Himax Technologies, Inc.

Hello, ladies and gentlemen. Welcome to Hymex Technologies Incorporation fourth quarter and fiscal year of 2025 earnings conference call. At this time, all participants are in no listening mode. And later, we will conduct a question and answer session. And instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Karen Teo, head of IR, PR, and Hymex. Ms. Chow, please go ahead.

Welcome, everyone. My name is Karen Chow, head of IRPI at HyMEX. Joining me today are Jordan Wu, President and Chief Executive Officer, and Jessica Pan, Chief Financial Officer. After the company's prepared comments, we have allocated time for questions in the Q&A section. If you have not yet received a copy of today's result release, please email hx-ir at hymex.com.tw or hinx at mzgroup.us or download a copy from Hymex's website. Before we begin the formal remarks, I would like to remind everyone that fiscal 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 risk factors can be found in a company's latest ACC filing, Form 20S, and the section entitled Risk Factors, as may be amended. Except for the company's full year 2024 financials, which were provided in the company's 20F and filed with FCC on April 2, 2025. 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 independent auditors. to which we subject our annual consolidated financial statements and may vary materially from the audited consolidated financial information for the same period. On today's call, I will first review the high net consolidated financial performance for the fourth quarter and four years 2025, followed by our first quarter 2026 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 by phone. We will review our financials on an IFRS basis. We are pleased to report that our Q4 profit was at the high end of the projected range, issued on November 6, 2025, while sales and gross margin were both in line with the guidance. Both quarter revenue registered at $203.1 million, representing a sequential increase of 2.0%, better than our flat quarter-over-quarter guidance. Gross margin was 30.4%, in line with our guidance of flat just slightly up from 30.2% in the previous quarter. Q for profit for diluted ADS was 3.6%. at the high end of the guidance range of 2.0 to 4.0 cents. Revenue from large display driver canning at $21.7 million, representing an increase of 14.2% from the previous quarter, outperforming our guidance range of a single-digit increase sequentially. This was primarily due to the rush order for both the TV and notebook IC legacy products from panel makers. Customers, through stocking of TV and monitor IC products, along with new Nobility DGI project entering mesh production during the quarter, contributed to the sequential increase. Sales of large panel driver IC accounted for 10.7% of total revenue for the quarter, compared to 9.5% last quarter and 10.5% a year ago. Revenue from the small and medium-sized display driver segment totaled $139.1 million, reflecting a slight decline of 1.3% sequentially. Q4 automotive driver sales, including both the traditional DDIC and TTDI, increased approximately 10% quarter-over-quarter, largely driven by widespread adoption of our marketing-leading TTDI technology among major customers across all continents. Despite customers in global automotive markets, our automotive driver IC sales for the full year of 2025 grew single-digit year-over-year, outpacing the broader market. Meanwhile, revenues for both smartphone and tablet IC segments declined quarter-over-quarter, as customers poured forward purchases in prior quarters. The small and medium-sized display driver IC segment accounted for 68.5% of total sales for the quarter, compared to 70.8% in the previous quarter and 70.3% a year ago. Two-fold non-driver sales reached $42.3 million, a 7.9% increase from the previous quarter, primarily attributable to increased ASIC T-CON shipment to a leading projector customer, along with robust T-CON shipment for automotive applications. T-CON, IMAX continued to hold an undisputed leadership position with the dominant market share in automotive T-CONs. T-Con business accounted for over 10% of total sales, with notable contribution from automotive T-Con. Also during the quarter, our automotive OLED on-sale touch IC entered mass production with the leading brand, marking another milestone and strengthening the foundation for future growth. Non-driver products accounted for 20.8% of total revenue. as compared to 19.7% in the previous quarter and 19.2% a year ago. Fourth quarter operating expenses were $54.9 million, a decrease of 9.6% from the previous quarter by increase of 11.6% compared to the same period last year. The sequential decrease was mainly attributed to a reduction in the annual employee bonuses and the depreciation of the NT dollar against the US dollar, partially offset by an increase in tap out expenses. As part of our standard company practice, annual