Himax Technologies, Inc.

Hello ladies and gentlemen, welcome to the HIMEX Technologies Inc. First Quarter 2025 earnings conference call. At this time, all participants are in the listen only mode. Later, we will conduct a question and answer session and instructions will follow at the time. As a reminder, this conference call is being recorded. Now, I would like to turn the conference over to Ms. Karen Tao, head of IRNPR at HIMEX. Ms. Tao, go ahead please.

Welcome everyone to the HIMEX First Quarter 2025 earnings call. My name is Karen Tao, head of IRNPR at HIMEX. Joining me today are Jordan Wu, president and chief executive officer, Jessica Pan, chief financial officer. After the company's prepared comments, we have allocated time for questions in a Q&A section. If you have not yet received a copy of today's results released, please email hx-iir at .com.tw or .mzgroup.us. As of the press release on financial portals, we download a copy from HIMEX website at .com.tw. Before we begin the formal remarks, I would like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements. They involve a number of risk uncertainties that could cause actual events or results to differ materially, although described in this conference call. A list of risk factors can be found in the company's SEC filing. For 20S for the year ended December 31, 2024, in the section entitled, Risk Factors, as may be amended. Except for companies for year 2024 financials, which were provided in the company's 20S and file with SEC on April 2nd, 2025, the financial information included in the conference call is audited and consolidated and prepared in accordance with IFRS accounting. Such financial information is generally internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and external audits by independent auditors, to which we subject our annual consolidated financial statements and may vary materially on audited and consolidated financial information for the same period. The company undertakes no obligation to publicly update or revise any forward-looking statements, where as a result of new information, future events, or otherwise. On today's call, I will first review the highest consolidated financial performance for the first quarter of 2025. Followed by our second quarter outlook, Jordan will then give an update on the status of our business, after which we will take questions. You can submit your questions online through the webcast or if I phoned. We will review our financial on an IFRS basis. Despite the typical seasonal slowdown due to Lunar New Year holidays, we are pleased to announce that our QI revenue was at the high end of projected range issue on February 13, 2025. Our margin remained in line with the guidance, while profit exceeded the guidance range. First quarter revenue registered $215.1 million, a decrease of .3% sequentially, reaching the high end of our guidance range of a decline of .5% to 12.5%. By representing a .7% increase year over year. Growth margin was .5% in line with our guidance of around 30.5%, first from last quarter and up from .3% in the same period last year. The year over year increase was driven by a favorable product mix and continued cost optimization. In the last quarter, Q1 profit per diluted ADS was 11.4%, exceeding the guidance range of 9.0 to 11.0%, primarily due to lower operating expenses. Revenue from large district drivers came in at $25.0 million, flat from last quarter despite the seasonal downturn. This was primarily driven by demands by Chinese government subsidies and the reviving domestic consumption. Novel and monitor IC sales recorded solid double digit growth in Q1. In contract, TV IC sales declined as expected due to customers fully forward their inventory purchases in the prior quarter. Sales of large panel driver IC accounted for .6% of total revenues for the quarter compared to .5% last quarter and .1% a year ago. Revenue from the small and medium sized display drivers segmented total $150.5 million, reflecting a sequential decline of .8% amid the typical low season. However, Q1 automotive driver sales, including both traditional DDI fee and TVDI, outperformed our guidance of low-team sequential decline, declining just a single digit from the last quarter. The sequential decline reflected the whining effects of the Chinese government's renewed training stimulus announced in mid-August 2024, while demeaning other major market remains stable. Q1 auto IC sales were nearly 20% -over-year, reflecting ongoing customer reliance on our technology and the strength of our competitive mode. Our