Himax Applied sciences, Inc. (NASDAQ:), a number one provider of show drivers and different semiconductor merchandise, has reported a stable efficiency for the second quarter of 2024, surpassing expectations with a big enhance in income and a revenue per diluted ADS that hit the highest finish of the corporate’s steerage vary. Regardless of the optimistic final result, the corporate anticipates a income decline within the subsequent quarter however stays optimistic about long-term progress prospects, significantly within the automotive IC sector.

Key Takeaways

• Himax Applied sciences’ Q2 2024 income rose to $239.6 million, a 15.5% enhance sequentially, with a gross margin of 32%.
• Revenue per diluted ADS reached 16.9 cents, aligned with the upper finish of steerage.
• The corporate predicts a 12% to 17% income decline in Q3, with a gross margin round 30%.
• A revenue of 1.5 to 4.5 cents per diluted ADS is projected for Q3.
• Himax plans to allocate $14.2 million for worker bonuses in Q3.
• Investments in FOCI and Obsidian Sensors purpose to reinforce the corporate’s cloud AI and thermal imaging sensor market presence.
• The corporate is increasing its OLED enterprise, with mass manufacturing of its on-cell contact controller set for 2025.

Firm Outlook

• Himax expects a decline in Q3 income as a consequence of macroeconomic uncertainty and diminished demand within the automotive market.
• The corporate stays optimistic in regards to the long-term progress of the automotive IC enterprise and is increasing into the automotive OLED panel market.
• Himax is specializing in profitability, lowering working bills, and enhancing operational resilience.

Bearish Highlights

• The automotive market in China is underperforming, resulting in scaled-back IC procurement for Q3.
• Massive show driver ICs are anticipated to see a double-digit sequential income lower in Q3.
• Small and medium-size show driver IC gross sales are anticipated to say no within the low teenagers sequentially.
• Pill gross sales are anticipated to say no.

Bullish Highlights

• Pocket book IC gross sales are anticipated to extend.
• Smartphone IC gross sales are projected to have an honest double-digit enhance.
• Himax is making strategic investments in FOCI and Obsidian Sensors to strengthen its market place.
• The corporate’s WiseEye Ultralow Energy AI Sensing Resolution is gaining traction within the good safety {industry}.

Misses

• There is a market drawdown affecting the manufacturing timeline for smartphone OLED, pushing it to the following yr.
• Tcon gross sales are anticipated to say no in Q3, though the automotive Tcon enterprise anticipates first rate progress.

Q&A Highlights

• CEO Jordan Wu addressed the influence of Chinese language market fluctuations and buyer pessimism for the second half of the yr.
• Wu expressed confidence in Himax’s expertise edge over Chinese language competitors within the automotive IC market.
• The corporate’s CTO mentioned the potential of changing steel wire with fiber optics to sort out the challenges of energy consumption and warmth dissipation in HPC and GPU ICs.

Himax Applied sciences is navigating via a posh market setting with strategic investments and product developments. Whereas the corporate faces near-term challenges, significantly within the Chinese language market, its management stays assured of their expertise and long-term technique. As Himax continues to innovate and adapt, traders and {industry} watchers can be intently monitoring its progress within the aggressive semiconductor panorama.

InvestingPro Insights

Himax Applied sciences, Inc. (HIMX) has just lately demonstrated resilience regardless of a difficult market, with its second quarter of 2024 outcomes showcasing a strong efficiency. To offer a deeper understanding of the corporate’s monetary well being and market place, listed here are some curated insights primarily based on real-time information from InvestingPro and InvestingPro Suggestions.

InvestingPro Knowledge highlights that HIMX has a market capitalization of roughly $1.02 billion, indicating a big presence within the semiconductor {industry}. The corporate’s P/E ratio stands at 28.14, which adjusts to 21.33 when contemplating the final twelve months as of Q1 2024. This implies that traders could also be anticipating future progress or that the corporate’s earnings are of top quality. Moreover, the income for the final twelve months as of Q1 2024 is reported at $908.77 million, though it has skilled a decline of 12% throughout this era.

An InvestingPro Tip factors out that the inventory is at the moment in oversold territory in response to the RSI, which might point out a possible rebound alternative for traders. One other tip highlights that analysts predict the corporate can be worthwhile this yr, aligning with the optimistic earnings report for Q2 2024 talked about within the article.

For traders looking for a extra complete analysis, there are further InvestingPro Suggestions out there on the platform, together with insights on inventory volatility, valuation multiples, and the inventory’s efficiency during the last month and 5 years. To discover these additional, one can go to https://www.investing.com/professional/HIMX.

In conclusion, whereas Himax Applied sciences anticipates a income decline within the upcoming quarter, the corporate’s profitability and strategic investments in areas just like the automotive IC sector and OLED expertise recommend a concentrate on long-term progress. As Himax adapts to market situations, these InvestingPro Insights might function useful info for traders contemplating the corporate’s potential.

Full transcript – Himax Applied sciences Inc (HIMX) Q2 2024:

Operator: Howdy, women and gents, welcome to the Himax Applied sciences Second Quarter 2024 Earnings Convention Name. Right now, all individuals are in a listen-only mode. And later we’ll conduct a Q&A session and directions will observe at the moment. As a reminder, this convention name is being recorded. I might now like to show the convention over to Mr. Eric Li Chief IR/PR Officer at Himax. Eric, please proceed.