cash and RSU bonuses are granted at the end of September each year, leading to higher IFRS operating expenses in the Q3 than in other quarters. The year-over-year increase was primarily driven by the increase in tap-out expenses. Salary expenses and the appreciation of the NT dollar against the U.S. dollar were also factors behind the year-over-year increase. Amid the ongoing macroeconomic challenges, we continue to emphasize trade budget and expense controls. Our business was $6.8 million. representing an operating margin of 3.4% compared to negative 0.3% in the previous quarter and 9.7% for the same period last year. The sequential increase was the result of increased revenue and higher gross margin as well as the lower operating expenses. The year-over-year decline reflected the lower sales and gross margin coupled with the higher operating expenses. Q4 after-tax profit was $6.3 million or 3.6 cents per diluted ADF compared to $1.1 million or 0.6 cents per diluted ADF last quarter and down from $24.6 million or 14.0 cents in the same period last year. Now let's quickly review the financial performance for the full year 2025. 2025 was a challenging year for the global economy, shaped by tariffs and other geopolitical uncertainties. Tender customers generally maintained a conservative method of order strategy with a lean inventory level. While consumer electronics demand remained soft, automotive and AI-related applications, where Hynix has strong exposure, proved comparatively resilient. Despite disciplined expense control, R4 in year 2025 operating expenses increased by 1.1%, as we strategically invested in select non-display IC areas with compelling long-term growth potential. Some of which are poised to ramp meaningfully starting in 2027. Reflecting on this market condition, our 2025 four-year revenue totaled $832.2 million, a decline of 8.2% compared to 2024. Our revenue from large-panel display driver IC totaled $90.7 million in 2025, marking a decrease of 28.0% year-over-year and representing 10.9% of total sales. as compared to 13.9% in 2024. Small and medium-sized service sales totaled $575.1 million, reflecting a decrease of 8.0% year-over-year, and accounting for 69.1% of our total revenue, as compared to 69.0% in 2024. Now, driver product sales totaled $166.4 million, an increase of 7.0% year-over-year, and representing 20.0% of our total sales as compared to 17.1% a year ago. Cost margin in 2025 was 13.6%, slightly up from 30.5% in 2024. Operating expenses in 2025 were $210.2 million, a slight increase of 1.1% from 2024, primarily due to the increase in tip-out and salary expenses, as well as the appreciation of the NT dollar against the U.S. dollar in 2025, partially offset by the lower employee bonus compensation compared to last year. 2025 operating income was $44.1 million, or 5.3% of sales, as compared to $68.2 million, or 7.5% of sales in 2024. Our net profit for 2025 was $43.9 million, or 0.25 per diluted ADS, as declined from $70.46 of U.S. dollars per diluted ADS in 2024. Turning to a balance sheet, we had $286.2 million of cash, cash equivalent, and other financial assets as of December 31st, 2025. This compared to $224.6 million at the same time last year and $278.2 million a quarter ago. Q4 operating cash inflow was $15.8 million compared to an inflow of $6.7 million in the prior quarters. We had $28.5 million in long-term unsecured loans with $6.0 million representing the current portion at the end of 2025. Our year-end inventories were $152.7 million. an increase from the $137.4 million last quarter, lower than $158.7 million a year ago. Accounts receivable at the end of December 2025 was $200.9 million, little change from last quarter, but down from $200 a year ago. DSO was 88 days at the quarter end as compared to 87 days last quarter, and 96 days a year ago. Fourth quarter capital expenditure was $4.0 million versus $6.3 million last quarter and $3.2 million a year ago. Fourth quarter capex was mainly for R&D-related equipment for our IC design business. Total capital expenditure for 2025 It was $20.1 million, as compared to $13.1 million in 2024. The increase was primarily due to the construction in progress for the new preschool near our Thailand headquarters built for employees' children, with completion expected by the end of Q2 2026. As of December 31st, 2025, HyMEX had a 174.4 million ADS outstanding, little change from last quarter, and on a fully diluted basis, the total number of ADS outstanding for the fourth quarter, 1.5 million. Now, 2022, our first quarter 2022 guidance. We expect Q1 revenues to decline 2.0% to 6.0% sequentially. Gross margin is expected to be flat to slightly down, depending on product mix. Q1 profit attributable to the shareholder is estimated to be in the range of 2.0 to 4.0 cents per fully diluted area. I will now turn the call over to Jordan to discuss our Q1 2026 outlook. Jordan, the floor is yours.