automotive business comprising DDI-C, TVDI, T-Con and OLA IC sales remained the largest revenue contributor in the first quarter, representing more than 15% of total sales. Meanwhile, our best smartphone and tablet driver sales declined as expected and made a sub-year festival season. The small and medium-sized driver IC segments accounted for .0% of total sales for the quarter, compared to .3% in the previous quarter and .5% a year ago. Q1 driver sales raised $39.6 million, a .8% decrease from the previous quarter. The sequential decline was primarily attributable to the absence of a one-time SX-T consumer to a leading projector customer in the prior quarter, coupled with the moderation in automotive-T consumer after several quarters of robust growth. They being set up position in a local demand-tea community and rival with us, supported by increasing validation and adoption for at least 10 meters to one supplier and automotive manufacturers around the world. We also have a robust pipeline of over 200 designing projects that are set to gradually enter mixed production in the coming years. Now driver products accounted for .4% of total revenues, as compared to .2% in the previous quarter and .4% a year ago. First quarter operating expenses were $45.7 million, a difference of .0% from the previous quarter and a decline of .8% from a year ago. I made ongoing economic challenges. We are strictly enforcing budget and expense controls. First quarter operating income was $19.8 million, or .2% of sales, compared to .7% of sales last quarter and .8% of sales for the same period last year. The sequential decrease was mainly a result of lower sales, offset by lower operating expenses. The -over-year increase resulted primarily from the high sales, improved growth margin and lower operating expenses. First quarter FX profit was $20.0 million, or 11.4 cents per diluted ADS, compared to $24.6 million, or 40 cents per diluted ADS last quarter and up from $12.5 million, or 71 cents in the same period last year. Turning to a balance sheet, we had $281 million of cash, cash equivalent and our financial assets of March 31, 2025. This compares to $277.4 million in the same time last year and 224.6 million a year ago. We achieved a strong positive operating case flow of $56.0 million for the first quarter. As of March 31, 2025, we had $33.0 million in long-term unsecured loans, with 6.0 million being the current position. Our quarter and inventory as of March 31, first 2025 were $129.9 million, lower than $158.5 million last quarter and $201.9 million same period last year. Our inventory level has steadily declined for 10 consecutive quarters, since beginning during the COVID-19 pandemic when the industry was undergoing a supply shortage. As macroeconomic uncertainty impairs the visibility across the ecosystem, we will continue to manage our inventory conservatively. Accounts receivable at the end of March 25, was $217.5 million, down from $236.8 million last quarter, but slightly up from $212.3 million a year ago. DSO was 29 days in the quarter end, as compared to 96 days last quarter and 23 days a year ago. First quarter capital expenditure was $5.2 million, versus $3.2 million last quarter and $2.7 million a year ago. First quarter of CapEx was mainly for &D-related equipment for our ICD-side business, and ongoing construction of new preschool near our Tainan headquarters for children of employees. The preschool is scheduled to open in 2020, and by 2026, reinforcing our commitment to a family-friendly workplace. Prior to today's call, we announced an annual cash dividend of 37.0 cents per 8 years, totaling $64.5 million, and payable on July 11, 2025, with a payable ratio of .1% of the previous year's profit. HIMEX will continue to focus on maintaining a healthy balance sheet for driving sustainable long-term growth to deliver value for our shareholders through high dividends and share repurchases. As of March 31, 2025, HIMEX had a 17.9 million 8-year outstanding. On challenges from last quarter, on a fully diluted basis, the total number of 8 years outstanding for the first quarter was 175.1 million. Now, turning to the second quarter 2025 guidance. We expect second quarter revenues to decrease .0% to increase .0% sequentially. Growth margin is expected to be around 31.0%, depending on the product mix. The second quarter profit attributable to shareholders is estimated to be in the range of 8.5 to 11.5 cents per fully diluted ADS. I will now turn the call over to Jordan to discuss our Q2 2025 outlook. Jordan, the floor is yours.

