Asustek Computer Inc Regs

Hello! Welcome to the ASUS Q4 2023 Online Investor Conference. Today's conference will be held by ASUS Tech Computer Co-CEO, SY Xu, and Samsung Hu, alongside CFO Nick Wu. The conference will be divided into two parts. In the first part, CFO Nick Wu will start by outlining our Q3 financial results. Next, our two Co-CEOs will go over the operational strategies and business outlooks. For the second part, we will be conducting a Q&A. You are welcome to raise any questions you might have in the panel on the left side of the webpage. Questions will be collected and answered. Let us start from the presentation from CFO, Mr. Nick Wu. Dear investors and friends of the press, good afternoon. Let us start from page 5 of the presentation. On this page, we have the ASUS financial results for the fourth quarter of 2023. In quarter four, our revenue was approximately NT 111.9 billion, down about 11% quarter over quarter and 5% year over year. Our operating profit for the quarter was around $23.4 billion NT, with a net profit after tax of approximately $39.3 billion, resulting in an EPS of about NT $5.3 per share. Looking at our key financial ratios, our gross margin for Q4 was 15.4%, and our operating margin was 2.1%. Overall, 2023 saw fluctuations in market demands. Throughout the first half of the year, we had to adjust to stock after COVID. We faced challenges such as inflation, challenging fiscal policies, and other factors. As a result, for the first half of the year, the market was in a state of flux. Looking back through the first half of this year, ASUS has had to quickly adjust back to profit through stock realignment and various operational adjustments. By quarter three of this year, we have saw the industry rebound, and as a result of introduction of new product cycles, we were able to achieve an increase in gross margin percentages. Things such as sales allowances and inventory allowances allowed our gross margin percentage to return to healthy states. By quarter four, we saw that the market rebound that happened in quarter three did not persist into quarter four. Our previously anticipated seasonal demands ended up being relatively flat. As a result, for quarter four, our revenue was, on the whole, compared to the market, relatively flat as well. Taking into account the increase in sales cost for quarter four, these two negative factors have resulted in lower than expected margin percentages and operating profits. And that was the situation that we've had to deal with for quarter four. Moving on to the next slide, slide six, we see a breakdown of our non-operating incomes. This includes interest income of approximately 696 million, investment income of 605 million, and exchange gains of around 1.4 billion NT. totally non-operating income of approximately $3.25 billion for this quarter. Now for slide seven, we have a summary of our full 2023 financial performance. Our annual revenue was approximately $448.1 billion, down 9% year-over-year, with an operating profit of around $83.5 billion, a decrease of 18% year-over-year. Our net profit after tax increased by 8% year-over-year to approximately $159 billion, resulting in an EPS of approximately 21.4% for the full year. Looking ahead, we anticipate that market volatility will persist in the first half of 2024. For 2023, we expect a certain degree of rebound. We achieved profits for quarter three, but we were not able to continue that for quarter four, and we expect similar situations to persist into 2024. Currently, we expect that going forward, factors like economy, like geographic conflicts, fiscal policy, and low consumer confidence will all contribute to low market demands going forward. However, if we take into account the preparations that we have made, we are actually anticipating an increase in market demands for the second half of 2024. And we deeply believe that AI PCs will serve as a major growth driver for the market going forward. And in fact, we expect this growth driver to last for several years. In fact, we actually think that AI PCs will deeply change how people live their lives and people work. And ASUS will look to cement its position as a leader in this upcoming AI PC growth spurt. So going forward on slide eight, this is our 2023 brand income statement. Currently, our inventory stands at approximately $116.4 billion, which reflects stability in inventory management. We currently see that the inventory we have have returned to much more healthier states, and we also anticipate that such stability will likely persist into at least the first half of 2024, while for the second half of 2024, we will accelerate introduction of new products. Moving on to slide nine, we see a breakdown of revenue by segment for quarter four. PCs accounted for 59%, components 40%. Geographically, Europe contributed to 36%, Asia 38%, and America's 26% of our revenue. On slide 10, we have a breakdown of our full year of 2023. PCs accounted for 3%, components and servers accounted for 36%, while by regional contributions, 32% came from Europe, 45% from Asia, and 23% from the Americas. Lastly, slide 11, outlines our operational targets for quarter one 2024 for pc products we expected a seasonal decline of about 10 percent a correction quarter quarterly decline while components and servers are anticipated to grow by approximately 15 to 25 percent quarter on quarter this is driven by momentum from server and ai server products so the combination of these two have actually contributed to significant growth momentum for this since the start of this year and we expect that this growth momentum will persist throughout the year of 2024 and this is something that we'll continue to invest into Now, I will hand it to our two co-CEOs to discuss our operational strategies and outlooks for Q1 2024 and beyond. Dear investors and friends from the media, good afternoon. I would like to thank everyone for participating in our earnings call. I'm co-CEO Su. Next, I and Sansom will together give you an overview of our operations over the past year and our plans for 2024. 