Thank you, Karen.

Overall, value conditions remain under pressure from ongoing macroeconomic uncertainty. Recent shock price increases in memory can further weight on the market sentiment for electronic products. However, compared with consumer products, the automotive segment, which accounts for over half of high-maintenance total sales, is more immune to memory price fluctuations. Having said that, our visibility for the whole year outlook of automotive sector remains limited amid the backdrop of uncertain government policy and consumer sentiment. However, we expect the first quarter to be the trial of the year with sales rebounding in the second quarter and business momentum continuing to improve into the second half, supported by lean customer inventory levels and new projects for automotive customers scheduled to enter mass production later in the year. In addition, continued growth in our non-drive IT businesses, particularly T-Con and WhiteLine AI, should provide incremental support. In the automotive display IC business, we remain optimistic about our long-term business outlook, backed by our leading new technology offerings and strong design win pipeline. In DDI, we have already secured hundreds of design wins, commending 40% market share in automotive DDI IC and well over half in the global TDDI market, maintaining a substantial lead over competitors. Concurrently, HIMAX has also established strong technology leadership in all emerging automotive display areas, including automotive TCAN with advanced level dimming functionality, LTDI for large size automotive displays, advanced T-card solutions for advanced head-up displays, automotive OLED panels, and micro-AE technologies. A growing number of customers are accelerating the adoption of these advanced display technologies in new vehicle models, driving new growth momentum for Hymex's automotive display IT business in the years ahead. We believe the automotive market still offers significant upside potential, driven by rapid innovation and ongoing advancements in smart cabins that were more vivid, intuitive, immersive displays such as not-on-display and many more. Despite lingering economic uncertainty, beyond our mainstream business of display IT solutions, we continue to expand into areas such as ultra-low power AI for endpoint devices, front-lit L-Core Spinal Display, and WebGuide for AR glasses, and WLO for co-packaged optics. All these technologies are seeing exciting upside potential in the next couple of years, driven by the recent breakout of AI. As adoption continues to broaden, some of these technologies have already begun translating into real world applications with more expected to follow suit in the near future. We expect these initiatives to become new meaningful growth drivers while also improving our product mix and overall profitability. Some of these capabilities were showcased through multiple live demonstrations at CES earlier this year. First, on actual low power AI. We are differentiated in the market by offering total and algorithm, helping customers streamline development and accelerate time-to-market. IMAX's industry-leading Wi-Fi AI features industry-leading ultra-low-power design with power consumption at just single-digit milliwatt levels. Combined with a compact form factor, on-device AI inference Wi-Fi is empowering battery-powered endpoint devices across a wide range of new AI applications. For use cases requiring real-time voice and vision sensing, Wi-Fi also serves as an ideal conceptual front-end for large language models, working in tandem with aerial ramps to enhance the device's ability to perceive and understand real-world contexts and deliver a more intelligent, responsive, and low-latency human-machine interaction. This creativity is reflected in applications such as keyword spotting for