Thank you, Karen. To start off, I'd like to

quickly comment on the recent broad and significant $80 appreciation against the US dollar. Its impact on our Q2 financial results is limited and has been accounted for in the financial guidance for the quarter. On the second quarter, all of Himex's revenues and nearly all of our cost of sales are US dollar denominated, providing the natural hedge for buying and selling activities. In addition, the bulk of our R&D expenses saved for employee salaries are also US dollar based. For employee compensation, the major item of our opening expenses where our employees are paid in the low currency of their location for their salaries, their bonuses are all US dollar based. Other major non-US dollar expenses, mostly $20 denominated, include utilities and income tax expenses. While we don't hedge for currency risk of our non-US dollar based operating expenses, as the cost of such hedging would usually outweigh the benefit, we do purchase any dollar in advance to cover the income tax payable, thereby minimizing the currency risk of a major expense item. Now, I would like to comment on the recent announced, on the recently announced US tariff measures, which have intensified global trade tensions, triggered volatility in capital markets, and heightened macroeconomic and market demand uncertainty. Currently, tariffs have not had a significant direct impact on Himex's business. The DoiC products are not directly exported to the US. Instead, they are assembled into panels or modules by customers outside the United States, and they sold into global markets, including the United States. Just a negligible portion, about 2% of Himex's products are shipped directly to the United States. Only customers for these products are subject to US tariffs. Almost all of these products are manufactured in Taiwan. Of course, our customers have requested early shipment to avoid tariff duties. Many others have opted to deter their orders amid ongoing tariff-related uncertainties. Our conservative Q2 revenue guidance reflects the highly cautious stance of our customers in general toward the global economic outlook and end-market demand amid ongoing tariff development. Looking into the second half of the year, overall market visibility remains low, with the world continuing to closely monitor the development of tariff negotiations. As the tariff-driven supply chain restructuring gains momentum, Himex is deepening its well-established supply chain in Taiwan, while further strengthening its supply chain presence in China, Korea, Singapore, and other regions to ensure production flexibility and cost competitiveness and to better mitigate geopolitical risks. Amid the volatile macro environment, most panel customers have adopted a -to-order model and are keeping inventory clean. In response, we are carefully monitoring web stocks, maintaining low inventory levels, and rigorously controlling operating expenses. Currently, we are further optimizing costs by diversifying both foundry and backend package testing, while mitigating risks and enhancing manufacturing accessibility. This approach is exemplified by the major milestone recently achieved in our automotive display-IC collaboration with SnackShift in China, with products now in mass production and adopted by million automakers. This now only validates our diversified supply chain strategy, but also underscores our steadfast commitment to scaling capacity and cost optimization. Turning to the automotive market, automotive IT business currently accounts for a hash of Hymex's revenue. Having served the automotive display market for almost two decades, Hymex has maintained a balanced global market share across major regions, while demonstrating technological leadership and offering the industry's most comprehensive suite of panel ITs spanning LCD, TOOL, or LAT. Combined with over a decade of lawyer relationships with global TAY suppliers and automotive brands, these strengths help mitigate potential risk from tariffs and reinforce the long-term stability of our automotive business. In addition, Hymex remains committed to a number of innovative fields, namely our Artro No Power AI, AR glasses, and co-packaged optics of CPL. Technologies in these areas are approaching maturity and offer substantial growth potential. As a pioneer and leader in key technologies enabling these novel areas, Hymex is working closely with supply chain partners from technology development through to mass production to actively expand new business opportunities. These innovative fields are relatively less affected by macroeconomic fluctuations, and customer development efforts have not slowed due to tariff uncertainties. We expect these businesses to contribute meaningfully to both revenue and growth margin in the years ahead. Despite the volatile geopolitical environment, Hymex continues to actively explore high growth markets, establish close partnerships with industry-leading companies, and continue to expand our global footprint while developing long-term competitive advantages. In our latest cross-border cooperation, we established a three-parting strategic alliance with Powerchip and Tata Electronics, the subsidiary of Tata Group, India's largest and most influential conglomerate. This