Eric Li: Welcome everybody to the Himax [Audio Distortion]. My title is Eric Li, Chief IR/PR Officer at Himax. Becoming a member of me at the moment are Jordan Wu, President and Chief Govt Officer, Jessica Pan, Chief Monetary Officer. After the Firm’s ready feedback, we’ve allotted time for questions within the Q&A session. In case you have not but acquired a replica of at the moment’s outcomes launch, please e-mail HIMX@mzgroup.us, or hx_ir@himax.com.tw entry the press release on monetary portals or obtain a replica from Himax’s web site at www.himax.com.tw. Earlier than we start the formal remarks, I’d wish to remind everybody that a few of the statements within the convention name, together with statements concerning anticipated future monetary outcomes and {industry} progress, are forward-looking statements that contain plenty of dangers and uncertainties that would trigger precise occasions or outcomes to vary materially from these described on this convention name. An inventory of danger elements may be discovered within the Firm’s SEC filings, Kind 20-F for the yr ended December 31, 2023 within the part entitled “Risk Factors”, as could also be amended. Aside from the Firm’s full yr of 2023 financials, which have been supplied within the Firm’s 20-F and filed with the SEC on April 2, 2024, the monetary info included on this convention name is unaudited and consolidated and ready in accordance with IFRS accounting. Such monetary info is generated internally and has not been subjected to the identical evaluation and scrutiny, together with inside auditing procedures and exterior audits by an unbiased auditor, to which we topic our annual consolidated monetary statements, and will fluctuate materially from the audited consolidated monetary info for a similar interval. The Firm undertakes no obligation to publicly replace or revise any forward-looking statements, whether or not because of new info, future occasions or in any other case. On at the moment’s name, I’ll first evaluation the Himax consolidated monetary efficiency for the second quarter 2024, adopted by our third quarter outlook. Jordan will then give an replace on the standing of our enterprise, after which we’ll take questions. You possibly can submit your questions on-line via the webcast or by cellphone. We are going to evaluation our financials on an IFRS foundation. We’re delighted to announce that Q2 revenues surpassed the steerage by gross margin and income have been in step with the steerage vary issued on Could ninth 2024 regardless of the prevailing financial headwinds. The higher than efficient monetary outcomes major stems from resumed order momentum throughout most of our product traces. Second quarter revenues registered $239.6 million, a rise of 15.5% sequentially, exceeding our steerage vary of an 8% to 13% enhance. Gross margin got here in at 32%, in step with our steerage vary of 31.5% to 33.5%, up from 29.3% of the earlier quarter and 21.7% similar interval final yr. The sequential progress was pushed by price enhancements and a good product combine, together with elevated gross sales within the automotive IC and Tcon product traces, each of which have greater than company common gross margins. The substantial enchancment in gross margin from the identical interval final yr was primarily as a consequence of one-time early termination expense paid to foundry companions, which eradicated minimal achievement requirement constraints and excessive wafer prices set in the course of the extreme {industry} capability scarcity. Consequently, our new wafer begins are not sure by these restrictive phrases. Moreover, we are able to now leverage numerous foundry sources for optimum operational effectivity and a considerably improved price construction, thereby sustaining our merchandise’ competitiveness. Q2 revenue per diluted ADS was 16.9 cents, on the prime finish of the steerage vary of $0.13 to $0.17. Income from giant show drivers got here in at $39 million, reflecting a sequential enhance of 24.7%. The rise was predominantly pushed by buyer restocking in TV and monitor ICs after a number of quarters of muted demand, in addition to elevated orders in preparation for buying festivals. Each TV and monitor ICs gross sales posted substantial double-digit will increase quarter-over-quarter. In distinction, Q2 pocket book IC gross sales declined barely following a powerful restocking within the earlier quarter. Gross sales of enormous panel driver ICs accounted for 16.3% of whole revenues for the quarter, in comparison with 15.1% final quarter and 19.3% a yr in the past. Small and medium-sized show driver income reached $158.8 million, marking a sequential enhance of 10.1% and surpassing our steerage as a consequence of stronger-than-anticipated gross sales within the TDDI merchandise for automotive, smartphone and pill. In Q2, automotive driver gross sales, encompassing each conventional DDIC and TDDI, elevated by an honest high-teens sequentially and greater than 50% year-over-year. Regardless of expectations of weakening electrical car demand, each automotive DDIC and TDDI gross sales skilled sequential progress in Q2, due to the our strong design-win pipeline in TDDI and clients’ steady restocking momentum in DDIC since finish of Q1. Our automotive enterprise, comprising drivers, Tcon, and OLED gross sales, remained the biggest income contributor within the second quarter, representing over 47% of whole gross sales. In the meantime, Q2 pill IC gross sales barely elevated sequentially, surpassing steerage of a decline, fueled by main clients’ new mannequin ramp-ups. Conversely, smartphone driver gross sales declined as anticipated throughout a subdued competition season characterised by sluggish demand. The small and medium-sized driver IC phase accounted for 66.3% of whole gross sales for the quarter, in comparison with 69.5% within the earlier quarter and 63.9% a yr in the past. Second quarter revenues from its non-driver enterprise reached $41.8 million, up 30.6% from the earlier quarter, as a consequence of a resurgence in orders for our Tcon merchandise for TV, monitor, automotive, in addition to OLED pill. Our automotive native dimming Tcon, the place we dominate the market, has been swiftly adopted by