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spk03: there will be a question and answer session. 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 that lies where your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. At this time, I'd like to hand the conference over to your host, Mr. Mark Schwalenberg from MZ Group. Please go ahead.
spk04: Welcome, everyone, to the HIMAC's first quarter 2024 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've 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 HIMAC's website at .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 results to differ materially from those described in this conference call. A list of the factors can be found in the company's SEC filing, Form 20F for the year ended December 31, 2023, in the section entitled Risk Factors, as may be amended. Except for the company's full year of 2023 financials, which were provided in the company's 20F and filed with the SEC on April 2, 2024, 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 advise 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.
spk06: Thank you,
spk04: Mark. And thank you, everyone,
spk06: for joining us. My name is Eric Lee, chief IRP officer at IMAC. On today's call, I will first review IMAC's consolidated financial performance for the first quarter of 2024, 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 an ISI basis. We are pleased to report that Q1 revenue, gross margin, and the profit, all exceeded guidance issued on February 6th, 2024, despite the seasonal downturn, as well as ongoing macro headwinds. The -than-expected financial results primarily stemmed from strong order momentum in our automotive and TECOM product line, coupled with cost improvement and a favorable product mix. First quarter revenues registered $207.6 million a decrease of .8% sequentially, exceeding our guidance range of a 9% to 16% decline. Gross margin came in at 29.3%, outperforming our guidance of around 28.5%. Q1 profit per diluted ADS was 7.1 cents, surpassing the guidance range of 2 cents to 5 cents. Revenue from large-discount drivers decreased 7% sequentially to $31.3 million, due to seasonally soft macroeconomic conditions, compounded by ongoing production and inventory control measures by our leading panel customers. Consequently, our sales of TV and monitor ICs declined sequentially. However, notebook IC sales saw a nice double-digit increase -over-quarter as customers accelerated their purchases after several quarters of the stocking. Sales of large-panel driver ICs accounted for .1% of total revenues for the quarter, compared to .8% last quarter and .7% a year ago. Small and medium-sized display driver segment revenue reached $144.3 million, a sequential decline of 11.5%. The -than-guidance result was sealed by strong sales in DDIC for automotive and on-lay tablets. Driven by rush orders for traditional DDIC, Q1 automotive driver sales in comparison both traditional DDIC and the TDDI experienced a single-digit decline, all performing the guidance of a mid-team decline. Meanwhile, automotive TDDI sales continued to defy the industrial downturn and increase sequentially thanks to our robust pipeline of design win projects. The automotive business, including traditional DDIC, TDDI, TECOM, and on-lay sales remained the largest revenue contributor in first quarter, representing around 46% of total sales. Q1 smartphone IC sales declined sequentially by exceeded guidance sealed by rush orders from leading customers. Conversely, tablet driver sales declined as expected, amassed the typical low season characterized by sluggish demand. The small and mid-size driver IC segment accounted for .5% of total sales for the quarter compared to .6% in the previous quarter and .3% a year ago. First quarter non-driver sales exceeded guidance, reaching 32 million dollars, an increase of .4% from the previous quarter. The better than expected performance is attributable to a resurgence in order for large-size display TECOM products. In the realm of automotive TECOM, the adoption of our automotive local DMI TECOM continues to reasonably expand, as evidenced by increasing number of projects of the world from numerous tier ones for the new vehicle project of their OEM customers around the world. This sets the stage for robust sales growth in coming years. Non-driver products accounted for .4% of total revenues as compared to .6% in previous quarter and the 15% a year ago. First quarter operating expenses were 50.7 million dollars, a decrease of .1% from the previous quarter and a decline of .6% from a year ago. Given the persistent macro-exhomic headwind, we continue to be diligent with strict budget and expense control measures. First quarter operating income was 10 million dollars, or .8% of sales, compared to .2% of sales for the same period last year and .3% of sales last quarter. The decreases in operating margin were primarily driven by lower sales. The sequential decrease was also attributed to lower gross margin. However, Q2 gross margin is on track to