Textron Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 11, 2023

There are 5 speakers on the call.

Operator

Hello, ladies and gentlemen. Welcome to the Himax Technologies Inc. First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

Operator

As a reminder, this conference call is being recorded. I would now like to hand the conference over to your host, Mr. Mark Schwallenberg from MZ Group.

Speaker 1

Welcome everyone to Himax's Q1 2023 earnings call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer Ms. Jessica Pan, Chief Financial Officer and Mr. Eric Lee, Chief IRPR Officer.

Speaker 1

After the company's prepared comments, we have allocated time for questions and a Q and A session. If you have not yet received a copy of today's results release, please email himxmzgroup.us, access the press release on the financial portals or download a copy from Himax's website at www.hymax.com.tw. Before we begin the formal remarks, I'd like to remind everyone that some of the statements in this conference call, including statements regarding expected Future financial results and industry growth are forward looking statements that involve a number of risks and uncertainties that could cause actual events or risks to differ materially from those described in this conference call. A list of factors can be found in the company's SEC filings, Form 20 F for the year ended December 31, 2022, in the section entitled Risk Factors as may be amended. Except for the company's full year of 2022 financials, which were provided in the company's 20 F and filed with the SEC on April 6, 2023, The financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFRS Accounting.

Speaker 1

Such financial information is generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and external audits by an independent auditor to which we subject our annual consolidated financial statements and may vary from the audited consolidated financial information for the same period. The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. I would now like to turn the call over to Mr. Eric Li. Eric, the floor is yours.

Speaker 2

Thank you, Mark, and thank you, everyone, for joining us. My name is Eric Li, Chief IR PR Office Hi Max. On today's call, I will first review the Himax's consolidated finance performance for the Q1 2023, followed by our Q2 outlook. Jordan will then give an update on the status of our business, after which we will take questions. We will review our financials on both IFRS and the non IFRS basis.

Speaker 2

The non IFRS financials is good share based compensation, acquisition related charges and cash awards. Despite the challenges of ongoing macro headwinds and the seasonal effects, 1st quarter revenues and EPS Both beat our guidance. While gross margin was within the guidance range issued on February 9, 2023. 1st quarter revenue registered to $244,200,000 a decrease of 6.9% sequentially, but marked better than our guidance of a decrease of 12% to 17% sequentially. The better than guided sales were attributable to increased order momentum, particularly in the large display driver IC business and the smartphone and the tablet TDDI segments, as well as our continuous effort to deplete inventory.

Speaker 2

IFRS gross margin came in at 28.1%, a decrease from 30.5% last quarter, but within the guidance range of 28% to 30%. Gross margin was impacted by several factors. First and primarily, we incurred the high cost of our asset inventories that were sourced during a period when foundry and the back end prices peaked. 2nd, we had to write down certain unsold inventories due to market price declines. Finally, there was price erosion, a requisite part of ongoing inventory of loading process.

Speaker 2

Yet, IFRS profit per diluted ADS was 0.085¢, surpassing our guidance of 0.035¢ to 0.07 dollars Non IFRS profit per diluted ADS was 0.115 dollars beating our guidance of $0.65 to 0.10 dollars Revenue from large display driver was $53,000,000 an increase of 21.8 percent sequentially and substantially above our PIE guidance of up high single digit from last quarter. Monitor IND sales grew remarkably as expected, increasing by a decent double digit quarter over quarter. This increased momentum is primarily due to leading customers starting to replenish chips following several quarters of channel inventory reduction. Notebook sales were also better than guided due to demand from chip replenishment. We saw strong sequential growth of TV IC sales stemming from increasing order from customers preparing for upcoming China shopping festivals.

Speaker 2

Large panel driver IC sales accounted for 21.7% of total revenues for this quarter compared to 16.6% last quarter and 26.8% a year ago. Moving on to our small and the medium sized display driver segment. Revenue was 100 and $54,700,000 a decrease of 12.8% sequentially, yet ahead of our guidance due to increasing shipment of smartphone and tablet, especially TDDI products to global leading brands after Lunar New Year holidays. Q1 automotive driver sales decreased mid teens quarter over quarter as guided. Automotive DDIC sales were better than expected due to customers' moderated inventory reduction measures.