AI PCs and environmental awareness and sensing in smart glasses. At CES this year, HIMAC showcased a broad portfolio of Wi-Fi-powered endpoint AI solutions. Spending applications involve security and surveillance, automotive, smart city, access control, AI PC, and smart glasses. One notable example in the field of security applications is the newly introduced WiseGuard solution. a significant technological innovation for next-generation security applications. White Guard features high-accuracy AI sensing even in low-luminance environments, along with proactive key event capture, all while consuming nearly milliwatt-level power, thereby extending battery life for end devices. I will elaborate on this later. All these demonstrations reinforce Wi-Fi's growing relevance across multiple ad markets. After many years of R&D and promotion, we expect to see very strong growth for the Wi-Fi business starting from this year. Turning to smart glasses, one of high-message key strategic focus areas We are uniquely as one of the few companies with both micro-display and low-power AI capabilities, both critical for the success of AR glasses. Fueled by the rapid advancement of AI, the smart glasses market is undergoing a strong resurgence, creating significant new opportunities for one-side AI and air-coast micro-displays. Smart glasses developers can leverage wide-sized ultra-low power AI capabilities to enhance device interactivity, supporting both outward-facing environmental awareness and object recognition, as well as inward-facing eye tracking and eye-risk authentication. It allows smart glasses to simultaneously understand user intent and external surroundings, delivering a more natural and citizen-to-machine interaction experience. In micro-display, Hymax's latest proprietary front-lit aerocosmicro-display achieves an optimal balance among size, weight, power consumption, resolution, and cost. We're meeting the stringent optical performance requirements of next generation see-through AR smart glasses. Our L-COS solution is a full-color micro-display, which can be configured for a high-brightness, low-power green-only mode, and switched back upon command from the central processor. seamlessly covering both indoor and outdoor instances. HIMAX is working closely with multiple web-guide partners across China, Europe, Israel, Japan, Taiwan, and the US, unzipping each other's technologies into complete display systems for AR glasses, with several joint achievements demonstrated at CES. Before turning to our segment outlook, I'd like to highlight our progress in CPO. Pymes continues to make solid progress in collaboration with our strategic partner, Fossey. Our main goal for 2026 is to complete mass production readiness with just small quantity shipment for the year. In addition, we are actively advancing multiple future generations of high-speed optical transmission technologies and advanced CPO architectures. These efforts focus on higher fiber channel density and more sophisticated optical designs to support the increasingly demanding requirements. Specifically, in collaboration with the leading global customer and partner. Hymax and Fossey are finalizing the manufacturing process of a state-of-the-art design supporting 6.4T transmission bandwidth. A spec positioned for the AI data center market with the biggest quality potential while demanding the highest transmission bandwidth. Recently, Fossey successfully completed an equity rights issue of NT$3.16 billion to fund equipment purchases and prepare for CTO mass production. Hymax participated in the share subscription, demonstrating our continuous support for our partner and further strengthening the collaboration between the two companies. I might expect CPO to become an important contributor to both revenue and profitability over the next few years.