rebound from Q1. First quarter after-tax profit was 12.5 million dollars, or 7.1 cents per diluted ADS compared to 23.6 million dollars or 13.5 cents per diluted ADS last quarter and 14.9 million dollars, or 8.5 cents per diluted ADS in the same period last year. Turning to the balance sheet, we had 277.4 million dollars of cash, cash equivalents and other financial assets at the end of March 2024. Compared to 223.8 million dollars at the same time last year and 206.4 million dollars a quarter ago. The increase in cash balance stemmed primarily from continuous debunking effort across all major product lines. In Q2, however, cash equivalent and other financial assets are set to decline primarily due to decreasing sales in the previous two quarters, resulting in lower Q1 receivables. In addition, accounts payable is expected to increase as a result of the rising Q1 wafer orders placed in preparation for higher shipment volume starting in Q2. Other significant Q2 cash outflows include annual income tax payments, as well as refund to certain customers for deposit made during the industry wide capacity supply shortage. As of the end of the first quarter, we had 39 million dollars in long term unsecured loan of which six million dollars was the current portion. Our quarter end inventory as of March, Q31, 2024 was 201.9 million dollars, lower than 217.3 million dollars last quarter, yet another illustration of our successful distracting effort. Accounts receivables at the end of March, 2024 was 212.3 million dollars, down from 235.8 million dollars last quarter and down from 252.2 million dollars a year ago. DSO was 93 days at the quarter end, as compared to 91 days last quarter and 93 days a year ago. First quarter capital expenditures was 2.7 million dollars, versus 15.1 million dollars last quarter and 2.8 million dollars a year ago. The first quarter cap ex was mainly for R&D related equipment and in-house testers of our IC design business. Prior to today's call, we announced an annual cash dividend of 29 cents per ADS, totalling 51 million dollars and the payable on July 12th, 2024. With a payout ratio of 100% of the previous year's profit, the high payout ratio is supported by our positive business outlook as we pursue business objectives and strive for sustainable long-term growth and shareholder value while retaining the healthy balance sheet. As of March 31, 2024, climax has 174.7 million ADS outstanding unchanged from last quarter. On a fully diluted basis, the total number of ADS outstanding for the first quarter was 175 million. Now, turning to our second quarter 2024 guidance, we expect second quarter revenues to increase 8% to 13% sequentially. Growth margin is expected to be around .5% to 33.5%, a notable increase from .3% of the previous quarter, primarily because of a high sale from automotive and the TECOM business, both of which enjoyed both better growth margin than corporate average. The final number may vary depending on product mix. The second quarter profit attributable to shareholders is estimated to be in the range of 13 to 17 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
spk10: you, Eric. Amid ongoing macroeconomic uncertainty, customer behavior in the display market remains conservative with panel makers continuing to implement strict output control measures amidst the cautious end-branch panel procurement environment. Given the limited visibility of the market, and the limited availability, customers tend to maintain lean inventory levels and underestimate demand, thereby providing us with conservative forecasts accompanied by last-minute order increases. This trend has persisted over the last seven consecutive quarters, including Q1, with our actual sales consistently at the upper end of or exceeding our guidance range. As we look ahead to the second half, even with lean inventory levels, we anticipate this conservative market sentiment will persist, causing customers to continue to prioritize agility in response to market dynamics. With that being said, we believe Q1 will be the low point for this year and see sales starting to pick up in Q2, especially in the automotive sector. With several other upcoming demand catalysts on the horizon, including major sporting events and festival shopping seasons, business momentum is expected to continue to steadily improve throughout the second half. Now, let me elaborate a bit on the near-term outlook for automotive business. Our largest source of revenue. Far out, many semiconductor vendors and their customers are still going through painstaking stocking processes. Our inventory position for the automotive sector has become healthy since the end of last year. With our panel customers also maintaining low stock levels at present. This is best illustrated by the large quantities of rush orders we received from panel customers over the last two months, for which we also had to place rush orders to our factory vendors. Therefore, now we stand in the recent headwinds faced by the global automotive industry. Our outlook