Speaker 2

For Automotive TDDI, Despite the widespread adoption of our products in the NEV, sales unexpectedly declined as panel houses cut back their ID purchases, while experiencing sudden order suspension from their EV customers. The underlying cost is exacerbated EV price compensation, which has led major Chinese automakers to drastically cut production and enforce of stringent cost control measures. Yet automotive driver business still represented the largest revenue contributor for us with 30% of total sales in the Q1. We remain Optimistic about our automotive DDIC growth potential in the coming years as we have secured about Around 300 design wins, a number which is still growing as we speak, which puts us significantly ahead of our peers. At this moment, only 1 third All of the acquired design wins have commenced the production, indicating enormous upside potential in the coming years after the remaining design wins enter mass production.

Speaker 2

Small and the media sized driver IC segment accounted for 63 point 3% of total sales for the quarter compared to 67.6% in the previous quarter and 62.6 1st quarter non driver sales also exceeded guidance with revenue of $36,500,000 down 11.8% from a quarter ago. Our TCOM business was up single digit in the Q1, markedly surpassing the guidance of mid teens decline, bolstered by decent shipment of Automotive TCOM as well as better than expected shipment of large size display TCOM Business represented over 9% of our total sales in the Q1. It's worth highlighting that our automotive local dimming TCOM technology was recently awarded Gold Medal Award at Touch Taiwan 2023, another illustration of our leading position in cutting edge technology for Automotive Display. Jordan will elaborate on this level. For Automotive TCOM, Backed by strong order pipeline, we anticipate business momentum to accelerate with rapid expanding design wins across the board.

Speaker 2

Non driver products in Q1 accounted for 15% of total revenues as compared to 15.8% in the previous quarter and 10.6% a year ago. Our IFRS operating expenses for the Q1 were $51,000,000 a decline of 2.9% from the previous quarter and down 1% from a year ago. Amidst the prevailing macroeconomic headwinds, we continued to tighten our expense control. Non IFRS operating expenses were $44,500,000 for the Q1, down 2.5% from the preceding quarter and up 1.1% from a year ago. 1st quarter IFI's operating income was $17,600,000 or 7.2 percent of sales versus 10.5% of sales in the last quarter and 34.5 percent of sales from a year ago.

Speaker 2

Non IFRS operating income was $24,200,000 or 9.9 percent of sales, compared to 13.1% last quarter and 36 $14,900,000 or $0.885 per diluted ADS compared to $42,200,000 or $0.241 per diluted ADS last quarter. 1st quarter non IFRS after tax Profit was $20,100,000 or $0.115 per diluted ADS compared to $47,700,000 or $0.273 in the previous quarter. Turning to the balance sheet. We had $223,800,000 of cash, cash equivalents and other financial assets as of March 31, 2023, compared to $447,100,000 at the same time last year and $229,900,000 a quarter ago. The decrease in cash was a result of cash outflow from investing activities, which was mainly used to make final payment for a major AMOLA capacity agreement for smartphones that we had signed in 2021, offset by $66,400,000 of operating cash inflow in the Q1.

Speaker 2

We had $45,000,000 of long term unsecured loans as of end of 1st quarter, of which $6,000,000 was current portion. The 3 $35,200,000 inventory, Wiresteel higher than $253,100,000 a year ago were monthly lower than 370 $900,000 last quarter. Accounts receivable at the end of March 2023 was $252,200,000 down from $261,100,000 last quarter and down from $442,200,000 a year ago. DSO was 93 days at the quarter end as compared to 96 days a year ago and 79 days last quarter. 1st quarter capital expenditure was $2,800,000 versus $2,300,000 last quarter and $3,600,000 a year ago.

Speaker 2

The Q1 CapEx was mainly for our IC Design business. Just prior to today's call, We announced an annual cash dividend of $0.48 per ADS, totaling approximately $83,700,000 and payable on July 12, 2023. The payout ratio is 35.4%. We have decided on the relatively low payout ratio in light of prevailing macroeconomic uncertainty. We are grateful for the continued support of our shareholders as we continue to execute our business objectives and the strength to deliver sustainable long term growth, while maintaining a healthy balance sheet.

Speaker 2

As of March 31, 2023, Himax has 174,400,000 ADS outstanding, unchanged from last quarter. On a fully diluted basis, total number of ADS outstanding for the Q1 was 174,800,000. Now turning to our Q2 2023 guidance. We expect the 2nd quarter revenue to be in the range of flat to down 9% sequentially. IFRS gross margin is expected to be around 20% to 21%, depending on the final product mix.