2023 was a challenging year for ASUS, facing a sharp decline in market demand. However, the ASUS team demonstrated strong execution and resilience and successfully completed inventory adjustments in the first half and returned the business to profit by the year's end. In order to ensure that we can hit our internal long-term goals, we are currently focusing on three strategies internally. Firstly, we have operational adjustments. We are committed to enhancing overall operational efficiency, strengthening interdepartmental collaboration, and ensuring operational outcomes aligns with our long-term plans. Second would be talent and resource allocation, we are adjusting our company's resource to increase investment in employee training and enhance team capabilities. For Q2 2023, we conducted restructuring on two CHPGs, we integrated the gaming and PC business units into one department, and we also introduced a new management team for the new business unit. Also, for the server line, we also invested in more resources, and introduce experienced executives to expand our R&D manpower. So, these business units have all had their operations modified and are currently on track. Thirdly, we have investments in growth. Faced with market and technological changes, we are always looking for new opportunities to integrate into our long-term plans to drive continuous growth. We will give a report on that in the future when the time is right. Once again, we think that the year has been fraught with challenges. The economy has not been performing very well. Market demand has not been that high. But we also believe that AI technology presents significant opportunities for innovation and growth. In particular, generative AI is developing very rapidly. it will have a large impact on the society and the industry. We think that this technology will have a significant impact on humanity as a whole, similar to a fourth industrial revolution. Which is why in 2024, we will focus on the multi-growth engine strategy to drive long-term growth goals using AI-related products and services. Our plans are as follows. Firstly, AI empowerment and transformation. ACES is currently undergoing a comprehensive AI transformation internally. We want to utilize AI technology to enhance management and strategic planning, intelligence, and deep AI integration into all aspects of our products in order to consolidate our leadership on the market. Secondly, we want to become a comprehensive supplier of AI equipment and solutions. Asus is committed to becoming a comprehensive supplier of AI equipment and solutions. We are innovating and launching products, enhancing performance for our solutions, and enhancing customer experience to help them succeed in whatever field they come from. We believe that for the second half of 2024, there will be a long-term growth cycle ushered in by AI. We are hopeful that through the integration of new AI technologies, we will begin a new round of long-term growth starting the second half of 2024. For the next page, we are going to go over the three key execution strategies for ASUS. For system products, particularly for gaming and consumer PC markets, ASUS has always been a leader. This is primarily attributed to our continuous investment in R&D. And our goal is not only to maintain that lead, but to become the top brand and overall to achieve this objective we will intensify our research and development efforts in ai technology to ensure that our products lead the industry in intelligence and personalization secondly in the realm for of open products we will consolidate our market leadership through again our leading R&D capabilities while simultaneously continuing investing in our server business in order to cultivate multiple profit engines. Even though the revenue from our server products currently do not account for such a high portion of our total revenue, we do have a very aggressive target internally. We want to achieve a five-fold growth within five years, which is a highly ambitious goal. Currently, our progress so far has been in line with expectations, and it appears that we are actually slightly ahead of schedule. Thirdly are our AIoT products. As we enter the era of AIoT, We actually just integrated the Intel NUC product line starting last year. The integration of that new product line will allow us to invest in the mini PC ecosystem and to ensure that we maintain a leading position in this rapidly evolving market. as we continue to provide innovative and high-quality solutions to our customers. Yet another