With that, I will now begin with an update on the large panel driver.

In Q1, large display driver IC sales are expected to increase single digit sequentially, mainly driven by continued replenishment of TVIC product from Chinese panel customers carried over from Q4 last year. Looking ahead, our focus in the notebook market is on premium models featuring OLED displays and touch functionality. This trend is being reinforced by recent rising memory prices which had put pressure on lower-end notebook models and further accelerated the shift towards higher-end devices. HIMATS offers a full spectrum of IT solutions for both LCD and OLED notebooks, including DDIC, T-CON, touch controllers, and TDDI. This broad product coverage allows us to address diverse panel architectures and system designs while increasing our content per device. In the first quarter, we even have our Touch IC for OLED notebooks with a leading notebook vendor, marking a milestone for another key application for OLED on-sale touch technology beyond automotive. By leveraging proven touch integration capabilities from automotive applications and extending them into consumer electronics, we are creating new growth opportunities in premium OLED IT devices. T-Con solutions are a key pillar of our notebook display IT portfolio, playing a critical role in image enhancement and system-level integration, strengthening our ability to provide customers with a comprehensive one-stop solution. We continue to expand our Noble TECAM portfolio to address diverse customer design requirements and cost considerations. Our solutions support a wide range of panel resolutions, refresh rates, and gaming-oriented applications while delivering high-value added features with a strong focus on power efficiency, which is becoming increasingly important for thin and light NAITCs. Turning to the small and medium-sized display drive IC business. In Q1, small and medium-sized display drive IC from last quarter. Q1 automotive driver IC sales, including TDDI and traditional DDIC, are set to decrease by double-digit quarter-over-quarter following two consecutive year replenishment. This decrease also reflects typical seasonal softness related to the Lunar New Year holidays. along with the tapering effect of automotive subsidy programs in major markets such as China and the U.S. That said, our long-term competitive position remains solid, supported by hundreds of design wins already secured across TDCI, TDIC, T-Con, and an expanding OLED portfolio. In addition, our diversified foundry footprint enables supply flexibility and allows us to better navigate ships in consumer, in customer demand. We continue to lead the global automotive display market with a 40% share in TDIC, well over half in TDDI, and even higher market share in Novo T-min, TCAS. Climax also continues to lead in automotive display IC innovation by pioneering with solutions across a wide range of panel types, while addressing diverse design needs and cost considerations. For example, in ultra-large touch displays, we introduced the industry's first LTDI solution back in 2023, which has already been must produce in several vehicle models. Design activity continues to expand across continents, and after several years of sustained effort, we expect meaningful revenue contributions starting this year. For smaller displays with form factor and budget constraints, an attractive choice for customers as it can significantly reduce costs and improve power efficiency. Looking ahead, OLED panel adoption in automotive displays is expected to accelerate, creating an opportunity for HIMAX to further strengthen our leadership in the automotive display market. Our ASIC OLED driver and TCON solutions have already been in mass production for a few years, and we now offer to support broader and more scalable deployment. At the same time, we continue to collaborate with DD panel makers on new custom ASICs to meet diverse customer requirements. Together, these efforts position content as premium automotive display technologies evolved from LCD to OLED. Complementing our OLED portfolio for automotive applications, we are also a leader in advanced OLED touch ICs, featuring industry-leading signal-to-noise ratio performance that ensures reliable operation even under challenging conditions such as glass or wet finger use. All the touch ICs enter mass production in 2024 and continue to see a growing design impact globally, many of which are scheduled to enter mass production in the coming quarters. Moving to smartphone IT sales, we expect Q1 smartphone revenue covering both LCD and OLED products to increase quarter-over-quarter, as new OLED solutions begin mass production with a leading panel maker for leading smartphone brands' mainstream model. For tablet ICs, QoS sales are also expected to grow sequentially, driven by the commencement of IC shipment for customers' new premium OLED tablets. Moving forward in the tablet market, we are advancing new technologies that enable value-added features such as active sliders, ultra-slim better design, higher frame rates, and power-saving architectures. Positioning HIMAX to capture more semiconductor content in next-generation premium tablets are far enforcing our competitive edge. I would like to now turn to our non-travel IC business updates, where we expect Q1 revenue to decrease single-digit sequentially. For an update on our T-Con business, we anticipate Q1 T-Con sales to decline by a single-digit quarter-over-quarter, primarily due to the absence of basic T-Con shipments to a leading projected customer. that occurred in the prior quarter. The sequential decline also reflects a moderation in automotive TCAN shipments following several quarters of starting growth, which we view as normal seasonality rather than a change in underlying demand. For the full year 2025, our automotive TCAN sales still grew approximately 50% year over year. Backed by hundreds of secure design wins, this momentum provides a strong foundation for sustained growth. Decom for monitor, notebook, and TV products is expected to increase sequentially in Q1, primarily a result of customers' replenishing