Himax Technologies Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2025

There are 3 speakers on the call.

Operator

Hello, ladies and gentlemen. Welcome to the Himax Technologies Incorporation First Quarter twenty twenty five 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. As a reminder, this conference call is being recorded.

Operator

Now I would like to turn the conference over to Ms. Karen Tao, Head of IR and PR at Himax. Ms. Tao, go ahead, please.

Speaker 1

Welcome, everyone, to Himax first quarter twenty twenty five earnings call. My name is Karen Tao, Head of IRPI at Himax. Joining me today are Jordan Wu, President and Chief Executive Officer Jessica Chen, Chief Financial Officer. After the company's prepared comments, we have allocated time for questions in the Q and A section. If you have not yet received a copy of today's results release, please e mail hxirhimex dot com.

Speaker 1

Tw or himxmzgroup dot us, access the press release on financial portals or download a copy from Himax's website at www.himax.com.tw. Before we begin the formal remarks, I would like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this conference call. A list of the risk factors can be found in the company's SEC filings, Form 20 F for the year ended 12/31/2024, in the section entitled Risk Factors, as may be amended. Except for the company's full year 2024 financials, which were provided in the company's 20 F and filed with the SEC on 04/02/2025. The financial information included in the 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 independent auditors, to which we subject our annual consolidated financial statements and may vary materially on 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. On today's call, I will first review the Hiret's consolidated financial performance for the first quarter of twenty twenty five, followed by our second quarter outlook. Jordan will then give an update on the status of our business, after which we will take questions. You can submit your questions online through the webcast or by phone.

Speaker 1

We will review our financial on an IFRS basis. Despite the cyclical seasonal slowdown due to Lunar New Year holidays, we are pleased to announce that our Q1 revenue was at the high end of projected range issued on 02/13/2025. Gross margin remained in line with the guidance, while profit exceeded the guidance range. First quarter revenue registered 2 and $15,100,000 a decrease of 9.3% sequentially, reaching the high end of our guidance range of a decline of 8.5 to 12.5%, but representing a 3.7% increase year over year. Gross margin was 30.5%, in line with our guidance of around 30.5%, flat from last quarter and up from 29.3% in the same period last year.

Speaker 1

The year over year increase was driven by a favorable product mix and continued cost optimization. Q1 profit per diluted ADS was $0.01 $14 exceeding the guidance range of $09 to $0.01 $10 primarily due to lower operating expenses. Revenue from large display drivers came in at $25,000,000 flat from last quarter despite a seasonal downturn. This was primarily driven by demand spread by Chinese government subsidies and at the reviving domestic consumption. Noble and monitor IC sales recorded solid double digit growth in Q1.

Speaker 1

In contrast, TV IC sales declined as expected due to customers pulling forward their inventory purchases in the prior quarter. Sales of large panel driver IC accounted for 11.6% of total revenues for the quarter compared to 10.5% last quarter and 50.1 a year ago. Revenue from the small and medium sized display driver segment totaled $150,500,000 reflecting a sequential decline of 9.8% amid the typical low season. However, Q1 automotive driver sales, including both traditional DDIC and TDDI, outperformed our guidance of low teens sequential decline, declining just a single digit from the last quarter. The sequential decline reflected the widening effect of the Chinese government renewed the trade stimulus announced in mid August twenty twenty four, while demand in other major markets remained stable.

Speaker 1

Q1 auto IC sales rose nearly 20% year over year, reflecting ongoing customer reliance on our technology and the strength of our competitive moat. Our automotive business comprising DDIC, TDDI, T Con and OLED IC sales remained the largest revenue contributor in the first quarter, representing more than 15% of total sales. Meanwhile, both smartphone and tablet driver sales declined as expected amid a subdued festival season. The small and medium sized driver IC segment accounted for 17% of total sales for the quarter compared to 7.3% in the previous quarter and 69.5% a year ago. Q1 non driver sales reached $39,600,000 a 12.8% decrease from the previous quarter.