crucial topic is our commitment to ESG. Asus will continue to invest in ESG-related areas, striving to become a world-class green high-tech company to provide valuable contributions to human society. This is something that Sansom will talk more about later on. Next slide, please. Now I will talk about the ACES plans for AIPC-related initiatives. ACES has impressive innovation capabilities and a lot of customer recognition, and that's what cements our leadership in the market. We want to leverage our design thinking to understand customer needs, to drive product innovation, and strengthen our leading position in this fiercely competitive market. The goal of AIPC ultimately is to transform PCs into personalized AI assistants that can truly enhance user productivity. We hope to achieve this by providing auxiliary functions that can ultimately help improve user work efficiency. We also want to lastly talk about our long-term goals. We think that AIPC will create a long-term growth cycle that lasts several years. We want to provide smart and personalized solutions for that market. Next slide, please. For 2023, our server business achieved substantial growth compared to the same period in 2022. The ASUS AI market has demonstrated excellent performance, paving the way for future growth. Firstly, we have outstanding talents and resources to allow substantial R&D efforts into AI servers. Secondly, we are also strengthening our internal production capacity in anticipation of future market demand. Thirdly, we have established a deep trust with suppliers and customers to ensure the stability of our entire supply chain and to support long-term growth for the company. Lastly, we have the ability to provide comprehensive solutions from hardware for AI servers, software to system deployment and subsequent maintenance, and even other related AI solutions. I think the ability to do all of that is unique even among Taiwanese companies. Using these advantages, ASUS will continue to promote the growth and innovation of the AI server market. Of course, we have internally set a very ambitious target. This ambitious target consists of achieving five-fold growth in five years starting from 2022. This goal reflects our confidence in the market and our confidence in our own strength. Now based on currently observed data, we should already be able to surpass some of our targets by the first half of 2024. This demonstrates our competitiveness and our execution capabilities. Next slide. As AI continues to rapidly develop, ASUS is ready to become a market leader. I believe that our advantage is cemented on three cornerstones. Firstly, we believe that in the era of AI, innovation speed is crucial. ASUS has the largest internal R&D team in the industry, enabling us to quickly transform innovation into products on the market. This allows us to maintain a leading position in the fierce competition. In fact, if you go by a broad definition, Asus has about 1,000 people for our R&D talent base, which I believe is a significant advantage. Second is design thinking. We focus on understanding customer needs to develop attractive products. We want to enhance user experience to maintain our market leadership. Lastly, we have strong partnerships. This is essential for our success. We collaborate with strategic partners in various fields to develop and promote innovative solutions. And because generative AI is a new technology, progress will be very rapid in the early stages of its development. Therefore, the speed of industry will likely also be very fast. This is why we believe that there will be several key things to focus on in the future. First, AI applications will become ubiquitous. It will span various platforms and generate various different product cycles. This implies that there's a need to develop innovative products to adapt to diverse new technologies to meet broad market demand. Second, we will face the challenge of rapid product upgrade cycles. As AI continues to develop, we must maintain agility and speed in introducing new products to meet those needs. Finally, a blend of traditional expertise and innovative design will be crucial. We will develop products that are aesthetically pleasing and practical to enhance user experience. we naturally expect that the advancement of AI technology is something that we want to capitalize upon. And so in this new era of AI technology, Asus is one of those companies with very strong offerings. We have hardware, cloud solutions, software, and even maintenance after the deployment of said solutions. And even we have a presence in IoT and edge device solutions. These are all markets that ACES is able to supply. And so ACES is ready to meet all of those real-world demands. I would also like to mention that a lot of clients have this notion that ASUS is just a hardware or software supplier. But I would like to raise an example to illustrate the contrary. ASUS has actually had some success in providing cloud-based solutions. Our subsidiary, Tai Chi Yun, has taken over the operation of Taiwan's National Supercomputer Center, Taiwan Site 2. And we are utilizing the computational power of that supercomputer to train a large traditional Chinese large language model. We are calling it the Formosa Foundation Model. We are using that large language model to collaborate