for the automotive display IT business remains positive for the second half of the year. The automotive display market is experiencing the mega trend of expanding quantities, sizes, and sophistication of displays within vehicles. Expensive displays are increasingly becoming the major selling point for carmakers. As the leader in the automotive display IT business, Himex is poised to benefit from this trend, which implies higher content value per vehicle for display semiconductor vendors such as us, leading to sustainable growth slated for the next few years. Our confidence stems from our dominant design wind pipeline in TVDI, and logo dimming TECAN, both relatively new and cutting edge technologies for automotive displays, with accelerating volume, a momentum which is expected to carry on over the next few years. This will further solidify our position in the market where we are already the leader in the traditional TVIC. Moreover, more customers are adopting Himex's logo dimming TECAN along with TVDI or LTDI as an integral part of their development platform for crafting new automotive displays, reflecting strong customer loyalty for our technology and service. Additionally, we are implementing cost optimization and supplier diversification strategies to enhance supply flexibility and cost effectiveness, as exemplified by our recent strategic partnership announced with NEPTCHIP for the automotive market. As Eric mentioned earlier, we just declared our annual cash dividend with a payout ratio of 100% of last year's profit. Our decision for the high dividend payout ratio this year underscores our unwavering commitment to shareholder value even in the face of uncertain microeconomic conditions. This not only recognizes the ongoing support of our shareholders, but also demonstrates our confidence in our financial stability. With that, I will now begin with an update on the large panel driver IC business. In Q2 2024, we anticipate a meeting's sequential increase in large display driver IC revenue, primarily bolstered by customer restocking following several quarters of million demand, as well as increasing orders from customers preparing for the upcoming shopping festivals. Q2 TV and monitor IC sales are expected to increase single digit and nice double digit respectively, quarter over quarter. In contrast, notebook IC sales are poised for a decline following strong restocking in the previous quarter. In the notebook market, a burgeoning trend of AIPC is emerging, prompting demand for display upgrades to include touch enabled features and or adoption of OLED displays. Timex offers comprehensive offerings in both LCD and OLED technologies in compacing DDI-C, T-CON, and touch related products. As we look ahead to 2025, the anticipated beginning of replacement cycles, we are well positioned to capitalize on this opportunity with numerous in-sale TDI projects for mainstream LCD notebooks and DDI-C and touch controller for OLED notebooks, some of which poised to enter mass production for leading brands in the second half of this year. We believe this will serve as an important growth catalyst for us in notebooks and elevate our presence in the market. Turning to the small and medium sized display driver IC business, we anticipate second quarter revenue to increase single digit sequentially. Automotive IC revenue is expected to grow high teens sequentially with sales for both DDI-C and TDI poised for sequential growth despite recent reports of softening electronic vehicles demand. Our leadership position in automotive TDI remains solid, underscored by the rapidly expanding adoption, as demonstrated by more than 450 secured design win projects and a continuous influx of new pipeline and design wins across the board. It's also important to note that only approximately 30% of awarded projects are currently in mass production, as an indication of the potential lucrative growth opportunity we believe is yet to be realized. Automotive TDI sales are anticipated to represent more than 40% of automotive driver sales in Q2. In contrast, both smartphone and tablet sales are projected to decline quarter over quarter as consumers prolong their replacement cycles in response to the challenging economic environment. To mitigate these sluggish conditions, we have taken steps to improve our cost structure by diversifying our supplier base to position HIMACS for a richer resurgence in demand. To elaborate further on our automotive IT business, where we have a more than 40% market share, HIMACS offers the industry's most comprehensive LCD product line-up, which includes traditional DDI-C and TDI technologies alongside Cardinage LTDI and LevelDimension T-Con solutions. Moreover, we are actively expanding and bolstering our footprint in OLED with a comprehensive range of products covering DDI-C, T-Con, and on-sale touch controller, while forming strategic alliances with top panel manufacturers in Korea and China. This proactive approach aligns us with the dynamic transformation of the industry towards increasing