inventory for high-end products. Meanwhile, head-up display or HUDs are poised to become a central element of next-generation smart complex. A trend clearly highlighted at CES, where numerous panel makers and automotive names equipped with OIC solutions showcase their latest trendy and innovative HUD concepts. HUD for automotive is rapidly evolving from simple text and symbols to high-brightness, high-contrast, AI-enriched visuals integrated into automotive displays. This shift is driving demand for sophisticated T-Con technologies, an area where IMAX holds a strong leadership position in automotive display T-Con solutions. To attract this trend, we introduced a multi-functional integrated TCAN feature in the industry's first full-area selectable local dewarping capability. Combined with HiMX's market-leading local dimming and on-screen display technologies, offering the flexibility to meet diverse design and cost requirements while simplifying overall system integration. This new TCAN continues to deliver exceptional contrast performance while effectively eliminating the so-called post-cut effect in SUVs, a common issue caused by light leakage in conventional TFT LCD panels. Our industry-leading OSD function is also integrated, ensuring that critical safety information remains visible, even when the main system is powered down, thereby enhancing overall driving safety. The new Type T-Con solution supports a full range of SUD architectures, including windshield SUD, and Pyramid HUD. Model customer projects are already underway, with leading panel makers and tier 1 players, reflecting strong market recognition of our advanced HUD technology, HUD QICOM technology products. Switching gears to the wide-side product line, a cutting-edge ultra-low-power AISX internal solution, targeting, endpoint, on his device market. As AI advances at an unprecedented pace, Whiteside stands out with context-aware on device AI inferences that combines industry-leading power efficiency consuming only a few milliwatts with a compact form factor and robust industrial-grade security and pre-trained low-code slash low-code AI algorithm, enabling easy deployment across the broad spectrum of applications. This powerful combination unlocks advanced AI capabilities in endpoint devices that were once constrained by power and size limitations. This is driving innovative new product concepts across the broad range of applications, from notebooks, surveillance, and access control, to smartphones, smart retail, and more recently, smart glasses, which the industry widely expects to become the next breakout market. expanding adoption among leading global brands, driven by its ultra-low power consumption, instant responsiveness, and privacy-centric design, were aligned with the industry's move towards always-aware AI-driven PCs. Building on this foundation, additional feature enhancements are being developed to address more complex real-world scenarios while preserving exceptional power efficiency and improving user convenience. One example is gesture recognition that emulates keyboard inputs, enabling users to scroll pages or adjust volume without touching the keyboard. Another advanced feature currently under development for Next Generation LTCs is a voice activated keyword spotting function. Here, Wi-Fi X is an ultra-low power front-end that continuously monitors audio and performs wake-work detection, activating the main CPU only when the designated trigger phrase is recognized. This advanced feature enables continuous audio monitoring, even in noisy environments, while maintaining minimal impact on overall system power consumption. In the surveillance domain, at the recent CES, we introduced our latest WiSCAR endpoint AI solutions, highlighting the versatile deployment of Wi-Fi AI in security applications. WiSCAR is a turnkey solution capable of accurately detecting and tracking multiple individuals, including their presence, location, and movement. Its proactive and continuous sensing capability enables security systems to anticipate and capture important events in advance, providing more forward-looking protection compared with traditional reactive security solutions. WhiteScar performs always-on sensing and AI processing at single-digit milliwatt level, enabling up to five years of battery life and reliable low-mantainless operation in compact battery-powered devices. At the same time, it maintains high precision event detection at distances of up to 10 meters and other extreme low-light environments. Immediately after its debut, White Guard has attracted strong market interest driven by its compelling advantages for scalable smart home and security systems. Meanwhile, from a module perspective, Wi-Fi technology is seeing expanding adoption across a wide range of domains, including leading brands' upcoming smartphone applications and various surveillance applications. Notably, our PalmVan module has had a strong design pipeline across multiple industries, covering smart access, workforce management, smart door blocks, and more recently, computer monitor and automotive applications. In the domain of AR and AI glasses, Wi-Fi delivers fast responsiveness for a wide range of AI functions while maintaining exceptional power efficiency. It enables intelligent, context-aware vision sensing in next-generation wearable and smart glasses through both outward and inward-facing capabilities. Outward sensing supports environmental awareness, object recognition, and spatial mapping. Core inward sensing enables iris authentication and tracks eye movements against the direction and pupil dynamics for natural, intuitive human-machine interaction. YSR is gaining strong traction in smart glasses with a growing number of design engagements underway among global tech names, solution platform providers, and smart glasses specialists. Our leading brands are Smart glasses are poised to enter mass production later this year, marking an important milestone for Wi-Fi in the smart glasses market. That concludes my report for this quarter. Thank you for your interest in HIMAX. We appreciate your joining today's call and are now ready to take questions.