with partners and using the capabilities of the model to provide services. This, I think, demonstrates that ASUS is capable even in the field of cloud AI, and this will be something that gives us a unique competitive edge in the AI era. For ASUS, the goal of achieving long-term growth remains unchanged. We are committed to pursuing growth through multiple growth fronts and engagement with user segments. While 2023 has been a challenging year due to economic sluggishness, ASUS has demonstrated outstanding operational capabilities, quickly recovering from unprofitability and maintaining a leading position on the market. through product innovation. We are full of expectations for the future and ASUS will continue to strive for transformation and innovation. We believe that through continuous industry innovation, ASUS will become a pioneer in the market and pioneer market trends. Now I'll hand over the stage to Samson. Thank you. Thank you. Members of the media, investor friends, I am co-CEO Samson. Now I will dive into details regarding the operational results of each business unit for quarter four and talk about our future operational focus. Let's start from the system business group. The system business group mainly consists of notebooks and PCs. For quarter four, our revenue declined approximately 10 to 15% year over year. As our CFO mentioned earlier, this is largely due to the prevailing economic uncertainty, which is suppressing consumer spending. Additionally, the market recovery momentum remains quite weak in the short term. This is especially noticeable in China and the US. However, despite these challenges, ASUS has had its bright spots. For Q4 of 2023, we maintained our position as the leader in the gaming laptop market. We have a substantial gap ahead of even the second place, and so despite difficult market conditions, our gaming PC sales volume outperformed the market average. Our overall market share in 2023 remained somewhere between 25 to 30%. And furthermore, we have a commitment to listening to the needs of gamers. The ROG brand is always incorporating innovative technologies that resonate with gamer needs. Besides introducing them to our laptops, we are also introducing technologies into peripherals like gaming keyboards and gaming headsets. And we are also working closely and we have been recognized by the media as well as by our gamer consumers, which is why in 2023, we saw a very significant year over year revenue growth of over 56%. Looking ahead, as AI applications continue to become more and more ubiquitous in everyday work scenarios, personal computers will also become more prevalent, which is why we have an optimistic outlook on the long-term market prospects. ASUS has the most robust R&D team in the industry, which is why we will continue to develop competitive AI solutions and consumer-centric scenario solutions to meet the demands of this AI market. As many of you have no doubt anticipated, for the second half of this year, there will be a new wave of AI PCs. Whether it's for the x86 or the non-x86 platforms, ASUS has plans to release products for those platforms. We will be among the leading brands to roll up the first wave of new products. Next slide, please. Next slide, we are moving on to our open platform business group consisting of motherboards and graphics card. For quarter four, we achieved a revenue growth of 10% to 15% growth year on year. However, the motherboard revenue experienced a decline of 5% to 10% due to subdued overall PC demands. On the other hand, however, graphic cards are recovering after the market inventory adjustments. And so that segment actually saw overall revenue growth of 20%. And that 20% is coming from positive trends in both shipment volume and average sales price. And so that market is quite healthy. Additionally, we have also made significant strides in emerging markets, including commercial and workstation motherboards. Both of those segments saw notable growth. For 2023, the commercial motherboard revenue grew year-over-year by 23%, and that was largely driven by the resurgence in demand after the pandemic. This includes both government and corporate procurement. Furthermore, workstation motherboard revenues also increased by 43%, and this, I think, reflects our continued focus on the ProArt motherboard product line, which targets creative professionals. As an industry leader, ASUS is committed to innovation and breakthroughs. Whether it's for the Intel or the AMD platforms, we are consistently setting new world records in overclocking. For instance, we reached a few world firsts. For the RNG Maximus Z790 APEX series motherboard, that motherboard was able to reach 9.044 GHz overclock on Intel's 14th generation CPU. And similarly, we also have a separate product line, the ROG Crosshair X670 overclocking motherboard also achieved impressive overclocking results on the AMD platform using achieving over 10 gigahertz memory overclock on DDR5 memory. And so I think these achievements continue to solidify the leading position that ASUS has in this market segment. Next page, please. For the server business group, many of you will no doubt be quite familiar. As previously mentioned, ASUS server business has made significant strides. For the entirety of last year, we achieved year-over-year growth of over 