Speaker 2

The Q2 IFRS profit attributable to shareholders is estimated to be in the range of minus $0.29 to 0.0.6 per basic ADS. Non IFRS profit attributable to shareholders is expected to be in the range of $0.01 to $0.036 per fully diluted ADS. I will now turn the call over to Jordon to discuss our Q2 outlook. Jordon, the floor is yours.

Speaker 3

Thank you, Eric. Soft consumer consumption coupled with recession fears continue to present challenges to market demand and amplify uncertainties throughout the tech world. The semiconductor industry appears to have come to a consensus to some degree with the expectation that inventory digestion will extend longer than previously projected. In the display market, M Brands remain cautious toward their panel procurement, while panel makers implement stringent upper controls and rigorous Procurement Scrutiny. Amidst ongoing macroeconomic uncertainty, our visibility remains limited as panel customers continue to shorten the duration of their forecast.

Speaker 3

However, our inventory has been reduced to a comfortable level after several quarters of aggressive destocking. While current inventory level is still somewhat above the historical norm, the good news is that the remaining stocks are comprised of IC products, which have a solid customer design base and long expected lifetimes. Moreover, after quarters of write downs, the book costs of the stocks are at least equal to and in many cases much lower than the prevailing market prices. In light of the better than expected inventory offloaded, we stand by our expectation that inventory will revert to historical levels no later than the 3rd or Q4 of this year. In an effort to improve our cost structure for new wafer starts and maintain competitiveness, we have strategically terminated certain high cost foundry capacity agreements recently prior to their expiration dates.

Speaker 3

This, however, has resulted in a significant one time early termination expense incurred in the 2nd quarter and hit our Q2 gross margin. In fact, this is the predominant factor for the 2nd quarter gross margin contraction on top of the price pressure incurred from stock destocking. Termination of the aforementioned capacity agreements is a crucial operational strategy for us. Clarifying, making a short term sacrifice can help us achieve long term gains. Moving forward, for those terminated contracts, our new waiver starts will not be subject to minimum fulfillment requirements and fixed contractual prices set at the time of This also gives us the flexibility to diversify suppliers.

Speaker 3

Given the significant contract termination expense, Q2 will mark the trial of our gross margin with sequential expansion expected throughout the second half of 2023. As an important side note, we have retained necessary capacity to support the growth of our AI motor business, which we believe will be a major growth driver in the coming years as the OLED displays gain traction in a wide range of applications. Next, on to the Q2 sales guidance. Sudden demand drop in automotive business is among the main reason causing the sequential sales decline. As we have talked about previously, automotive has been our largest business contributor for many quarters, accounting for over 30% of total sales, have far greater contribution than our peers.

Speaker 3

The sudden decline in the automotive defense, therefore, has a heavier impact on our total sales. Automotive sales are being adversely impacted by recent on price turbulence in Chinese EV market as we reported earlier. However, we view the current setback as a temporary and short term phenomenon. Our outlook for the automotive business remains positive given the megatrend of increasing quantity and sophistication of displays inside vehicles and backed by our undisputed leading market share as well as new design win pipelines. This is particularly true for for automotive TDDI, where we have already achieved a global market share leadership position.

Speaker 3

Our TDDI sales are already on track to resume rapid growth momentum, and we remain confident and its potential to be a primary driving force for our long term business growth. Last but not least, We remain committed to our strategy of expanding in high value added areas, including TDI and TCOM for automotive, OLED and AI. Hohr's secular trends of growth remains intact, and in some of these areas, we have already achieved a leading market position. This now only warrants much higher content value, but also establishes higher barriers of entry for lead commerce. With that said, we are going through A challenging second quarter in terms of both sales and gross margin, but believe this will be a short term phenomenon with a rebound around the corner starting in the second quarter in the second half.

Speaker 3

Excuse me. I will now begin with an update on the large panel driver IC business. Our Q2 2023 large display driver IC revenue is projected to be down double digits sequentially. We expect TVIC business to decline double digit quarter over quarter as customers have pulled forward demand in preparation for the upcoming seasonal shopping sales, replenishing our chips over the past two quarters. Monitor IC sales in the 2nd quarter are set to decline single digits sequentially following the strong order replenishment we saw last quarter.