collaboration combines Tata Electronics' lead manufacturing and local supply chain integration strengths, Powerchip's mature web manufacturing capabilities, and Hymex's leading display IC and YSI -Low-Power AI S&C technologies to jointly create a powerful ecosystem. The collaboration echoes the -in-India strategy of the Indian government for high-tech areas who are exploring the huge potential demand of the Indian market. With that, I will now begin with an update on the large panel driver IT business. In Q2, large display driver IT sales are expected to decline by a single digit sequentially, driven by customers' pull-forward orders placed in parent quarters against the backdrop of Chinese government subsidies boosting domestic consumption. Monitor and notebook IT sales are expected to decrease in Q2, whereas TBIZ sales are set to increase sequentially, driven by higher shipments to key end customers. Looking ahead, in the notebook sector, we are observing a growing trend for premium notebooks to adopt OLED displays and advanced touch features, partially fueled by the rise of the IPC. Hymex is well positioned to capitalize on this trend, offering a comprehensive range of ICs for both LCD and OLED notebooks, including DDIC, T-Card touch controllers, and TDDI. In addition, we are expanding our high speed interface product portfolio to support faster data transfer rates, lower latency, and improved power efficiency, features that are critical for next generation displays. We have made progress on the next generation EDP 1.5 display interface for T-Card, for both LCD and OLED panels. This high speed interface supports high frame rates, low power consumption, adaptive sync, and high resolution. Key features essential for next generation AI PCs. Through ongoing portfolio expansion and continuous technology innovation, Hymex is well positioned to lead in the rapidly evolving landscape of AI PCs and premium notebooks. Turning to the small and medium size display IC business. In Q2, small and medium size display driver IC business is expected to decline single digit from last quarter. We expect Q2 automotive driver IC sales, including both TDDI and traditional DDIC, to decline meetings sequentially, reflecting the combined impact of tariffs and the waning effect of China's automotive subsidy program. Despite this near term headwinds, automotive TDDI adoption continues to expand across the globe driven by growing demand for more intuitive, interactive, and cost effective touch panel features essential in modern vehicles. Hymex's cumulative shipments of automotive TDDI have outpaced competitors with nearly 500 design projects secured to date, majority of which have yet to enter mass production. On top of a continuous influx of new pipelines and design wings across the board, we are well positioned for continued growth, further reinforcing our leadership in this space. For automotive TDDI, we continue to see solid shipments falling for automotive TDDI for non touch applications, including custom displays, SUVs, and rear and side view mirrors. Our confidence is further strengthened by the growing proliferation of advanced technologies such as LPDDI or large touch and display driver integration in large display car models. Hymex is a pioneer in LPDDI technology which supports seamless integrated large touch display mount panels, typically larger than 30 inches or spanning pillar to pillar across the entire width of the cockpit. LPDDI also features high density touch functionality for responsive performance, making it ideal for next generation smart cabins designs that emphasize large displays and intuitive touch interaction. Additionally, we have seen an increasing number of customers choose it to adopt our integrated LPDDI and HECAN solution as a standard platform for their ultra large automotive display development. Such panels typically require four or more LPDDI chips and at least one of them is T-car panel. This growing platform adoption of more of Hymex's automotive IC offerings not only reflects strong customer loyalty to our technologies, but also signifies an increase in contact value for our customers. Over per panel phases. Multiple projects with globally leading car brands are set to begin mass production starting the end of 2025. Hymex continues to lead the global automotive display market holding the 40% share in TDI-C, over 50% in TDI and an even higher share in Cardinage, the HECAN technologies. Moving to smartphone and tablet IT sales. We expect Q2 smartphone IT revenues to decline meetings from last quarter. Oil tablet IT sales are poised to grow by 18 sequentially driven by renewed demand from leading customers following several quiet quarters. Next, for an update on our OLED business. In the automotive OLED market, we have forced strategic alliances with leading panel makers in Korea, China and Japan. As OLED technology expands beyond premium car models, Hymex is well positioned to become the partner of choice and accelerate OLED adoption in vehicles. By capitalizing on our strong presence and proven track record in automotive LCD displays. Leveraging our first mover advantage, we offer a comprehensive suite of solutions, including DDI-C, T-CAN and on-sale touch controllers. It's worth noting that