main panel makers, Tier 1 suppliers, and automotive producers worldwide, boasting nicely over 100 design-win initiatives with solely a small variety of design awards having commenced mass manufacturing. This momentum is additional fueled by the fast growth of challenge awards throughout continents, positioning us for sturdy progress, mirroring the success we has achieved in automotive TDDI. Tcon enterprise represented over 10% of our whole gross sales within the second quarter. Non-driver merchandise accounted for 17.4% of whole revenues, as in comparison with 15.4% within the earlier quarter and 16.8% a yr in the past. Second quarter working bills have been $47.3 million, a lower of 6.7% from the earlier quarter and a decline of 11.1% from a yr in the past. The sequential lower was primarily pushed by decreases in tape-out bills. The year-over-year lower was primarily as a consequence of diminished tape-out bills and a decline within the annual bonuses for the amortized tranches of the earlier years’ bonuses. Amid ongoing macroeconomic challenges, we’re strictly implementing price range and expense controls to handle these situations. Second quarter working revenue was $29.3 million or 12.2% of gross sales, in comparison with minus 0.9% of gross sales for a similar interval final yr and 4.8% of gross sales final quarter. Each the sequential and year-over-year will increase have been primarily as a consequence of greater gross sales and an improved gross margin. Second-quarter after-tax revenue was $29.6 million, or 16.9 cents per diluted ADS, in comparison with $12.5 million, or 7.1 cents per diluted ADS final quarter, and $0.9 million, or 0.5 cents in the identical interval final yr. The after-tax revenue for the primary half was $42.1 million, or 24.1 cents per diluted ADS, a big enhance from $15.8 million, or 9.1 cents for a similar interval final yr. Turning to the steadiness sheet. We had $253.8 million of money, money equivalents and different monetary belongings on the finish of June 2024, in comparison with $277.4 million 1 / 4 in the past and $219.5 million on the similar time final yr. The sequential lower in money steadiness was primarily as a consequence of buyer refunds for his or her deposits made in the course of the industry-wide capability scarcity, together with a strategic funding of roughly $16 million in FOCI via personal placement. The money steadiness discount was partially offset by an working money influx of $26.9 million in the course of the quarter. In comparison with the working money influx of $56.7 million in Q1, the sequential lower was primarily attributable to diminished gross sales over the previous two quarters, resulting in decrease receivables. Moreover, the rise in accounts payable in Q2 was a results of greater Q1 wafer orders, as we anticipated bigger cargo volumes in Q2. Different vital working money outflows in Q2 included annual revenue tax funds. Waiting for Q3, we anticipate a decline in money, money equivalents, and different monetary belongings, primarily as a consequence of a cost of $50.7 million for annual dividends to shareholders. We additionally anticipate to distribute a complete of roughly $30.7 million for worker bonus awards on the finish of this quarter, which incorporates round $11.3 million for the instantly vested portion of this yr’s awards, with the precise quantity topic to the ultimate Board determination, and $19.4 million for vested awards granted over the previous three years. Our product inventories as of June 30, 2024 have been $203.7 million, just like $201.9 million final quarter, indicating a well-managed and balanced stock stage. Accounts receivable on the finish of June 2024 was $242.4 million, up from $212.3 million final quarter and $239 million a yr in the past. DSO was 99 days on the quarter finish, as in comparison with 93 days final quarter and 90 days a yr in the past. Second quarter capital expenditures have been $4.6 million, versus $2.7 million final quarter and $2.9 million a yr in the past. The second quarter CapEx was primarily for R&D associated tools and in-house tester for the our IC design enterprise. As of June 30, 2024, Himax had 174.7 million ADS excellent, unchanged from final quarter. On a completely diluted foundation, the entire variety of ADS excellent for the second quarter was 175.1 million. Now turning to our third quarter 2024 steerage. We anticipate third quarter income to lower 12% to 17% sequentially, gross margin is anticipated to be round 30%, relying on remaining product combine. The third quarter revenue attributable to shareholders is estimated to be within the vary of 1.5 cents to 4.5 cents per diluted ADS. As we’ve achieved traditionally, we’ll grant workers annual bonus, together with RSUs and money awards, on or round September 30 this yr. The third quarter steerage for revenue per diluted ADS has taken into consideration the anticipated 2024 annual bonus, which, topic to Board approval, is now assumed to be round $12.5 million, out of which $11.3 million can be vested and expensed instantly on the grant date. As a reminder, the entire annual bonus quantity and the instantly vested portion are our present finest estimates solely and the precise quantities might fluctuate materially relying on, amongst different issues, our This autumn revenue and the ultimate Board determination for the entire bonus quantity and its vesting scheme. As is the case for earlier years, we anticipate the annual bonus grant in 2024 to result in greater third quarter working bills, in comparison with the opposite quarters of the yr. Compared, the annual bonus for 2023 and 2022 have been $10.4 million and $39.6 million respectively, of which $9.7 million and $18.5 million vested instantly. In offering our Q3 monetary steerage, the Q3 expense associated to worker bonus is estimated to be $14.2 million, comprised of $11.3 million, the instantly vested portion of this yr’s bonus as said above and $2.9 million, the amortized portion of the earlier years’ unvested bonuses. For the sake of completeness, worker bonus expense in every of the final three quarters was additionally round $2.9 million. I might now flip the decision over to Jordan to debate our Q3 outlook. Jordan, the ground is yours.