50%. Within this segment, the AI server segment saw notable growth. The AI server is accounting starting from 10% in 2022 to 35% in 2023. And so that really shows that ASUS has made significant strides in this server segment. Even though ASUS showed up as a latecomer, we have made significant progress in the past two years, and these numbers reflect that progress. Besides the trend of applications derived from generative AI, we think that for 2024, there will likely be a significant increase for the in-house portfolio share. It is likely to reach over 70%. And so ASUS will definitely look to cement its presence in the new generative AI wave, whether it's hybrid cloud, edge computing, or other solutions. We will have comprehensive solutions that include motherboards, data centers, and provide a comprehensive total solution to ensure that we can meet all of our internal growth goals. Please turn to the next page. As for the AIoT business group, for last year, we reached 25-30% year-over-year growth. Especially for Q4 of 2023, we made several significant breakthroughs. Firstly, as many of you may have already heard about from media reports, last year we integrated the Intel NUC product line into our mini PC segments and it's now starting to contribute to revenue. It is enhancing our offerings in the mini PC segment and it has significantly helped us break into different markets. Besides the existing gaming and prosumer markets, we are also penetrating into previously unaccessible commercial and industrial market PC clients. And all of these have contributed to not just the revenue growth we've seen thus far. For the next few years, this is something that we will focus our efforts on. Besides this, we are also investing in smart manufacturing, smart retail, smart healthcare, and smart cities. These are the four major areas we are focusing on. Take, for example, smart manufacturing. We have made strides in AIoT solutions. connected with certain semiconductor companies. We are helping them with developing new automated production lines. As for smart cities, we have also made breakthroughs. We have worked with several Southeast Asian countries in order to provide them with edge AALT solutions to help them with border management. As for smart retail, we have deployed solutions for famous retailers to help them with online and offline 1ID client information management solutions. As for smart healthcare, we are now integrating cutting-edge AI technology into digital healthcare solutions. Just last year, on the Taiwan Medical Technology Exhibit, we debuted a total smart healthcare solution. Next slide, please. Now, this is probably familiar to many of you. The ASUS gaming brand, ROG, has had a consistent brand identity. We hope to leverage comprehensive innovative solutions and community engagement. to deepen our connection with the community and lead industry trends. In terms of results, just in the beginning of this year, we launched several products in the CES, which includes products like the ROG Zephyrus laptop, which won multiple accolades, and the ROG Phone 8, which was our latest generation of the ROG Phone product line. Other newcomers to the ROG line will be the back-to-the-future BTF ecosystem. This is what we hope to solve certain cable management solutions in the custom-built PC market, and that's something that's also been quite successful. We've also introduced a new series of motherboard and graphics cards targeting that segment. And calling back to the NOC PC line, we also introduced an ROG NOC product to allow our gaming product line to become even more comprehensive. And so throughout all of the efforts we've made, we are certain that the ROG brand will retain its leading position in the gaming market. Next slide, please. As for climate leadership, we are committed to our efforts into sustainability and climate change. I will raise two examples. Firstly, our efforts over the past year have once again gained international recognition. For instance, we have been selected once again in the renowned top 200 global companies by CNBC. We are ranked among the top 25 for the second year in a row. And this is something that shows our dedication to the cause. A second example would be our ranking in the carbon disclosure project. We were ranked as leader in climate change and supply chain collaboration. I think this acknowledges ACES's efforts in environmental information disclosure, and it shows that we are implementing relevant climate action throughout our value chains. This concludes my presentation. Thank you. I would like to thank the CEOs and the CFO for their presentation. Now we will enter the Q&A section. If you have any questions, please raise them at the left-hand side of the webpage. We will collect the questions and answer them. Thank you. The first question comes from JP Morgan. We would like to ask how the increase in component prices have impacted profit margins. Yes, the increase in component prices have affected us. Starting from Q4 last year, certain components, especially those related to memory modules such as DRAM and solid-state storage, have saw an increase in component pricing. Now I think that is something that has impacted our profit margin, which is why starting at the end of quarter three last year when we saw that memory and solid-state