our advanced OLED on-sale touch control technology both an industry-leading signal to noise ratio exceeding 45 dB. These are reliable performance even under challenging operational conditions such as glove wearing or a wet finger. The solution entered mass production in 2024 and an increasing number of leading global brands are rapidly adopting it for their premium car models. We expect to be a key beneficiary of the shift to OLED displays for the automotive industry over the next few years, unlocking the new growth driver for us that further reinforces our market leadership. In addition, we have expanded our comprehensive OLED portfolio into the tablet and novel markets, covering DDI-C, T-CAN and touch controllers through partnerships with leading OLED panel makers in Korea and China. Several new projects are slated to enter mass production with top tier brands later this year. Meanwhile, we are developing radiology features such as active stylus and gaming models to further enhance our product differentiation and competitive edge. In the smartphone OLED market, we are making solid progress in our collaborations with customers in Korea and China and expect mass production to start later this year. I would like to now turn to our non-driver IC business update where we expect the second quarter revenue to increase low teams sequentially. First, for an update on our T-CAN business, we anticipate Q2 T-CAN sales to increase high teams sequentially, primarily due to increased shipment of T-CAN for notebook and automotive products. Automotive T-CAN sales are set to increase by double digits in Q2, fueled by a strong pipeline of over 200 design-winning projects gradually entering mass production. With a steady influx of new projects coupled with growing validation and widespread adoption of our new T-CAN in both premium and mainstream car models worldwide, Himex continues to maintain an unchallenged leadership position with a dominant market share. In the second quarter, we expect T-CAN business to account for over 12% of total sales with notable contributions from automotive T-CAN. Meanwhile, header display or -U-D is emerging as a major growth area within automotive displays where -T-CAN adoption is accelerated. Our industry-leading -T-CAN eliminates the pop-car effect of the C in -U-Ds caused by backlight leakage typical of conventional TSC OCD panels. These are crisp, high-infidelity images on the windshield. Additionally, EFICIUS advanced transparency detection to prevent the display from obstructing the driver's view thereby ensuring driver safety. With several -U-D projects already underway and increasing inquiries, we are excited about the potential opportunity ahead. Our automotive T-CAN business is well positioned for growth over the next few years. Switching gears to the YSI, our low-power AI-setting solution, a cutting-edge endpoint AI integration featuring industry-leading -low-power AI processor, always-on CMOS-Gmin sensor, and CNN-based AI algorithm. In the rapidly evolving AI landscape, YSI AI technology stands out for its expertise in all-device AI categorized by remarkably low-power assumption, operating at a single-digit, many-once. And it enables AI functionality in battery-powered endpoint devices. Additionally, YSI AI significantly extends battery life and improves overall data processing efficiency by uploading text from the main processor. These attributes unlock new opportunities across a wide range of everyday battery-powered endpoint applications, evidenced by broad adoption of YSI AI across diverse applications, including notebooks, tablet, smart door lock, surveillance system, access control, smart retail, and many others. Of notebooks, building on the success of their notebooks, YSI AI is expanding to additional use cases across other leading notebook brands, with some entering production later this year, and expanding further into 2026. The broad adoption is further fueled by the rise of AI PC, as YSI's ultra-low power on-device inference capabilities align seamlessly with the industry's shift towards more intelligent, context-aware, and energy-efficient computing. YSI's advanced local inferencing technology enables real-time, high-position user engagement detection by analyzing presence and motion, supporting a broad set of intelligent features, such as head-posed estimation, gaze tracking, facial expression recognition, voice command, adaptive screen-theming, secure identity, authentication, and many others. These features enhance interactivity and user comfort without compromising battery life or system performance, making it fit for the demands of high-performance and energy-efficient naturalization AI PCs. YSI also continues to achieve significant market success across various sectors, such as smart door lock, where we introduced the world's first smart door lock with 24th-7th century monitoring, and real-time event recording. We are now expanding globally by collaborating with a number of leading door lock makers worldwide to integrate a suite of innovative AI features, including power-based biometric access, parcel recognition, and anti-pinch protection. Several of these value-added solutions are suited for mass production later this year. YSI also powers smart retail, exemplified