Jordan Wu: Thanks, Eric. Given the prevailing macroeconomic uncertainty, finish clients stay conservative inflicting panel makers to take a cautious stance and strictly management manufacturing to take care of low stock ranges. That is adversely impacting IC demand, resulting in our conservative third quarter forecast. Throughout the second quarter within the automotive market, automotive makers initially anticipated a gross sales increase as a consequence of promotional actions and authorities subsidies particularly in China. Consequently, we noticed a serious uptick within the second quarter IC gross sales together with the aggressive low cost campaigns of automotive makers. Nevertheless, these intense campaigns didn’t generate the anticipated gross sales progress and will have even triggered shoppers to hesitate in buying new vehicles, resulting in disappointing automotive gross sales in China for the second quarter and leading to extreme inventories all through the provision chain. Consequently, our panel clients have begun to cut back their IC procurement in Q3 to handle stock ranges. Compared, the automotive makers in Europe and the U.S. have remained comparatively secure since final yr, with out experiencing the dramatic fluctuations seen in China. Because the chief of the automotive show ICs, we serve a various vary of manufacturers worldwide, with gross sales evenly distributed throughout all main markets. Nevertheless, since China is the world’s largest automotive market, commanding over 30% of the worldwide gross sales, fluctuations in China do have a considerable influence on our enterprise. Shifting ahead, we’ll navigate the present difficult enterprise setting via shut collaborations with panel makers and Tier 1 suppliers, meticulously managing our wafer begins and intently monitoring buyer calls for. The automotive IC enterprise is Himax’s largest income contributor, accounting for over 47% of our whole revenues in Q2, considerably greater than our friends. Regardless of the latest challenges, we stay optimistic about our automotive IC enterprise and are dedicated to the long-term innovation and growth of our automotive merchandise. The automotive show market stays on stable footing with a optimistic progress trajectory pushed by versatile improvements and expertise developments. Superior and fancier shows are more and more changing into a serious promoting level for automotive makers, driving the automotive show market in direction of a megatrend of increasing portions, sizes, and class. Because the main participant within the automotive IC market, Himax is well-positioned to be the important thing beneficiary of the pattern. We command a 40% world market share in conventional automotive DDIC and maintain a fair bigger share in each the automotive TDDI and native dimming Tcon markets. Along with providing probably the most complete vary of automotive IC merchandise for LCD panels, we’re actively increasing into the automotive OLED panel market, forming strategic partnerships with main TV panel makers in Korea, China and Japan to develop complete options encompassing DDIC, Tcon, and contact controller ICs. This proactive strategy positions us to navigate {industry} shifts and capitalize on the anticipated wide-spread adoption of OLED shows within the high-end autos, additional solidifying our market management. Throughout the quarter, we introduced two substantial strategic investments. First, in an effort to strengthen the long-term partnership with FOCI, we as a strategic investor, acquired a 5.3% fairness stake via personal placement. The partnership integrates Himax’s Wafer Degree Optics, WLO experience and FOCI’s optical fiber know-how to create modern, world-leading Linear-drive Pluggable Optics or LPO and Co-Packaged Optics or CPO options for superior Multi-Chip Modules required for the fast-growing cloud AI and high-speed computing markets. This collaboration not solely highlights the appliance versatility of the WLO expertise and Himax’s market management but in addition underscores the numerous potential of our WLO in advancing LPO/CPO expertise, which is significant for the developments of cloud AI and high-speed computing. Individually, we invested within the U.S.-based Obsidian Sensors, whose revolutionary high-resolution thermal imaging sensors meet the rising demand of thermal imaging throughout varied industries, together with automotive, safety, surveillance, drones, and army. This funding broadens our portfolio of imaging sensors, which, when meshed with our ultralow energy WiseEye AI, allow enhanced sensor fusion prospects for endpoint AI purposes. The Obsidian funding positions us on the forefront of machine imaginative and prescient AI purposes, delivering excessive effectiveness, significantly in harsh environments and in utterly darkish eventualities. As we glance forward, our focus stays on enhancing profitability, strengthening operational resilience, and bettering adaptability to the evolving market. We continues to optimize the our price construction and reinforce our provider diversification methods for foundries in addition to back-end packaging and testing. On the similar time, we stay dedicated to stringent expense management, set to additional cut back working bills in comparison with final yr. For reference, we achieved a 4% year-over-year discount in working bills in 2023. With that, I might now start with an replace on the massive panel driver IC enterprise. In Q3 we anticipate a double-digit sequential income lower for giant show driver ICs, primarily as a consequence of subdued monitor and TV IC gross sales, set to say no double-digit and single digit respectively, following substantial order replenishment in preparation for buying festivals within the earlier quarter. Procurements from our main panel clients have develop into extra conservative as a consequence of sluggish market situations pushed by worse-than-expected buying competition gross sales. Nevertheless, pocket book IC gross sales are poised for an honest enhance, bolstered by strong order replenishment from the our main panel clients. Trying forward within the pocket book sector, we’ve made a strategic effort to place the ourselves to capitalize on the anticipated rising calls for for 2 new market areas, particularly LCD shows outfitted with contact options and OLED shows, each anticipated to take pleasure in first rate penetration in premium pocket book and the upcoming AI PC markets. Leveraging our {industry} management in TDDI options for pill market, we’re working intently with LCD panel clients within the growth of in-cell TDDI and new era Tcon options for LCD shows. Concurrently, we’ve made vital strides in OLED expertise for pocket book in strategic partnerships with main panel producers in Korea and China, growing state-of-the-art contact controllers, DDICs and Tcon options. A number of the initiatives above, together with in-cell TDDI for mainstream LCD notebooks and Tcon and DDIC for OLED notebooks, are slated for mass manufacturing within the second half of this yr with main panel makers. And we’re optimistic that the pocket book phase will act as a powerful progress catalyst for Himax as we strikes into 2025. Turning to the small and medium dimension show driver IC enterprise. We anticipate third quarter income is to say no low-teens sequentially. Impacted by our clients’ destocking measures, particularly for the Chinese language market, as I simply talked about. Automotive income in Q3 is anticipated to lower high-teens sequentially, following high-teens progress of each