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

Thank you.

If you would like to ask the question, please press star key and number 1 on your telephone keypad. Thank you. Now we'll have our first question. Morgan Stanley, go ahead, please.

Thank you, Jordan and Karen, for taking my question, and congrats on the great result. Yeah, so my first question is on first quarter gross margin. I know why the margin would be flat to down in first quarter. Is it because of product mix, or are we seeing elevated pressure coming from, like, the increasing material costs and also the offsite costs? Thank you. And I have a follow-up.

Thank you, Tiffany. Actually, we are only guiding for a slight decline only. So we are not seeing material change from the gross multiple last quarter. And the difference is really the product mix change. We are seeing proportion-wise slightly less auto shipment in Q1 compared to last quarter. And you pointed out about the material price increase, which is obviously a factor. And it has been a factor for a pretty long time, as we all know. As we know, gold prices have been increasing over the years. And now, on top of that, we have seen frontery, capacity tightening, and therefore prices appear to be rising. And for that reason, I mean, with our boundary vendors, we are in discussion with them, you know, how to get our delivery support while in the meantime, you know, hoping for a a manageable price increase from that. At the same time, we are also in active discussion with our customers about the possibility for price increase to reflect our costs. So that both are ongoing. So we don't have any conclusion yet, but I think, you know, so far, I mean, this is all pretty recent. And so far, we have seen our customers all kind of recognize the fact that, you know, as we all know, memory price, the memory demand and, you know, squeeze out the supply of other types of ICs and therefore demand appears to be rising for other kinds of memory IT products because the supply is being squeezed and and prices is rising. So, again, we are in discussion with both our customer side and vendor side. So, that doesn't really quite, that is not really quite a factor for our Q1 cross-funding type guidance. If anything, I think that is going to becoming a factor starting from Q2 and onward. Thank you for your question.

Very clear. Thank you. So my second question would be regarding CPO. Could you give us more information or maybe some guidance for the CPO revenue in maybe 2026 and 2027, as I think investors are very excited about our development and progress in this area. Thank you.

Thank you. Actually, we also are getting a few questions surrounding CPOs. I'll try to kind of address them, you know, together. Again, we said that in last quarter's earnings call and I'm going to repeat that. Now, the main goal of 2026 for us and also for our partner 4C is to complete the validation of both our Gen 1 and Gen 2 products. It's validation by key customers slash partners. So, With the validation being the target, the revenue contribution will be limited for 2026, because we will be talking about sample shipments only. Notably, while I'm commenting on 2027, in close collaboration with anchor customer and partner, OCIE and HIMAS are close to finalizing the Gen2 product, which targets bandwidth of greater than 6.4T. Okay, this is important. Again, we are finalizing the Gen2 product for its production readiness, targeting bandwidth of greater than 6.4T. And for this Gen2 product, we can potentially see meaning for top and bottom line contribution starting from 2027, even before the official MP gets started. The reason why I emphasize this is because when and how this CTO product will start mass production is really a call on which can only be made by the customer. We don't fully know. And also a reminder that it's actually a complex and lengthy ecosystem run by our customer. So it is not a matter of when we are proven to be ready, the customer can just click a button and then in full volume production, it is not going to happen that way. So we don't have full visibility on exactly when and how the ramping, the mass production ramping will take place. Our current view is that it is likely to be 2027 or 2028. We don't know. However, what I'm trying to say is even before the official ramping, official MP, let's say it's 2017 or 2028. Even before then, because prior to the official MP, there will be further sample shipments for various purposes with certain quantity, which will be greater than 2026. So even before the official MP gets started, just from pre-MP shipments, we, based on our internal count, the contribution can be already pretty meaningful for Himex as a total, in terms of our total revenue certainly, even more so for total profit. Right, so I guess that address your issue about total 2027. And again, I want to emphasize this product targeting 6.5T bandwidth spec. is done in close collaboration with our anchor customer and partner. It is not like we are closing our doors and we try to think of a product and try to push it to the customer. No, it is actually from beginning to now it has been a joint development by our direct customer, direct partner 4C and our joint joint anchor customer and partner. And the so-called 6.4T transmission product spec, the target is the AI data center market with the biggest volume potential, while demanding the highest transmission bandwidth. You're talking about the GPU market, right? Which requires a very high transmission rate. So... so but that i guess that's the thing for me that kind of addresses your question directly and also people ask about uh what is the the the volume potential or regular potential when you start mp um and i i this for this i i would uh uh uh kind of repeat what i uh what I mentioned earlier in our earlier session, even in what I call early stage of mass production, meaning we are far from reaching full penetration, full deployment, and so on and so forth. How exactly that is defined, I cannot say precisely, but in early stage mass production, for Hymex, we'll be talking about hundreds of millions of sales. So it's going to be very, very significant based on what the customer is telling us, based on how we price it, and based on our internal calculation. And so I'm still holding the same view now. And the good news is we do have existing WL capacity to support and manage a pretty big volume of production for that kind of scale, hundreds of millions of dollars of annual sales. Okay, so I guess that kind of summarizes my answer for all questions related to CPO right now. Thank you.

Thank you. If you would like to ask a question, you may press star key and number one on your telephone keypad. Thank you.