adoption of OLED displays for high-end vehicles. The inherent flexibility of OLED displays to cater to foldable or curved shapes, along with their outstanding visual performance and low power consumption, opens new horizons for automotive interior displays. Notably, our meticulously engineered OLED on-sale touch controller sets a new standard as it boasts an industry-leading -to-noise ratio exceeding 45 dB and offers heightened sensitivity accommodating challenging user conditions such as glove wearing and wet finger operations. Our comprehensive solution in automotive LCD and OLED displays address the broad spectrum of customer preferences and requirements, nurturing robust customer loyalty and fostering collaborations with global panel makers, P1 suppliers, and automotive manufacturers. We anticipate our automotive business will remain a significant catalyst for our growth moving forward. Next, for an update on our OLED business. As I just covered, we have made significant progress in providing solutions for automotive OLED displays, an area with exciting growth potential. We also are expanding into other OLED applications such as tablet, notebook, and monitor. Through collaborations with leading panel manufacturers in Korea and China, featuring a comprehensive offering covering DDI-C, T-CAN, and touch controllers. Additional products with new feature enhancements are slated to enter mass production in the second half of 2024. Regarding smartphone OLED, the current slowdown in smartphone market demand has unfortunately necessitated adjustment to our initial timeline. Nevertheless, collaborations with customers in Korea and China persist with ongoing verification and partnership projects. I would like to now turn to our Non-Driver IC business update. First, for an update on our T-CAN business. We anticipate a notable sequential increase of more than 40% in T-CAN sales in Q2, prepared by ex-television shipments for T-CAN in large-size displays and automotive. HiMAT has been devoted to developing panel driver ICs and timing controllers for decades. We stand as the industry leader in both monitor and automotive T-CANs. We are universally adopted by leading panel makers across the board. In the monitor T-CAN sector, HiMAT excels in the higher market, especially in gaming, where intricate designs are required for high resolution, high refresh rate, and low latency display performance. This is crucial for achieving immersive gaming and entertainment experiences. In the automotive T-CAN domain, our leading position remains unchallenged, boasting well over 100 design-willed projects, powered by our cutting-edge logo-dealing technology, along with our industry-leading proprietary algorithms. The incorporation of logo-dealing T-CAN not only significantly enhances the display's contrast ratio, but also offers improved power efficiency, particularly crucial for EV and large-size displays. Our industry-leading logo-dealing T-CAN solutions support super-high frame rates and a wide range of resolutions from Full HD to up to 8K. We are encouraged by the rapidly expanding validation and widespread deployment of our solutions, initially in customers' premium car models, which have been expanded into mainstream models worldwide. In the second quarter, automotive T-CANs are anticipated to grow more than 30% sequentially, representing more than 3% of total sales. From a longer-term perspective, the growing traction of our logo-dealing T-CAN for automotive is on track to mirror the success of our automotive TDI over the last couple of years. Switching gears to the Wi-Fi -low-power AI sensing solution, a cutting-edge endpoint AI integration featuring proprietary -low-power AI processors, -SIMO-seme sensors, and advanced CNN-based AI algorithms. In the rapidly evolving AI landscape, Wi-Fi AI technology stands out for its expertise in all-device tiny ML solutions and unique -low-power consumption measuring nearly single-digit mini-Watts. This opens the door for battery-powered endpoint devices to incorporate AI sensing for intuitive and intelligent user interactions, something that would otherwise be impossible without such extremely low-power consumption AI. For instance, in smart door locks, which are typically battery-powered devices, China's leading high-end door lock maker Desmond, harnessing HiMax's -low-power Wi-Fi AI technology, created the world's first smart door lock products that feature -7-centimeter monitoring and real-time event recordings. Our Wi-Fi total solution for Desmond boasts an exceptionally low-power draw of just 2.2 milli-Watts, representing a novel and highly advantageous feature with minimal impact on battery life. The potent AI inherent in Wi-Fi allows the door lock camera to capture snapshots periodically on a 24-7 basis, and when detecting human presence, immediately start recording, while concurrently waking up the door lock's much higher power-consuming main processor. The result is a comprehensive event recording for seamless threat protection that better ensures security