Speaker 3

While notebook driver segment is expected to slightly decline. Turning to the small and medium sized display driver IC business. We expect Q2 revenue for this segment to be down single digit sequentially. However, there are indications of business momentum recovery for smartphone and tablet in the Q2, particularly in TDDI products. Both are projected to increase mid teens sequentially, fueled by resumed customer orders following several quarters of Importantly, our inventory depletion for smartphone and hybrid CZD is progressing nicely and improving as we speak.

Speaker 3

As such, we have initiated new overseas for select products, which will enjoy better margins starting Q2. Automotive IC sales are anticipated to be down low teens sequentially, a result of weakening demand in China, which is prompting automotive panel houses to implement cost reduction measures and to recalibrate inventory levels. Having said that, our position as the market share leader in both DDIC and TDDI for Automotive remains intact. Looking at a longer term perspective, while only moderate growth is Anticipated for automotive DDIC, our TDDI business is projected to expand explosively, backed by the fast expanding TDDI adoption for new generation vehicles and our dominating new project design win status. Himax also continues to lead the industry with the launch of its LT DI or large touch and display driver integration, automotive display solution, are specifically designed for the next generation extra large automotive displays, typically 30 inches or larger.

Speaker 3

Our cutting edge LTE DIR technology enables ultra high resolution displays and high precision touch sensitivity, catering to the growing demand for large, seamless and intuitive in car experiences. We are scheduled to start mass production this quarter, which is well ahead of the competition. But currently, we are working on several design collaborations for some of the modish of Automotive Vehicles with Major Panel Makers. As we have repeatedly said before, The trend for automotive interiors continues to evolve towards more stylish and diverse designs such as free form and curvature with ever improving image quality, made possible with panels equipped with Advanced Technologies. Himets is the frontrunner in the automotive display IC market, offering a comprehensive product portfolio covering the entire spectrum of specifications and technologies to address varied design needs, including traditional DDIC, TDDI, double dimming TCOM, LTTI and NetVault.

Speaker 3

We are encouraged by our progress, having expanding design win coverage across panel makers and engaging more TONs and OEMs to incorporate new technologies into their new vehicle models. This implies we not only have been able to reinforce much higher content value on a per panel basis, but we also enjoyed better profit margin. We are confident that the automotive driver business will continue to be our primary sales contributor moving forward. Next for an update on AMOLED. Himax offers both DDIC and TCAN for AMOLED display and has commenced production for tablet and automotive applications jointly with global leading panel makers.

Speaker 3

For automotive air motor display, we continue to see robust design in activities is worth increasing product awards, project awards with both conventional carmakers and Additionally, we continue to gear up for AMOLED driver IC development, strategically partnering with major Korean and Chinese panel makers on various applications covering smartphone, notebook and TV. For smartphone AMOLED display driver, we already have secured meaningful capacity and expect to commence production toward the end of 2023. Our AMOLED business, including display driver and TCAT, is slated for strong growth in the next few years. Now let me share some of the progress we made on the non driver IC businesses. Starting with an update on timing controller, we anticipate Q2 TCON sales to decrease by low teens sequentially, hampered by decreased demand for both large display panels and AMOLED displays for template.

Speaker 3

On a positive note, we continue to solidify our leadership in the automotive TCAM market, particularly in local dimming technology. As Eric mentioned earlier, Himax Automotive Global Gaming TCAN was awarded the Gold Panel Award by Touch Taiwan 2023, another great recognition by the industry after our years of strenuous work on this high entry barrier technology. Let me take a few seconds to elaborate on our award winning double team in TCAN. The adoption of Zohu team in TCON not only dramatically improves contrast ratio of the display, but also provides enhanced power efficiency, both of which are crucial, especially for EV displays. Our industry leading novel dimming TCON offerings support super high frame rate and a wide range of resolutions from Full HD up to 18.

Speaker 3

Additionally, when 2T comes up paired, this solution can even accommodate up to 16 ks resolution. We see rapidly increasing adoption by all leading panel makers, Tier 1s and carmakers, Starting from premium new car models and in some cases, extending to mainstream models, Tremendous progress has been made with numerous project awards already. Similar to that of TDDI for Automotive, only a small number of design awards of Automotive TCON have commenced mass production starting last year. We, Therefore, expect a strong growth trajectory for automotive TCAR starting 2023 and in the coming years. Switching gears to the Wiseye Smart Image Sensing Total Solution, which incorporates Himax proprietary ultra low power AI processor, always on CMOS image sensor and CNN based AI algorithm.