drives were rising in prices, we started inventory management practices to include our stock of inventory. We worked with suppliers to to save up our inventory stock. And we are also extending our inventory cycles slightly to accommodate the increase in stock. And so on the whole, I think while the increase in component prices has impacted our profit margin, but it is still for the most part within the realm of manageability. This is something that every brand has to deal with, of course. Going forward, if the rising prices do not seem too slow, then we will likely make certain adjustments to the pricing models of our new products. That is something that we might take as an action in response to these rising prices in the future. But for now, the impacts are still manageable. But we do have plans in the future if needed. Thank you. This question once again comes from JP Morgan. In the presentation, you mixed the revenue from servers into the component business unit. We would like to ask how the server and the AI server product segments have contributed to revenue and what goals you have for 2024. So for ACES, we started first with a component business unit, started from the channel server product line, which is why currently the server team and the revenue from the servers are all categorized under the component business unit. This is why we are disclosing them the way that we are. As for the year 2023, on the whole, the server products probably account for the low single-digit percentages in terms of our total revenue. But 2023 was more of a transitory period. So for 2024 Q1, based on the data that we have observed thus far, servers will likely increase to the high single-digit percentages. And going forward, we are hoping that the growth momentum in the server segment will sustain further growth in 2024. Thank you. The next question comes from KGI Securities. We would like to ask the management team at ASUS how you define AI PCs. And also, what do you expect would be the market penetration rate for AI PCs in 2024 and 2025? I think that on the question of how we define AI PCs, it is something that has had quite a few different definitions, depending on what event you are in. Now, I think on a very basic level, in the past, AI models and AI applications have largely relied on cloud computing capabilities, and that's largely been the case even today. But going forward, as we continue to develop the AIPC market, we are hoping that the computation and the generations of the resource can be moved from the cloud down to your local PC. The most direct benefits of this move is that the latency of the applications will go down and at the same time it also takes into account privacy and security concerns of the user. But So going by this definition, in order to qualify as an AI PC, it needs to have the hardware processing capabilities to run those AI models At the same time, it also needs to have enough memory to load those models which is why despite the conversation that's been going on, there's been a broad consensus even among major vendors that AI PCs should at the very least have 40 tops in terms of its computational power. The MPU should have at least 40 tops to support the hardware acceleration. As for AI applications, that's of course been a market that's filled with applications lately. AI has been used for generating text, images, videos, and a lot of things. But I think the most dominant player will be Microsoft and the Microsoft Co-Pilot AI application. It will likely contribute to major productivity increases for the end user. And that will definitely be what most consumers will be thinking about going forward. That's how we can convince consumers that AI can actually become a very useful digital assistant. So I think these are some of the definitions that we can go by when thinking about AI PCs. As for the question of market penetration, I think both me and our management team, we have actually talked about how the process for AIPC to become ubiquitous in the market is one that's highly iterative. It's something that will require collaboration from both the consumer and the vendors. consumers will gradually get accustomed to using AI applications on the computer. They will figure out how AI can be used. But on the other side, we also have vendors that will need to learn from customer feedback to observe what problems that the consumers are facing. And so they need to make iterative improvements to solve those problems. So this is definitely a constant process of evolution. On the whole, we do think that the year 2024 can be considered year zero for AIPCs, and that development will start to gradually accelerate. So for the following three years, we are hopeful that market penetration rates may reach as high as over 50%. This is our current observations. Thank you. The next question comes from UDM Money and UBS. So following our discussion on the AI PC, so based on the same specs, would an AI PC have a higher price difference or a higher price premium compared to regular PC? And would that change after AIPC becomes more common in the market? Would a large volume of AIPC help the margin, the gross margin percentages for the company? Okay, so I will give my thoughts on this. I think as I talked about previously, the two criteria for AI PC is to support