or mitigating potential breaches, all achieved with a battery-powered door lock. By working with ecosystem partners and customers, we are expanding Wi-Fi AI applications aggressively, covering new areas, including but not limited to smart home, smart agriculture, automotive, smart office, AMR, or automatic meter reading, healthcare, and a wide range of other AIoT applications. To broaden our market reach and help shorten customers' development cycles, we also offer seamlessly integrated, -and-play, Wi-Fi modules. These modules enable no-code slash low-code AI development, while providing building context-aware AI algorithms, which are reprogrammable for the customer. Within a few months after its launch, the Wi-Fi modules have seen successful adoption in battery-powered parking systems across Asia, as well as applications in fleet management, occupancy sensing, pet tracking, all-flow sensing, access control, among others. Moreover, for companies with their own AI expertise, we provide hands-on, open-source AI frameworks, toolchains, and robust AI models to streamline development efforts and reduce costs in the time for AI product introduction. This year, at the ISE West, a leading US trade show for the security industry, HiMax unveiled YSI PalmVen technology, an -low-power, contactless biometric authentication solution. Powered by the advanced YSI 2 AI processor, YSI PalmVen can swiftly authenticate an individual's identity in less than 100 milliseconds, while consuming nearly milliwatts of power. It boasts exceptional accuracy, enhancing security by minimizing the risk of depletion or spoofing, through the distinct PalmVen patterns unique to every individual. The solution targets battery-powered access control devices for a small group of authorized individuals. Having only launched recently, YSI PalmVen technology has already attracted interest for applications such as automotive, door lock, surveillance, laptop, and more. We are actively accelerating verification partnership projects in these areas, and are enthusiastic about the potential for YSI PalmVen authentication that marks a significant breakthrough in the industry. Next, for an update of our Ecosmicro Display technology, at the upcoming Display Week 2024 in May in San Jose, California, Hi-MACS will unveil its groundbreaking ultra-luminous new generation color sequential-friendly Ecosmicro Display, capable of achieving a brightness of up to 250,000 nits. This represents a notable .5-volt increase from its predecessor, announced at the Display Week 2023, while maintaining low power consumption of just 300 milliwatts. Additionally, thanks to its compact form factor of just 0.5 cc of volume, when incorporating both illumination optics and the air-course panel, stylish and everyday-ready AR glasses are becoming a reality. While volume commercialization of AR glasses targeting the general public may still take several years, we are proud that Hi-MACS's new generation color sequential-friendly air course stands as the sole viable solution in the marketplace for authentic see-through AR glasses, delivering imperial brightness, power consumption, form factor, display quality, and mass production readiness. Collaborations with leading tech companies worldwide are on the rise, solidifying Hi-MACS's position as the leader in the field. For non-drivable IT business, we expect revenue to increase double-digit sequentially in the second quarter. That concludes my report for this quarter. Thank you for your interest in Hi-MACS. We appreciate your joining today's call and are now ready to take questions.
spk03: Thank you, Jordan. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Frank Wang with Athena Capital. You may proceed.
spk05: Hi, good evening. My first question is on the auto business. Texas Instruments, NSP, UMC, TMC, will indicate some softness in auto... We can't hear
spk09: you, Frank.
spk05: Okay. Okay.
spk07: Can you hear me okay? Can you hear me now? Hello, can you hear me okay?
spk03: Frank, we can hear you. I'm going to actually remove you and then re-promote you because it seems like the team with Jordan and Eric are not able to hear you. So please stand by.
spk08: Frank, we have
spk03: brought you online again. Please proceed and confirm that the team with Eric and Jordan and team can hear you.
spk05: Okay, yep. Thank you. And yep, good evening. The first question is on the auto sector. Texas Instruments, NSP, TMC, UMC will indicate some softness in the auto sector. What is your view? And why are these leading semiconductor companies seem to be more pessimistic on the auto sector? Why are you expecting a decent quarter of a quarter growth in the auto sector? Thank you.
spk02: Frank,
spk03: it seems the team is still unable to hear you, so we're going to bring you back and then try again. We're going to prompt for questions. Hold on. Can you
spk10: hear Frank?
spk03: Mr. O'Brie? I can hear you fine. We can hear Frank and the rest of the people can. I don't know why the folks in your room are not able to hear him.