Speaker 3

We continue to support the mass production of Stell's notebook along with other endpoint AI applications such as video conference device, share bike parking, door lock, smart agriculture, among others. We are unwavering in our commitment to WiSign as we look to proliferate our industry leading ultra low power AI solution by fostering innovation in a broad spectrum of endpoint AI applications across the globe. Furthermore, we remain dedicated to bolstering development in the domain of energy efficient AI processors and AI image sensors for endpoint AI applications to maintain our top ranked status in the space. The home surveillance application, such as doorbell, door lock and security camera showcases another successful deployment of ultra low power WiSai technology. YSci offers embedded context aware AI that accurately identifies humans to reduce excessive force triggers, avoiding unnecessary SoC processing and leading to efficient power usage for the surveillance system.

Speaker 3

This facilitates the transition of conventional surveillance systems from wired to battery powered watts, broadening real time adoption. Furthermore, YSight features Ultra Low Power Pre Roll AI to enable always on full color negative time image recorded before a classified event, resulting in a complete video stream and pre roll clips of what happened before the said event. This also illustrates another significant improvement compared to existing surveillance solutions. In March this year at ISC West, a leading security industry trade show, Himax joined forces with various ecosystem partners and customers to unveil a broad array of battery operated home surveillance devices that embed our WiSai technology. The adoption of WiSai in surveillance areas is quickly proliferating and we are seeing more active design activities and broad inquiries after the event.

Speaker 3

Moreover, for the upcoming China Shopping Festivals, Himax is teaming up with a leading door lock vendor in China, specializing in smart home and security, to debut as smart door lock solution with advanced security and low power consumption. This is yet another confirmation of the WiZine technology in the rapidly emerging endpoint, ultra low power image AI era. Now next for an update on our next generation W2 AI Processor, which builds upon our industry leading W1 Processor and performs contextual awareness AI, particularly in detecting user engagement levels based on more subtle Presence or Movement. W2 is designed with advanced computer vision engines that can recognize images over a longer distance at much enhanced accuracy, speed, for efficiency and inferencing performance. Based on its superb AI processing capabilities, W2 can enable more comprehensive and detailed types of Object detection, such as facial landmark, hand landmark and body skeleton, to perceive complex human body movement, enabling high precision AI detection for a wide range of applications and use cases in real life.

Speaker 3

Yes, gained significant traction for next generation smart notebook, targeting to hit the market starting 2024, where we are making solid design progress with leading top brands, leading then top brands as well as CPU and AP SoC partners to jointly work on the enrichment of new AI features of notebooks. The breadth of business activities is also expanding with IoT players specializing in various domains to meet different demands that were previously unknown to us. We are thrilled to be at the forefront of these innovative developments that lie ahead in the near future. Supported by fast expanding customer adoption from various domains, we are committed to the development of the YSai product line, while leveraging broad ecosystem partners to capture the vast endpoint AI opportunities. We believe our YSai product line will be a significant long term growth driver for us.

Speaker 3

Lastly, for an update on our optical related product lines, including WLO, 3 d sensing and LCOS. Himax is one of the few companies in the technology industry with a wide array of optical related product lines that play a vital role in immersive technologies development and realization of the metaverse. Our technology leadership and manufacturing expertise are evidenced by the growing list of ARVR for the company's ongoing engineering projects. We continue to work on strengthening our optical related technology suite while collaborating with global technology leaders in the space. Now to quickly review some of our recent progress.

Speaker 3

First on 3 d sensing, On 3 d chipset control, we are delighted to share that we will commence volume production of our WLO technology to 1 leading North American customer for their next generation VR devices starting Q2 this year. Our WLO technology is deployed to empower VR devices with 3 d perception sensing for precise controller free gesture recognition. Separately, we are expanding our 3 d processor offerings to offer time of flight or TOF 3 d In addition to structured light three d decodings, where we are already a market leader with a proven track record in mass production. This will enable us to meet The diverse use case of 3 d sensing, where ToF is more effective for long range 3 d perception, while structured light excels in high precision 3 d detection for shorter distance. All our 3 d processes are equipped with advanced sensing sensor fusion, offering industry leading FASICS response rates are characteristic that makes our processes a perfect fit for high precision special reality applications.