by our collaboration with e-ink on eSignage. It's always on AI text viewer's attributes, such as gender, appearance, and age, followed by real-time personalized ads and nearby product recommendations, creating immersive engagement that elevates the in-store shopping experience. Next, for an update on our YSI module business. Equipped with pre-trained, low-code or low-code AI, our YSI modules simplify AI integration and support diverse use cases, including human presence detection, gender and age recognition, gesture recognition, face, mesh, voice commands, thermal image sensing, power and authentication, and people flow management. Among them, the Hi-MACs Parliament module has generated strong engagement across several industries. Multiple design wings have been secured with mass production either way by global customers for smart access, workforce management, and smart door lock, as we continue to explore additional application opportunities. Meanwhile, to meet growing demand for flexible access control in varied settings, the upgraded YSI Parmen suite now combines Parmen recognition and facial recognition with P-hole camera input, underpinned by an advanced brightness check for high precision multi-modal authentication. This upgraded Parmen module not only enhances security by offering multiple layers of biometric verification, but also ensures adaptability across the range, the wide range of environments. These attributes make it particularly appealing to global brands looking to differentiate their products with enhanced security, greater use convenience, and, first of all, customization. We anticipate increasing sales contribution from YSI Parmen across a diverse array of applications starting next year, and are excited about its global growth potential. Looking ahead, YSI is poised to scale rapidly across the broader AI OT market and emerge as a key growth driver for HEMEX in the years ahead. Separately, we are bringing intelligent, actual power always on AI sensing to AI glasses. Powered by real-time, context-aware AI running at single digit milliwatt, YSI uniquely delivers the two essentials for AI devices, instant responsiveness, and all-day battery life. These advantages have already led to YSI AI being adopted by a leading AI glasses platform with ongoing engineering engagements, involving several other prominent global AI AR techniques for the upcoming AI glasses. YSI supports always-on auto sensing, enabling AI glasses to detect and analyze the surrounding environment in real time. This empowers instant response and key functionality such as object recognition, navigation assistance, translation, and environmental mapping, greatly enhancing the overall AI experience. YSI also enables precise -or-sensing, detecting subtle eye movements, gaze direction, pupil size, and blinking, providing critical data for more intuitive and natural user interactions in their applications. Next, for an update on WLO. As you may recall, in June of 2024, HEMEX, in partnership with FOSI, the world leader in silicon photonics connectors, unveiled as they were the art silicon photonics packaging technology, a critical technology to enable co-packaged optics or CPO technology. This innovation of CPO integrates silicon photonics chips and optical connectors within matter chip modules, replacing traditional metal wire transmission with high-speed optical communication. The technology significantly enhances bandwidth, boosts data transmission rates, reduces signal loss and latency, lowers power consumption, and significantly minimizes the size and cost of MCM. Currently, several shipments of our first-generation silicon photonics packaging solution for engineering realization and trial production are proceeding as planned, with volumes set to increase in the coming quarters. In addition, HEMEX continues to advance its technology roadmap in close collaboration with FOSI, top tier AI companies, and boundary partners through the joint development of future generation CPO solutions to meet the escalating bandwidth requirements driven by AI and HPC applications. We are pleased to see our partner FOSI achieving significant advancements in silicon photonics packaging, with notable improvements in automated production and testing. Together, we are actively progressing in process validation and yield optimization to enable full-scale production for leading AI customers. HEMEX is exceptionally positioned to capitalize on future growth opportunities in high-performance computing, AI inference, and data center markets. Alongside the CPO progress, certain global technology leaders are now engaging our WO expertise to develop next-generation waveguides for AR classes, a testament to the market's growing confidence in HEMEX WLO technology. With strong growth opportunities from CPO and AR classes in the making, we are as optimistic as ever that our WLO business can emerge as a significant revenue and profit engine for us in the years ahead. Moving on to our latest advancement in the air-cosmology display technology. At Display Week 2025, next week in San Jose, we will debut our ArchoLuminous Miniature DOH from the air-cosmology display. This industry-leading solution integrates both the illumination optics and the air-cosmology panel into