DDIC and TDDI in Q2. That being stated, via the primary 9 months of the yr, our automotive driver IC gross sales are nonetheless set to develop mid-teens year-over-year, pushed by continued growth of TDDI adoption throughout all main finish clients. We now have secured over 450 TDDI design win initiatives, with solely roughly 30% at the moment in mass manufacturing, indicating vital progress potential going ahead. In the meantime, a pattern is rising the place extra clients are choosing Himax’s TDDI or LTDI, together with our native dimming Tcon, as their customary growth platform for creating new automotive shows of varied sizes. This rising adoption of extra of our automotive IC choices additionally signifies a rise in content material worth for Himax on a per-panel foundation. Himax is widely known because the chief within the automotive show IC market, providing the {industry}’s broadest vary of merchandise, from conventional DDIC and TDDI to superior applied sciences corresponding to native dimming Tcon, LTDI, and OLED. We’re dedicated to repeatedly enhancing our product portfolio to fulfill clients’ numerous and evolving wants. Our newly launched TDDI incorporating native dimming Tcon in a single chip exemplifies this dedication to offering clients with extra choices, as the brand new resolution is right for smaller panels that normally require only one to 2 ICs for price concerns, whereas nonetheless outfitted with superior contact and native dimming options. Turning to smartphone IC gross sales, we anticipate an honest double-digit enhance sequentially, due to new product launches by key clients in the course of the quarter. In distinction to the optimistic outlook in smartphone enterprise, Q3 pill gross sales are projected to say no sequentially, as our finish clients extend their substitute cycles in response to difficult financial situations. Subsequent for an replace on our OLED enterprise. For the automotive OLED market we’ve fashioned strategic alliances with main panel producers in Korea, China and Japan. Leveraging our management in automotive LCD expertise and OLED design experience, these partnerships additional strengthen our presence out there. We provide a complete suite of OLED options for automotive, together with DDIC, Tcon, and on-cell contact controllers, guaranteeing full protection of buyer necessities. Notably, our meticulously engineered OLED on-cell contact controllers set a brand new customary, boasting an industry-leading contact signal-to-noise ratio of over 45 dB, significantly enhancing sensitivity. This enables automotive shows to take care of correct performance beneath difficult situations, corresponding to glove-wearing and moist finger operations. We’re happy to share that our OLED on-cell contact controller for automotive has entered mass manufacturing this quarter. With further initiatives set for mass manufacturing quickly, we anticipate gross sales of our OLED on-cell contact controller to additional bolster our revenues beginning 2025. Past the automotive sector, we’ve made notable advances within the pill and pocket book sectors with prime OLED panel producers in Korea and China. Our complete OLED product choices, encompassing DDIC, Tcon, and contact controllers, have led to a number of new initiatives which can be on observe to enter mass manufacturing later within the yr. Relating to smartphone OLED, the present market drawdown of our clients has prompted us to revise our manufacturing timeline to subsequent yr. Regardless of these challenges, we’re actively collaborating with clients in Korea and China and have a number of verification and partnership initiatives at the moment in progress. I wish to now flip to our Non-Driver IC enterprise replace. First for an replace on our Tcon enterprise, we anticipate a double-digit sequential decline in Q3 Tcon gross sales as clients pulled ahead their stock purchases in the course of the prior quarter, significantly for monitor utility. Nevertheless, our automotive Tcon enterprise is anticipated to realize an honest double-digit progress in Q3, regardless of the present headwinds within the automotive market, fueled by the cargo of latest initiatives from beforehand secured design-wins. Since solely a small portion of the secured design-wins are at the moment in mass manufacturing, we anticipate vital progress potential for our automotive Tcon enterprise within the coming years. Whereas ongoing weak macroeconomic situations proceed to subdued demand in shopper electronics, a few of our newly developed Tcon ICs for OLED tablets and ePaper shows are beginning to present promising outcomes. Within the Pill phase, we rae increasing our product lineup and strengthening our place within the high-value-added OLED market, constructing on our early success within the pill OLED market. For the quickly rising ePaper market, we just lately made a joint announcement with E Ink, the worldwide chief in ePaper market, to unveil T2000, a state-of-the-art, next-generation colour ePaper Tcon. ePaper stands out for its vitality effectivity, consuming energy solely throughout display screen updates. Leveraging Himax’s a long time of experience in picture show processing and Tcon design, the T2000 Tcon accelerates display screen updates for a greater viewing expertise whereas significantly lowering energy consumption of the ePaper show. Moreover, the T2000 options an unique handwriting processing accelerator, enabling seamless, practically lag-free handwriting whereas boosting immediate show responsiveness on ePaper shows with out requiring a SoC. It additionally permits richer and extra vibrant colours, enhancing the show’s visible enchantment throughout a broad spectrum of E Ink’s colour ePaper platforms. The collaboration opens new prospects for colour ePaper purposes in eReaders, ePaper, digital signages, and extra. Switching gears to the WiseEye Ultralow Energy AI Sensing Resolution, a cutting-edge endpoint AI integration that includes industry-leading ultralow energy AI processors, always-on CMOS picture sensors, and superior CNN-based AI algorithm. Within the fast-changing AI panorama, WiseEye AI expertise stands out for its experience in on-device tinyML microcontroller options, characterised by remarkably low energy consumption, working at simply single-digit milliwatts, making it doable so as to add AI functionalities to battery-powered endpoint units. Our WiseEye expertise is creating new alternatives for corporations corresponding to DESMAN, China’s main high-end good door lock vendor, who launched the world’s first good door locks with 24/7 sentry monitoring and real-time occasion recording with the flowery AI options achieved whereas nonetheless sustaining over six months of battery operation. Our collaboration with DESMAN has sparked elevated pursuits from different door lock distributors throughout varied continents to develop modern value-added AI options corresponding to parcel recognition, good anti-pinch safety and biometric entry. Notably, a few of our clients are at the moment evaluating our newly launched WiseEye PalmVein resolution which presents easy, keyless and extremely safe biometric entry for entry management. WiseEye PalmVein is a part of our WiseEye AI module enterprise, integrating Himax WiseEye2 AI processor, AoS CMOS picture sensor, and our proprietary palm vein authentication algorithm. We see rising traction and in depth engineering actions for this contactless biometric authentication resolution that may authenticate a person’s identification in beneath 100 milliseconds whereas consuming just