, with our market share, we need to cover them all. So there's no focus one way or the other as such for Hymex. and DITO for Tier 1s. They are European, Korean, Japanese, American, and Chinese Tier 1s. There is some crossover. European Tier 1s were, in addition to European market, will also cover some Chinese market and so on. Chinese Tier 1s will cover some European market and so on and so forth. But there is still this reach. global diversification with a lot of global buyers for T1 market. And again, our strategy, and we have implemented that quite successfully, our strategy is to cover them all and to try to get a leadership position to the extent possible with as many of them as possible. So we have major engineering support offices certainly in China, in Japan, in Korea, and we have engineering support office even in Europe, in the core of Europe, in Germany, and even in North America, not just in Bay Area, but also in Detroit. And that shows, that illustrates our efforts to cover truly, you know, to extend our global footprint for automotive market.

I hope that answers your question. Yes, that's very clear. Thank you. Thank you.

Thank you. And this concludes the Q&A session. I'd now like to turn the call back over to CEO Mr. Jordan Wu for any closing remarks.

As a final note, Eric Lee, our Chief IRPR Officer, will maintain investor marketing activities and continue to attend investor conferences. We will announce the details as they come about. Thank you, and have a nice day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.