A question from online inquiry. Our online sales is going to be huge in 2026. Is price or price premium versus conventional panels? Actually for all that we have we in our preparing marks we We said we started Shifting in mass production volume for a smartphone studying a actually a bit of last quarter and certainly this quarter. But the sales contribution from the smartphone OLED for HIMAX right now is still low. If you combine the smartphone OLED for HIMAX together with IT and automotive OLED together, our expected sales contribution for 2026 is still less than 10% of our total sales. So I would say probably high single digits of contribution 2026. The rampage, the real rampage is going to be 2027. I will explain why 2027 and why it's different from I get back to your question about margin. For Himex, the OLED products gross margin for smartphone, it is actually lower than our corporate average. So to be honest, we are not very, very keen. I mean, we recognize the fact that our peers are already ahead of us and probably should be bigger volume than us. So it is already a very competitive market with low margin across the board. So that is for smartphone. However, I would say something very different for automotive OLED and IT OLED. The ICs, these two areas are our focus area right now. And they both enjoy much better gross margin compared to our traditional LCD products. And also, on a per panel basis, the IT content are materially higher than LCD products. So I would probably describe our status separately for OTO and IT. First on OTO, we are in strategic partnership with top tier Korean and Chinese panel makers. And this is a market which is now being led by major Korean panel makers. And we are the prime IC partners for both Korean panel makers. And I say it's like we expect to see breakout demand from 2027 mainly because it is actually now the Korean makers leading the charge in terms of aggressively promoting the oil market, which up to now has been, volume-wise, has suffered from two main factors. One is cost, and the other one is reliability. That's through many years of effort across the ecosystem, the reliability has been kind of resolved. So it's an issue of yesterday, no longer an issue. So the real issue is now cost. But career makers, they have a lot of legacy, all the capacity, which can only do a rigid displays, advantage of those capacities which are fully depreciated, running with very good efficiency and so on and so forth to price their products aggressively to the extent that the OLED prices for automotive products in certain specs are already approaching the levels of LCD products already and certainly OLED enjoy better quality and lighter weights and so on, a few very good benefits. So when you start to see prices approaching those of LCD, this becomes very appealing. So we are in the middle of very, very busy design activities with our panel makers and tier ones at the moment. So with a lot of design-in, design-win projects going on, and many of which are slated for mass production in 2027. So this year, while we do ship some volumes, but I think hopefully 2027 volume will be much, much bigger than this year. And for this, we offer our standard products, including driver IC and timing controller and AC products for both leading panel customers. Again, for both T-Cart timing controller and driver IC. And on top of that, we also offer discrete touch IC, which we are now leading the pack. We are competing in technology, in performance, compared to their They are all the vendors. So we are international and Chinese names. So that is for automotive. And for IT, slightly different story, but very similar timing. 2027 is likely to break out. Now, for IT, you need large panel size, larger panel size, so you do require Gen 8.5 or 8.6 to be mass-producing IT products effectively. Korean panel makers have led the charge a couple of years ago, they have completed their production line. But the Chinese are catching up. So across the board, quite a few Chinese panel makers are starting mass production for their GemPoint 8.6 on that line. All targeting IT products, mainly tablet and notebook, right? And likewise, we are going through very, very busy status stage with a few such customers. So the story here is that when you have a new Gen 8.6 OLED line coming into production, joining production in the same time, 2037, it is likely to be price pressure. And that's certainly for market demand for notebook makers is good news. And again, OLED panel enjoys lighter weight, better contrast, and better brightness, and good power consumption, and all these benefits, as we all know. So the major issues stopping OLED panel from high penetration is cost. The fact that quite a few Chinese Gen 8.6 are coming online starting in 2027, I think it's likely to bring down the cost substantially and trigger the demand. So again, we are going through a design stage right now.

Any other questions?

Yes. Okay, thank you, Jordan. And we don't have further questions at the moment. We thank you for all your questions, and I'll pass the call back to Jordan. Thank you.

Thank you. As a final note, Karen Teo, our head of IRPR, will maintain investor marketing activities and continue to attend investor conferences. And we'll announce the details as they come about. Thank you, and have a nice day.

Yes, thank you. And ladies and gentlemen, this concludes fourth quarter 2025 earnings conference. You may now disconnect. Thank you again. Goodbye.