some milliwatts of energy. This represents a big breakthrough in safety expertise by enabling biometric authentication in battery-powered units. With excellent accuracy and strong liveness verify capabilities, palm vein authentication considerably reduces the chance of duplication or spoofing in comparison with typical fingerprint or face recognition, making it a perfect selection for indoor safety, login authentication, and different entry management purposes. WiseEye PalmVein upholds strong safety requirements whereas providing best-in-class energy effectivity, making it the one resolution appropriate for battery-powered units. We’re collaborating with distributors throughout varied sectors globally, together with door lock, entry management, pocket book and automotive. Whereas simply launched at first of the yr, WiseEye PalmVein has already been efficiently adopted by a U.S. buyer for good safety and is about to start mass manufacturing beginning the top of this yr. We imagine WiseEye PalmVein will profoundly influence the safety {industry} and unlock new alternatives for battery-powered units throughout varied use instances. To broaden WiseEye AI’s market attain and shorten buyer growth cycles, we additionally present seamlessly built-in plug-and-play WiseEye Modules and no-code/low-code AI growth platforms, that includes numerous context-aware AI algorithms that clients can reprogram or fine-tune with minimal effort for real-world use instances. Our latest announcement with NVIDIA (NASDAQ:) TAO exemplifies this strategy whereby our WiseEye Module clients concentrating on AI deployment on resource-constrained endpoint units can simply optimize and quantize our deep studying fashions with pretrained enterprise-ready AI fashions and instruments supplied by NVIDIA. This facilitates fast democratization of endpoint AI purposes utilizing cost-effective, production-ready AI modules for varied use instances. Moreover, in response to rising AI-driven demand in direction of machine-vision throughout varied environments, we just lately made a strategic funding in Obsidian Sensors, a San Diego primarily based firm famend for its revolutionary, high-resolution, low-cost thermal sensors, providing unmatched versatility by detecting warmth variations even in full darkness, measuring temperature, and figuring out distant objects. This funding expands our picture sensor portfolio past optical sensors to incorporate thermal sensors, a useful complement to our product suite which is now widened to cowl harsh sensing situations corresponding to heavy fog or full darkness. Furthermore, this strategic funding guarantees synergy of the 2 corporations with our WiseEye AI aggregating information from each optical and thermal imaging sensors for a really holistic view of the setting past human imaginative and prescient. As well as, we’re engaged in ongoing engineering collaborations that leverage Himax’s IC design assets and know-how. We imagine by integrating the energy of Himax and Obsidian, we are able to seize new alternatives within the increasing sensor and AI markets throughout industrial, protection, safety, shopper electronics, and automotive sectors. As an illustration, the U.S. Nationwide Freeway Visitors Security Administration issued a brand new rule in April 2024, mandating that Computerized Emergency Braking or AEB together with Pedestrian AEB or PAEB, be applied beginning in 2029. This regulation goals to considerably cut back rear-end and pedestrian crashes. Related guidelines are more and more being mandated by regulatory authorities worldwide. The novel ADAS and AEB programs, built-in with Obsidian’s thermal sensors, offers clear imaginative and prescient in low-light and adversarial climate situations corresponding to fog, smoke, rain, and snow. This ensures higher driving security and safety, underscoring the pattern and vital potential demand for thermal imaging sensors. Final on WLO. Throughout the second quarter, we made a strategic funding in FOCI, a Taiwan-based world chief for silicon photonics connector, via a $16 million personal placement, leading to a 5.3% fairness stake. This collaboration highlights the immense potential of our WLO expertise for LPO/CPO, that are essential for additional advancing high-speed AI and HPC applied sciences. Our partnership integrates FOCI’s proprietary LPO/CPO connector expertise with Himax’s nano-scale Wafer Degree Optics know-how to create an industry-leading optical transmission resolution catered for probably the most superior multi-chip modules, which demand enhanced bandwidth, improved information fee, minimized sign loss, diminished latency, and decrease vitality consumption, all for accommodating future-generation wants of Generative AI and HPC. Presently, in shut collaboration with world main AI semiconductor gamers and foundry accomplice, we’re working intently with FOCI on LPO/CPO growth for merchandise that meet clients’ near-term manufacturing objectives. LPO/CPO expertise is essential for furthering Generative AI and HPC and can proceed to evolve quickly to fulfill the explosive demand in these areas. We’re dedicated to advancing the expertise with FOCI, guaranteeing our options keep on the innovative and align with the multi-year roadmaps of our AI chip and foundry companions/clients. We imagine this may generate new, long-lasting income streams for Himax. Anticipate additional updates as they develop into out there. As FOCI is an organization listed on the Taipei Trade, the inventory price and ensuing “fair value” mirrored on our books change every day. These fluctuations have been, and can proceed to be acknowledged by means of adjustments in homeowners’ fairness as a steadiness sheet merchandise, not affecting our revenue and loss. As an illustration, primarily based on the shut of FOCI’s inventory price as of the top of June 2024, we made a “gain” of $9.6 million on our $16 million FOCI funding. Nevertheless, the stated “gain” was not recorded as an funding revenue in ourQ2 monetary statements and as a substitute was booked as a rise in homeowners’ fairness. Likewise, upon disposal, the ensuing funding achieve or loss will even be acknowledged as a change of fairness, via retained earnings, thus not affecting our revenue and loss on the time of the disposal both. The accounting technique the we selected displays our long-term dedication to the FOCI funding. With over a decade of expertise in WLO, Himax has developed numerous designs throughout a broad spectrum, together with 3D sensing, AR/VR units, biomedical inspection, and optical communication, simply to call a couple of. These applied sciences have been extensively adopted by a few of the world’s most outstanding tech corporations, with cumulative shipments reaching greater than 600 million items. We anticipate WLO taking part in an much more decisive function within the next-generation optical expertise panorama, due to its versatile, high-precision, light-weight and small type issue traits that aren’t possible with different applied sciences. Along with the progress made in LPO/CPO, we’re seeing a rise in engineering initiatives with globally acknowledged leaders who’re leveraging our WLO experience for his or her upcoming AR/VR units, underscoring the widespread recognition of our expertise. For non-driver IC companies, we anticipate income to say no high-teens sequentially within the third quarter. And that concludes my report for this quarter. Thanks on your curiosity in Himax. We admire you becoming a member of at the moment’s name and at the moment are able to take questions.