spk10: That is very weird.
spk03: Okay, that's all right. I've got another person coming to assist on this. We're going to keep Frank in questions. Please thank everyone for your patience. Crystal, thank you for coming in to assist. Everyone can hear Frank except for Eric's line where the group is gathered.
spk10: Or Mr. Operator, can you relay the question of Frank to us because we can clearly hear you. And we are assuming you can hear us. I'm assuming everybody can hear us. And it appears that everybody can hear Frank except for us. I don't know why. So if you can pass on Frank's question to us, then we can respond to the question.
spk09: I can do my best. He asked a lot of information.
spk05: So let me set up one more time. So the first question is regarding the auto sector. Hi-MAC is more optimistic. It's expecting a very good growth for the second quarter. But other companies, same kind of other companies, are expecting some softness. So what's the view? How's that different? Thank you.
spk02: So what
spk03: is the view from Hi-MAC in terms of the auto sector? Frank asked some pieces about there was some softness. I'm doing my best to relay information.
spk10: Okay. I think I got the answer to the question. Yes. That is the question. So I suppose the question from Frank, again, I apologize for some system reasons. We cannot hear it. But the relay from the operator appears to be that the industry is going through softness in auto semiconductor business, while we are guiding for a pretty strong outlook. So I guess Frank's question is why we are seeing a partial of directions. I think indeed we have seen in recent earnings calls from semiconductor companies, both foundries and IDMs across US, Europe and Japan, where they are giving rather cautionary outlook on the auto market demand. But if you retail for the above their comments, you will be able to see that they are not saying the auto industry's overall shipment is going to decline. What they are saying merely is that their stocks are perhaps too high and they are going through the stopping process. And that is the reason for their cautionary outlook. And if you look at the industry focus, most people are, I mean, while we are not expecting a very strong auto shipment for this year, people are not focusing any decline either. Typically, at least something like 3% or 5% or some forecast projected for higher gross outlook for the vehicle shipment volume this year. So the industry actually remains solid. And I mentioned in my prepared remarks that our inventory for auto market actually is very, very lean. And so are our customers' inventory positions. And I particularly mentioned in my prepared remarks that we actually had to take a look at Russia orders recently. Actually, I'm talking about very sizable quantities of Russia orders from our panel customers. And the reason why they are giving Russia orders clearly is because they have run out of stock and their existing stock cannot meet the customer demands. And with the Russia orders, we also have to turn around and place our orders, Russia orders, to our boundary partners because, again, for the same reason, our inventory is very low and our existing inventory simply cannot meet the demand of
spk08: the customer.
spk10: So I think I also explained in my prepared remarks there has been a total of seven quarters in a row when we see our inventory consistently declining very nicely. And also we announced at the end of last year that we believe our inventory level has become very healthy, and that certainly covers the auto industry. And I think that is the major reason for departure, I suppose. And also I think we continue to highlight the fact that the auto industry is going through this mega trend to upgrade their panels in terms of quantity, feature, sophistication, size, etc. for vehicles panels. And that is very good news for panel makers targeting auto industry because for each vehicle, the panel content value is increasing. And even more so for IT vendors because for each panel going to vehicles, the IT content value is increasing. So we are going through that mega trend right now and being market leaders, I think we really are taking a nice ride and enjoying this mega trend. So I hope that explains the short-term difference in our outlook as opposed to most semiconductor makers. Back to you, operator.
spk03: Thank you, Frank, for your question.
spk05: Thank you, operator. Yes. Can I just ask you to relay one more question, please? Hi, Mac is a leader in L-COS. Can I talk about the chance for C-2 AR glasses to really happen? Thank you.
spk03: So I'm going to do my best to relay. They're asking about, Hi, Mac is a leader about B-2BR glasses or classes. And I want you guys to speak to that scenario.