hardware acceleration in terms of the CPU or having a dedicated MPU in the CPU. And the second criteria is to have additional memory. These two things are the main spec differences. So as you may expect, when you need to have additional hardware in the CPU, that will likely raise the price of the CPU. at least compared to a traditional CPU without an MPU. As for the memory requirements, because you need that additional memory to load the models, you do need that extra memory there. So having those extra memory will be larger than a traditional PC. based on these two factors it is reasonable to expect that AI PCs will be higher than traditional PCs but as for how much more expensive that will of course vary depending on the precise specs and the precise platform you're operating on and I can't necessarily put a concrete pin on that As for the question of margins, I think that also goes back to how AI PCs offer a completely new experience. It's going to be used in using text, image, and video generation. It's going to be used in Microsoft Copilot, which will include various productivity-related applications. And so based on all of these value-added applications, this improved experience will hopefully give the AI PC more value in the eyes of the consumer. which is why we also expect the margins for AI PCs to be higher than even the traditional PCs. Thank you. Okay, the next question comes from DigiTimes. Now, you talked about how AI servers accounted for 10% of the server segment in 2022, 35% in 2023, with an expected 70% for 2024. Is this from a revenue perspective or from a sales volume perspective? Okay, for this question, I think when we mentioned percentage numbers, that's actually revenue percentages. Now, the reason we mentioned those numbers was meant to illustrate the operational capabilities of the server team at ASUS. Our server team has been recognized by our clients. This is, of course, in part due to the popularity of AI service as of late, and our ability to quickly grow in this AI service market shows that we are recognized by our clients, which is why we reiterated on our five-fold growth in five-year internal target. We're even ahead of schedule, as I remind you, so I think that's a very good result. The next question comes from Digitimes and investor groups. The question is, what are ASUS's expectations for revenue in quarter one and quarter two? Now, as I previously mentioned, recently the PC market has been impacted by a lot of general economic factors, which is to say that the growth cycle for the AIPC will probably not start until late 2024, the second half of 2024. So on the whole, in terms of market demand and taking into account our company's operational plans. For the first half of 2024, we are hoping for stability in execution. So we are hopeful that our margin percentages will likely be the same as quarter for 2023. But as AI PCs officially launched onto the market, as well as the seasonal demands that are typical of Q3 and Q4 of fiscal year, we think that as we enter late 2024, there are quite a few positive factors that can drive growth in the market as a whole. Furthermore, ASUS has made preparations, namely investments in markets like AIPC, AI servers, and our gaming products. which is why taking account our preparations in those markets, our internal goals for the second half of 2024 is that we want to see gradual increases and improvements in margin percentages. But from a long-term perspective, I think we will hope for operating margin percentage of 4% for our brand as a whole. That's our goal right now. The next question comes from KGI Securities, as well as other investor groups. Now, ASUS has seen impressive growth in its server market. So can you talk about which industries do your server clientele come from? Okay, so as we mentioned previously, the server business unit or particularly the AI business unit has seen impressive growths. That in some sense shows that our clients are doing quite well. In response to the emergence of generative AI, we are really seeing that a lot of countries, a lot of governments from a lot of countries and major corporations feeling this anxiety of wanting to build their own AI data center solutions to train their own AI models to provide solutions to their clients, which is why many of our clients come from these national governments, and large corporations. Now, in terms of a breakdown by region, besides a few coming from Europe, for the most part, our AI server clienteles are coming from the greater Asian region. We have a lot of companies and governments that are in the rush to build their own AI data centers. Thank you. The next question comes from KGI Securities. Regarding the company's outlook on the overall PC shipping volume for 2024, can you give us a segment breakdown by consumer and commercial segments? ASUS has always aimed to surpass average industry growth as its long-term goal. So what goals do you have set for the year 2024? First, let's discuss the overall shipment volume. As many of you may recall, the PC market saw a period of significant weakness or even slow decline before COVID. But during the pandemic, we saw a significant surge in demand for the PC market. COVID effectively reaffirmed the essential role that PCs play as powerful productivity tools Which is to say that PCs