Operator: Thanks very a lot, Jordan. [Operator Instructions] The primary one to ask questions Donnie Teng, Nomura. Go forward please.

Donnie Teng: Thanks, Jordan for taking my query. My first query is concerning to the automotive enterprise, so, I believe we’ve began to see some optimistic indicators again in April and I bear in mind we have been fairly optimistic again in June and even coming into into July, the steerage appears to be like wish to be a bit bit upset and also you simply talked about about clients adjusting the inventories shortly. Simply questioning when precisely you’re seeing the form of weak point from the purchasers and in addition as a result of within the mid of July there was the information in China that Chinese language authorities asking EV corporations to verify their localization fee when it comes to the part and IC procurement. So questioning if there’s any problem there whether or not we can be, probably employed by the Chinese language EV makers or it is not the case? Thanks.

Jordan Wu: Thanks, Donnie. You might be proper in that we’re extra centered on the final quarter the place we had spoke that then the price in OLED and I believe the explanation behind is I already defined the intimately in my ready remarks, i.e., the fluctuation in Chinese language market is the metrics are inflicting the distinction in our view. And because it seems our clients received’t be optimistic for the second half look enter into Q2 and so they have been apparently compelled to too many an excessive amount of IC stock. And now they’re going via the destocking course of and in addition we additionally talked about in our ready remarks that the US and European markets are comparatively secure in contrast with China. Now in case you take a look at the Q3 prospect and in addition if we glance additional into This autumn, so the OLED shopper in Q2 and the destocking in Q3 form of explains our technique place in our outlook. Now, the basis query is how it’s going to go going ahead and I believe definitely, for long run, like subsequent yr, we stay nonetheless fairly optimistic in regards to the outlook, which I’ll in all probability cowl in a couple of minutes. Now extra importantly, what’s stays early This autumn and I am going to let you know the reality our inside forecasts which have been the outcomes of collective forecasts coming from varied clients globally together with our parameters in Q1 and Tier 1s. This autumn as of at the moment, the place stays fairly optimistic with really an honest double-digit progress in comparison with Q3. Nevertheless, we really firming down our This autumn – prospects proper now given the very latest I am speaking about final week additionally the worldwide turmoil in monetary markets, which could influence the buyer confidence of their main huge ticket spending corresponding to new prices. So, we’re unsure and we’re given the quick time frame as a result of the most important monetary turmoil throughout the worldwide monetary market actually occurred solely final week. So there is no such thing as a time for us to get suggestions from our clients and I believe there is no such thing as a time for our clients to get with the influence rises from the market. So we’re like taking a with a free perspective, however in impact as of at the moment, our outlook for This autumn are primarily based on our forecast e book remains to be fairly optimistic. And when the sentiment turns, I’ll say in all probability starting of this quarter solely very just lately. However we see regular form of a slight pull again of shoppers for forecast all of week-by-week, barely however steadily and that’s definitely one other a really promising signal. Now, in your concern of China localization the place we’ve seen – we’ve made bulletins and set targets to additional localize their IC provide for China’s automotive sectors. However so far as we’re involved, in our IC which is our automotive IC, which is show ICs. We – I would not say that might not be a menace as a result of any competitors is a menace. However I believe our forefront is now so vital that I can see any influence of Chinese language competitors in phrases or within the foreseeable future and in comparison with shopper electronics, as we’re very conscious of automotive ICs are a lot tougher to interchange and to undergo a a lot lengthier ecosystem and are made alongside the varied requirement excessive bills of fifty and different necessities. So Chinese language organizations definitely doesn’t play any function in our focus of this outlook for Q3 or going ahead into This autumn, i.e. actually subsequent yr if something we imagine our market share particularly for these new applied sciences corresponding to PD/PI, promote any Tcons all really beginning within the subsequent yr. We’re prone to see some ramping – additional ramping. I believe if something we imagine fairly dedicated our market share on automotive or show ICs will additional rise from this yr’s ranges and there’s no purpose for us to imagine subsequent yr’s automotive market will proceed to be very bearish. I imply, I believe it’s too early for us to type a really technique for subsequent yr. However there is no such thing as a utilization of indicators that individuals’s price – spending on vehicles will essentially lower given the truth that the financial system goes via some shuttles however I believe governments authorities and protection of various nations are prone to take measures to encourage consumption and put their GDPs And automotive – head us to be a serious merchandise within the authorities desires to push that instantly. So I believe, once more, I’m not offering a stable outlook for I simply need to say there is not any purpose for us to imagine subsequent yr can be a foul yr for automotive market. I hope that solutions your query.