spk10: Okay. Yes, I suppose Frank is asking about AR glasses and particularly our L-COS solution targeting that market. And towards the end of my previous remarks, we highlighted the major breakthrough in technology and our excitement about the breakthrough. And I suppose, not knowing, not hearing the details of Frank's question, I suppose many people may wonder, AR as a general of products has not seen great success so far. And L-COS is just a supporting technology for the AR glasses industry. So what is our comment? Is there really a future? And the company over the many years seems to have been committed to the development of L-COS technology for AR glasses. So I guess many people may have questions about whether this strategy actually makes sense. And my response is obviously we believe there's a reasonable chance for AR glasses to become successful. And I will elaborate on the importance of micro display or L-COS micro display for the success of AR glasses. And clearly we are committed and frankly, bringing money to develop this technology for many, many years because of the simple reason that we have a very strong commitment for its success. And we certainly believe that the chance of success is quite good. And I will also highlight the fact that simply because the technology is so difficult, when it's successful, it's going to be tremendous potential, tremendous space and opportunity for HIMACS because very few people are involved simply because the technology is actually quite challenging. Now, let me elaborate the background a little bit. One of the major technical challenges for see-through AR glasses is the display system, which by definition needs to be totally different than the displays we are so used to every day for say smartphone or watch or even those for AR or MR goggles. So basically a see-through display system is comprised of three things. A micro display which generates image, a web guide which projects the image, and a coupling lens which channels the image generated by micro display to the web guide. Okay, now because of the see-through nature and the need to allow for outdoor use, the brightness to eyes for display for AR glasses needs to be significantly higher than those for the usual displays, which typically ranges between 250 to 300 nits around. I'm talking about your usual notebook displays or cell phone displays or TV displays, typically between 250 to 350 nits. In comparison, our customers are now demanding for the brightness to eyes for the AR glasses to be at least 1000 nits, which is quite a number of times higher than our usual displays. Now the trouble is the optical efficiencies of both the web guide and the coupling lens are quite low, especially the web guide, which is typically as low as 1% or less. While for the coupling lens is around 50-60%. So what this means is that more than 99% of the brightness generated by the micro display is quote unquote wasted after traveling through the optical system and before the image is projected onto the eyes. And this is the reason why we are now offering our new generation from the AirCross with super high brightness of 250,000 nits. So on a 4-part basis, if the web guide efficiency is 1%, then our 250,000 nits AirCross can create about 1500 nits brightness to eyes, which is going to meet the demand of our customers. So while we continue to work towards even higher brightness, we believe for the first time ever in the industry, we are finally seeing a micro display which offers a legitimate level of brightness for AR glasses targeting the general public. So to complete the story, in addition to the major breakthrough in brightness, our new front-lit AirCross also offers low power consumption of around 300 milliwatts, as I mentioned in my prepared remarks, and a form factor of just 0.5 cc in total volume. All of these are very critical for the success of AR glasses. Last but not least, our AirCross solution is way beyond laboratory level and is actually now quite ready for volume production. I would just add one last point, which is the only competing technology for AR glasses for display is micro LED, for which the industry has put in tremendous resources over the last few years to develop billions of thousands of resources. In our view, our proprietary front-lit AirCross provides much better power efficiency than micro LED, i.e. given the same amount of power consumption, our solution actually produces much better brightness than micro LED, than micro LED micro display. So as far as we can tell, what we have achieved so far in our color sequential front-lit AirCross solution is far better than the performance delivered by any micro LED micro display. So far, we are offering comparable form factor with much better readiness for mass production. So this is a pretty lengthy response, but I hope that kind of addresses the issue for our long-term commitment to the development of AirCross for our AR glasses industry. Thank you.
spk03: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. If you need to withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our next question comes from the line of Tyler Bomba with Baird. You may proceed. Tyler, your line is open. You may proceed with your question. Tyler, okay. We're going to proceed to the next question. Again, to ask a question, you need to press star 11 on your telephone and wait for your name to be announced.
spk02: Tyler, please press star 11 again.
spk10: We are still not hearing the question.
spk03: So we tried to people that were supposed to take questions. We did not hear them. This concludes the Q&A. We're going to hand it over to you, Jordan, for closing remarks.
spk10: I apologize for the system issue, but as a final note, Eric Lee, our Chief IRP 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.
spk03: This concludes today's conference.
spk09: You may now disconnect.
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