Speaker 3

Next on LCOS, We are delighted to announce that we will unveil our state of the art color sequential front end LCOS technology at the Display Week 2023 in LA, 1 of the world's most renowned display industry symposiums and trade shows. Our proprietary ALCO design offers unrivaled performance and functionality, featuring a lightweight and compact form factor With a total volume that includes the illumination optics and LCOS panel of around 0.5cc, as well as high revenue financial efficiency, delivering brightness of up to 100 ks needs. These outstanding characteristics make it the perfect micro display solution to meet the stringent specifications of the most advanced AR glasses deployed to the exit pupil expansion waveguides that support greater than 50 degrees We are honored to be invited to give a deep dive presentation of our color sequential front leader across technology to industry at the symposium. Additionally, 1 on 1 meetings with literally all major tech names, ARYIN AR goggles have also been lined up. We will provide updates on our progress for this exciting new technology as they come about.

Speaker 3

We remain steadfast to strengthening our optical related technology suite and 4Giant's strong partnerships with the world's leading technology companies that are deeply committed investing in its development. As the metaverse and immersive technologies continue to develop, We believe that Himax is well positioned to capitalize on its growth with years of research and development, a unique product portfolio, production history and key partnerships. For non driver IC business, we expect revenue to remain flattish sequentially in the Q2. That concludes my report For this quarter, thank you for your interest in Himax. We appreciate you joining today's call, and we are now ready to take questions.

Operator

Thank you. Our first question comes from Jerry Hsu with Credit Suisse. You may proceed.

Speaker 4

Thanks for taking my question. Just want to follow-up on your previous comment about the Q2 guidance, which the gross margins that was impacted by the termination of the wafer contracts. Can you give us an idea of what is the impact on the margin? How much of penalties that you are recognizing in the Q2? That's the first question.

Speaker 4

And secondly, if I look at your large size driver IC outlook, it seems like that you are a little bit different for the industry Because I look at the panel makers or back end or your driver IC peers all are expecting a sequential growth. Can you give us an idea what is the discrepancy between your guidance versus the industry trend? Thank you.

Speaker 3

Thank you, Jerry. On the first question, our last quarter gross margin was about 28%, just above 28%. And for this quarter, we are guiding for 20% to 22%. 20% to 21%, if we take the midpoint, about 28.5%. So there's a differential of about 7%.

Speaker 3

So the impact of from the termination of long term contract, The impact is we said in the prepared remarks the predominant factor. That means far greater than half, Right. That means far greater than half, meaning with the 3% differential, far greater than half Difference actually came from this termination, meaning if without the termination, our margin would have been much closer to that of the previous quarter of 28.2%, I think. Now The remaining difference, I think, come primarily from the fact that our In the Q2, the automotive business was hit by what we described as Certain global turbulence in the especially in the EV market in China, which actually is related to your Second question, right. So because our automotive market exposure is far greater than loans of our peers at 30% to more than 35% historically over the last, I don't know how many quarters, many quarters already.

Speaker 3

So the impact, especially TDDI, which is presumably on the fast track of growth every single quarter. But I mean, we unexpectedly, in Q2, we are now We've seen some sequential decline, which we believe will be a short term surprise, and We emphasized in our prepared remarks that growth will resume Probably strongly in the second half for automotive business, especially for TDDI where we are very, very confident that this temporary setback will be a short term phenomenon. So because the weighting of sales coming from automotive is so high for Himax And there is a short term, how we call, market turbulence in automotive markets. So that is why we are probably harder hit than our peers during the Q2. So I think that covers both part of the first question as well as the second question.

Speaker 3

The difference primarily comes from automotive. We said earlier in our prepared remarks, actually, if you look at our smartphone capabilities, yes, they will be actually growing And the non driver will be flattish to certain small growth, that's not what we expect, and others. So I think automotive is the main difference. But again, I think among all the applications for display, We are happy. We are betting big on automotive because in the long term, I'm talking about next Several years, automotive is still on track to outgrow the rest in our view.

Speaker 3

And so having such high exposure to automotive While it's actually negative news for Q2, I think looking forward, it's going to be very good news, especially given our dominant position in new product design wins covering both CDDi and the local team and TCAMs were I mentioned in my prepared remarks of the 100 also Design Wing projects for TDDI, only about onethree or 300, 300 design wing projects, only about 100, I. E. Onethree is going to mass production with the rest. We're starting to mass production over the next 1 or 2 years, even more so a lot more so for the lower dividend TCOM, which is of very high value and high margin, And it is it has appeared to be becoming a major trend, becoming trendy for automotive makers and panel makers to adopt our local TVTecan, which is Right now, still the only choice in the industry. So starting mass production in 2023, Only small portion, I think we will expect very strong growth of Dolby T Card going forward.