are actually very useful And it's seemingly, in the short term anyways, a non-replaceable tool for many people which is why according to IDC forecast for 2024, the overall shipment volume is expected to nearly to return to pre-pandemic levels. Because before the pandemic, as I recall in 2019, the IDC estimation for PC shipments stood at around 260 million units. And for this year, compared to the last year, the IDC growth rate forecast seems to be at around 2 to 3%. So the volumes are fairly similar to 260 million units that we saw before. So given the anticipated AIPC trend, we think that the annual growth rate may reach a long-term trend of constant positive growth. we think that the total shipment volume will still maintain that 2% to 3% growth for the overall PC market. But that's the general PC market. But right now, most people, I think, are interested in the AI PC segment. As for the AI PC segment, that, of course, is going to vary depending on which definition you use. But starting from the later half of 2024, we expect that AIPCs will likely account for a low single-digit percentage. But over the next two to three years, perhaps by 2026, the AIPC segment may surpass 50% or even 60%. So if you look at the speed of AI PC by itself, it's actually very fast. Furthermore, because AI PCs need to have an additional NPU inside the CPU and also need to have larger memories in order to run those models locally, the price of AI powered PCs are expected to increase compared to traditional PCs. So overall, I think this is a positive for ASUS. Internally, we have actually set a very ambitious revenue target As mentioned previously, we are hoping that the AIPC market will be something that we can assert a lead in As the market continues to grow, we also expect that we will grow faster than the industry average, so that for the next two to three years, we can fully capitalize upon the AIPC trend. We will continue to leverage our hardware and software integration capabilities to reach those growth targets. Now we've seen the questions that everyone has raised in the comment section. I think we have answered the questions that most media outlets are interested in. If you have other questions, please raise them into the comment section right now. Thank you. Okay, due to time constraints and the fact that I think there are no new questions here, I think we can conclude our earnings call for today. We would like to invite our two co-CEOs to give their concluding remarks. We have discussed at length on AI related products. I believe that deep learning and generative AI has very positive impacts for the PC industry as a whole, and even changing how many companies are operating internally. Now for this wave of AI PC, Asus has a great advantage. We have a lot of R&D internally. We have a lead in AI related technologies, which is why we are going to make full use of this wave to introduce the best products to the market to increase our market share, ultimately increasing our revenue. I would like to once again thank our friends in the media and our investor friends for attending today's investor relations conference. For the year of 2023, it's no doubt that the PC market was shrinking. This is something that's already happened. For the year 2024, even though at least for the first half of 2024, there are a lot of geopolitical factors and negative factors affecting market demand, but going into the later half of 2024, we expect these factors to gradually weaken. that in combination with the fact that there are positive growth factors like the new OS from Microsoft and the AI applications that we talked about, and even the demand from the new wave of AI PC products, a lot of these factors together will likely serve as a major driving factor for the PC industry as a whole in the coming years. As we mentioned previously, AI PCs will likely have a very large impact on both the x86 and the non x86 platforms. Accordingly, ACES has plans for introducing products in both platforms. we have concrete projects that are already in the works, which is why we aim to be among the brands that launches products in that first wave of AIPC solutions hitting the markets. So going forward, ASUS wants to cement its position as a leading brand in the AIPC market. A good start, I think, is very important, and we're confident in being able to have that good start. As for the AI server market, that's also something that we talked about at length. For the AI server market, the key component to running large language models are, of course, the GPUs and the CPUs. And ASUS has deep partnerships with the three major American suppliers for CPUs and GPUs, which is why, based off that partnership, we are confident that ASUS will have an advantage when it comes to securing parts from these major suppliers. As for the issue of client retention, again, our AI server clientele demonstrates that there is clear demand and we know which clients we have. So after the 50% AI server segment growth last year, we think that this year the growth will be even larger. For reaching that five-fold growth in five-year target, we are confident that it is something that we can accomplish in the future. So I would like to once again thank everyone. Thank you. Thank you. So this concludes our investors relations conference. Thank you.