an exceptionally compact form factor as small as 0.09 cc and weighing only 0.2 grams.

While targeting up to 350,000 nits brightness and one lumen output at just 250 milliwatts maximum total power consumption, demonstrating unparalleled optical efficiency, the luminous breakthrough ensures excellent eye-level visibility even in bright ambient conditions, while its compact form factor enables the development of sleek everyday AR glasses. With industry-leading compact form factor, superior brightness and polyfugency, it is ideally suited for next-generation AR glasses and head-mounted displays where space, weight, thermal constraints are critical. Global collaborations with leading global tech companies are underway. We are confident that our technological advancements will help revitalize the AR glasses market, drive its expansion, and unlock new opportunities for immersive visual experiences. That concludes my report for this quarter. Thank you for your interest in Timex. We appreciate you joining today's forum and are now ready to take questions.

Yes, thank you President Wu. And ladies and gentlemen, we are now in question and answer session. If you would like to ask a question, please press star key and number one on your telephone keypad and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, you may press star two to cancel the question. Thank you. And in addition to submitting questions via phone, you may also submit questions through the webcast where the chat box is available on the right-hand side of the screen. Thank you. Now please press star key and number one on your keypad if you would like to ask a question or you may submit your questions through the webcast system. Thank

you. Ladies and gentlemen,

we are now in question and answer session. You may press star key and number one on your keypad if you would like to ask a question. Thank you. And in addition to submitting questions via your phone, you may also submit your questions through the webcast system. Thank you.

We do have a couple

of questions from the online. The first question is, could you extend the validation process for some of the questions that you have received from the CPO? The validation process is now being conducted by our leading our being our forces and ourselves, our leading customer and our boundary partner. And it is a work in progress at the moment. The process involves primarily the validation of our current generation of products as well as the newly developed equipment, including manufacturing, assembly and testing equipment involved for the production of the product. And the equipment also includes the manufacturing equipment for the FAU as well as the equipment for the funding of FAU together with the co-authors. So it's going to be a challenge because not just the products but also the manufacturing process are brand new. And it's primarily the in-house development on the side of Himex as well as FAU. However, we believe the process is going well and we have good confidence on the successful validation of our technology. I don't want to comment exactly when, although certainly there is a timetable. All I can say is not very distant in the future. And once the validation process is concluded, then both in particular we're in a bubble of immediate expansion of their capacity, which will not take a long time. And that's how we will get ourselves ready for the mass production scheduled for next year. And in our February mass, we mentioned that the sample shipment from Himex to FAUC is slated to increase quarter by quarter this year. And by Q4, you will reach in the amount of millions of dollars for Himex. And these sample shipments are actually exactly for the purpose of such validation. So once the validation is done, we will certainly start the next phase, which is trial production. Try to make sure nothing is going to go wrong and also for yearly improvement and optimization. So that's my answer

to the first question. There's another question.