Speaker 3

So again, the difference for Q2 comes to auto, but we are quite positive on auto in the long term.

Speaker 4

All right. Thank you. I think my previous question regarding the revenue trend for this quarter was mainly on loss side driver IC because I think you guided that the loss side driver IC was declined double digit quarter over quarter. When we look at the guidance from the panel makers or your peers, apparently that they are guiding for some sort of growth for LASX Business. So the question was actually more related to this front.

Speaker 4

And then The other one, the automotive, just a follow-up. Can you elaborate a little bit about what is your end customer mix for automotive? Is it more Chinese customers or is Amor global customers? Thank you.

Speaker 3

You mean end customer?

Speaker 4

Do you mean end customer? Yes, end customer, panel end customer, if possible. Thank you.

Speaker 3

Okay. Okay. I will probably give you an overview of the customer base. Now on the first question, I apologize for Ms. FanDuel's question.

Speaker 3

Yes. We guided for some decline for large panel, while you see certain of our peers have for large panel, As far as some of our peers have guided for upside. I think it comes primarily from TV, the difference for TV. I think TV for most of our peers, including Himax, is the largest sector by far in the large display space. Now, yes, we do see recovery for TV market.

Speaker 3

And we have actually enjoyed over the past few quarters steady growth for TV driver. And also another good news is panel price through panel makers various measures has been stabilizing and even going up a little bit going forward. But In this quarter, in particular, we don't get the full benefit because of the difference in customer base. Our customer base, Our TV panels are supplied primarily by Chinese makers, largely by Chinese makers and followed by Taiwanese panel makers. Our customer base are much more exposed in China than in Taiwan, where through for certain reasons, DG9 customers panel allocation Hopefully, it's a short term decision, but has swung from Bigger focus on China to more focus on Taiwan.

Speaker 3

And so it's really our end customers' panel allocation that causes Our probably different direction compared to our peers because we are our exposure is more towards Chinese panel makers, a lot more than Taiwanese panel makers, where the current trend is The short term trend is for the occasion to go to Taiwanese panel makers more. So I think that is the main reason. We are discussing extensively with end customers We have a very direct technical and business relationship with. I think various measures are on the way and including our getting into more exposure to certain Taiwanese And also their longer term strategy towards allocation of money to markets. So hopefully, we'll be on track starting the second half for TV panels As far as your second question is concerned about our customer base for Automotive.

Speaker 3

With our market share, Every single customer, every single panel maker is our customer. And in most cases, we are In many cases, we are actually the predominant supplier. In some other cases, we are number 1 or number 2 suppliers. So I'm talking about every single panel makers. That is the easy question.

Speaker 3

Now with the panel makers that you have Tier 1 makers and ultimately to end user OEMs. We have also very comprehensive global reach. We realize end brand OEMs, First, the number of brands are many and with with the global diversification, right? You have North American brands, Korean brands, Japanese, European, Chinese, etcetera. So we need to Without market share, we need to cover them all.

Speaker 3

So there's no focus, one way or the other, as such for Himax And Detox for Tier 1s, They are European, Korean, Japanese, American and Chinese Tier 1s. There is some crossover. European Tier 1s were in addition to European market, we also cover some Chinese market and so on. Chinese POS will cover some European market and so on and so forth, but there is still this rich global diversification with a lot of global buyers for Tier 1 market. And again, our strategy And we have implemented that quite successfully.

Speaker 3

Our strategy is to cover them all and to try to get a leadership position to the extent possible with as many of them as possible. So we have major engineering support offices Certainly in China, in Japan, in Korea, and we have Engineering support office even in Europe, in the core of Europe and Germany and even in North America, not just in Bay Area, but also in Detroit. And that shows that illustrates our efforts to cover truly to extend our global footprint for automotive market. I hope that answered your question.

Speaker 4

Yes, that's very clear. Thank you.

Speaker 3

Thank you.

Operator

Thank you. And this concludes the Q and A session. I'd now like to turn the call back over to CEO, Mr. Jordan Wu, for any closing remarks.

Speaker 3

As a final note, Eric Li, our Chief IRP Officer, will maintain investor marketing activities and continue to attend investor conferences. We will announce the details as they come about. Thank you and have a nice day.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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