Donnie Teng: Nice. Thanks, Jordan. And my second query is concerning to CPO. So might you perhaps elaborate extra on what kind of timeline for the CPO merchandise? And when ought to we actually begin to see some extra quantity contributions. And the way assured you’re it’s wish to ramp up this enterprise within the mid to long run? Thanks.

Jordan Wu: Preset timeline, I’m in all probability NBA my accomplice and clients. So I’m sorry I can’t offer you very particular date or timetable, however I can let you know what we’re engaged on proper now the design is focused for mass manufacturing. It isn’t it’s definitely not a RP idea, or an R&D challenge it’s not really nicely processed stage, I imply definitely we see that earlier than – years earlier than. However we’re in course of stage and we at the moment are pushed in direction of mass manufacturing after which that what I can let you know is actually, we anticipate to see some small however very early consequence hopefully by the top of this yr however that’s minimal. However subsequent yr, if every thing goes as deliberate, there can be regular ramping. And the boldness stage mid to long run, I might say could be very assured. I believe everyone knows about this starvation for extra optimistic energy due to generative AI proper? And we’re all of us very conscious of the problems there. The adjustments to additional enhance your bandwidth, your processing energy, the presence and velocity and however there are all form of points together with our energy consumption, warmth dissipation and all that proper? And I might say, CTO is a comparatively low price and comparatively simple, I’m not saying it’s simple by triggered and simple to repair to all this points and in addition price smart, as nicely. As a result of, proper now, in case you analyze the multi-sensor HPC ICs or GPU ICs they’re very huge optimistic energy. However they’re automated proper now is definitely the transmission we see exterior. The transmission of the ICs, the IC can course of with out energy, or information, excessive bandwidth, tremendous excessive bandwidth, very broad than you are feeling it, the bandwidth is increasing or it’s anticipated to increase exponentially over the following few years. Now with benefit and it’s going to – that they anticipate it’s going to be processed. Nevertheless, the actual bottleneck proper now’s their transmission to functionality, their transmission bandwidth which is restricted as a result of now they’re counting on steel wire to do the transmission and everyone knows is there is no such thing as a secret to disclose merchandise you flip into exchange your megawatt with fiber optics and that’s efficient what we try to realize, proper? Now we try to assist to develop. And so in case you can primarily you exchange your steel wire with fiber optics straight away you push your bandwidth by an enormous lep and thereby additionally a serious materials to scale back your energy consumption and simply the thermal wealth will develop into a lot much less. And also you enhance your information accuracy, et cetera, et cetera. So, I might say, all people within the ecosystem could be very eager to creating certain that this occurs ASAP. And quietly – as a result of as I’ve talked about, proper it is a comparatively low-cost and simple repair to their options. So I don’t see any purpose why distribution already adopted throughout the board to cowl as most of the IC as doable. Now I’ve solely speaking about ICs with demand very excessive bandwidth, proper, which demand very excessive bandwidth. And our aim, our function is to constructing on the muse of at the moment to proceed to assist increase the transmission bandwidth proper? And we’ve a roadmap along with companions, our clients to essentially fairly dramatically increasing transmission bandwidth very considerably, I am speaking about my – by a number of instances over the following few years. And a few of these initiatives are already in experimental stage within the earliest experimental stage or extra mature tech it’s been on experimental stage. Though I’m speaking pretty is that the third era of manufacturing will significantly increase the transmission bandwidth of these ICs already with additional options anticipated to be out there. In relatively, quick time span with a number of instances enchancment in our transmission bandwidth. So I believe it is a actually thrilling alternative for us for WLO. I imply, it’s a shock once we realized very long time in the past that our connections be utilized to take all this for this problem however as we dig additional and additional, we understand that is really a really, very good resolution and a really good repair for the information transmission bandwidth problem that’s now confronted by this AI expertise development. Any additional questions from Donnie or others?

Donnie Teng: No, thanks, Jordan. Very useful.

Jordan Wu: Thanks.

Operator: [Operator Instructions]

Jordan Wu: As a remaining observe, Eric Li, our Chief IR/PR Officer will keep this month-to-month actions and proceed to attend investor conferences. We are going to announce the main points as they arrive about. Thanks and have a pleasant day.

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