Do you have a guidance for 2025? How do we see the demand into second half? As you know, since our IPO, we never provide full year guidance. And we do comment on the trend we are seeing, but we never really like the immediate quarter guidance. We never provide that. So we certainly have to do with that at this moment, especially when the macro uncertainty is so high. I would, however, again make a certain qualitative comment on the visibility of the second half. In short, this year is of particularly low visibility, as we all know, especially with tariffs, uncertainties. And another thing is we are seeing our customers, especially for the auto demand in China. And you appreciate auto accounts for now about half of our total sales. In China, after quite a few rounds of government stimulus programs, our customers are worried that further new government programs targeted to stimulate social consumption may not be as effective as before because consumers have been through quite a few of such things. And now everybody is aware of the global uncertainty in the macro economy. So that is a concern area for our customers. And that is reflected in our Q2, rather conservative guidance, because our customers are saying, see, how the tariff negotiation is going to unfold, nobody knows. And then another thing is sure, Chinese government is in no likelihood is going to launch new programs to boost the whole economy. However, whether that program will be as effective like the one program that was launched exactly about a year ago, that was quite effective. Whether this year's program will be as effective is a measure unknown. We were actually able to grow our automotive business by 20% last year, which was quite good considering the global auto sales was only about flat at best. But it is actually harder to predict how the auto sales will grow this year, although internally our target is still to at least enjoy a shift in growth this year. And for us to achieve the growth, I think we are fairly confident in achieving growth in new technology areas, i.e. TDDI, T-Con, LPDDI, because our pioneering position and the strong design we have in these areas. And I would just point out again that our market shares in these new technology areas are always all the way above 50% globally. And we are still seeing aggressive adoption of such new technology. So in this area we are fairly confident. However, depending on the global automotive shipment, the overall automotive shipment, we may see some decline in the traditional DDIC area, as it will continue to be partially replaced by TDDI. However, I would also like to point out the traditional DDIC will never be totally replaced by TDDI, as we witnessed in the smartphone market, because some types of automotive displays such as dashboard, side mirror, rear mirror and HUD will never need touch functionality. So as a reminder, we also enjoy about 40% gold market share and data leader in the traditional

DDIC market.

Would you comment on the Obsidian Investment? That's another question. Obsidian Investment is a Sydney, Australia based company, specialized in a very unique proprietary thermal imaging sensing technology. And we love the company because our technology is a perfect fit, because in their very unique and proprietary design, their thermal sensor needs our CMOS-DB sensor inside. And our optical solution can also be very effective to improve their optical design. And in addition, our actual power AI is a perfect fit for their thermal imaging sensing solution, because the benefit of thermal imaging compared to visual imaging such as our CMOS-DB sensor is quite clear. So thermal imaging has a major benefit of keeping privacy concerns away, and also it works well in total darkness, even. And that is certainly those are the weaknesses of CMOS-DB sensor or RGB sensor. So we love the investment because one, Obsidian thermal imaging is a very good supplement to our RGB sensor imaging. And also, their key components actually is something we can supply, provide very good support for that. And also, our one-side special technology, Astrolabe Power, is a perfect fit. Thermal imaging together with Astrolabe Power AI can create very good, very convincing applications for our joint customers. So we are together working on new generation of design, and we are proactively promoting the technology together. Whether it will be for trade shows or customer business. And we believe Obsidian's thermal imaging is quite successful, and hopefully we will see next year, hopefully we will start to see meaningful value. And also, our new technology is a very unique proprietary technology to offer thermal imaging together with AI with reasonable cost, reasonable low cost. While offering reasonable resolution and one of their strengths is very, very uniquely low signal noise. So their application can be universal. We have seen many, many application areas, especially in those areas, as I mentioned, where privacy is a major concern. Or in the evening, you need to continue to detect objects. So we are quite excited about this, and so we are going to work very closely.

Oh. And what else?

We

see

meaningful revenue contribution for CPO-related products. We mentioned in the last call, this year will only be central contribution. So they are meaningful, but they are still negligible compared to our total sales. We also indicated next year, year 2026, will be the first year of mass production. But we don't know, and we are not going to comment exactly when. So I would say by the time it starts official mass production, the contribution will be meaningful. So hopefully that will be somewhere next year. Exactly, when next year, we are not

prepared to comment at this moment. I think that

some questions are rather repetitive from the ones I just mentioned. The key bottleneck for the CPO project right now, again, we need

to get the product and the process very detected. And I think that's the key bottleneck. And certainly our customers will have their own technical challenges to deal with. But again, I think it is everybody's objective that we are going to produce mass production next year. And I think we are all quite confident and excited about this joint objective. I think that's about it for all the questions we received so far. Okay, and also as a final note, Karen Jiao, our head of IRPR, will maintain Mr. Marketing activities and continue to attend Mr. Conferences. We will note the details as they come about. Thank you and have a nice day.

Thank you, President Wu, and ladies and gentlemen, this concludes first quarter 2025 earnings conference. You may now disconnect. Thank you and goodbye.