Speaker 1

The sequential decline was primarily attributable to the absence of a one time SSD consumer to a leading projector customer in the prior quarter, coupled with the moderation in automotive T consumer after several quarters of robust year's growth. That being said, our position in the low density convenient arrival supported by increasing validation and adoption for lead panel makers, Tier one suppliers and automotive manufacturers around the world. We also have a robust pipeline of over 200 design win projects that are set to gradually enter next production in the coming years. Non driver products accounted for 18.4% of total revenues as compared to 19.2% in the previous quarter and 15.4% a year ago. First quarter operating expenses were $45,700,000 a decrease of 7% from the previous quarter and a decline of 9.8% from a year ago.

Speaker 1

Amid the ongoing macroeconomic challenges, we are strictly enforcing budget and expense controls. First quarter operating income was $19,800,000 or 9.2% of sales compared to 9.7% of sales last quarter and 4.8% of sales for the same period last year. The sequential decrease was mainly a result of lower sales, offset by lower operating expenses. The year over year increase resulted primarily on higher sales, improved gross margin and lower operating expenses. First quarter FX profit was $20,000,000 or $0.01 $14 per diluted ADS compared to $24,600,000 or $0.40 per diluted ADS last quarter and up from $12,500,000 or $0.71 in the same period last year.

Speaker 1

Turning to our balance sheet. We had $281,000,000 of cash, cash equivalent and other financial assets as of 03/31/2025. This compares to $277,400,000 at the same time last year and $224,600,000 a year ago. We achieved a strong positive operating cash flow of $56,000,000 for the first quarter. As of 03/31/2025, we had $33,000,000 in long term unsecured loans with $6,000,000 being the current position.

Speaker 1

Our quarter end inventory as of 03/31/2025 were 129,900,000 lower than $158,700,000 last quarter and $201,900,000 same period last year. Our inventory level has steadily declined for ten consecutive quarters since peaking during the COVID-nineteen pandemic when industry was undergoing a supply shortage. As macroeconomic uncertainty impairs the visibility across the ecosystem, we will continue to manage our inventory conservatively. Accounts receivable at the March 2025 was $217,500,000 down from $236,800,000 last quarter, but slightly up from $212,300,000 a year ago. DSO was twenty nine days at quarter end as compared to ninety six days last quarter and twenty three days a year ago.

Speaker 1

First quarter capital expenditure was 5,200,000 versus $3,200,000 last quarter and $2,700,000 a year ago. First quarter's CapEx was mainly for R and D related equipment for our IC design business and ongoing construction of new preschool near our China headquarter for children of employees. The preschool is scheduled to open in 2026, reinforcing our commitment to a family friendly workplace. Prior to today's call, we announced an annual cash dividend of $0.03 $70 per ADS, totaling $64,500,000 and payable on 07/11/2025, with a payable ratio of 81.1% of the previous year's profits. Himax will continue to focus on maintaining a healthy balance sheet while driving sustainable long term growth to deliver value for our shareholders through high dividends and share repurchases.

Speaker 1

As of 03/31/2025, Hynix had 170,900,000.0 ADS outstanding. On challenging from last quarter, on a fully diluted basis, the total number of ADS outstanding for the first quarter was 175,100,000.0. Now turning to the second quarter twenty twenty five guidance. We expect second quarter revenues to decrease 5% to increase 3% sequentially. Gross margin is expected to be around 31% depending on the product mix.

Speaker 1

The second quarter profit attributable to shareholders is estimated to be in the range of $0.85 to $0.01 $15 per fully diluted ADS. I will now turn the call over to Jordan to discuss our Q2 twenty twenty five outlook. Jordan, the floor is yours.

Speaker 2

Thank you, Karen. To start off, I'd like to quickly comment on the recent abrupt and significant anti dollar appreciation against the U. S. Dollar. Its impact on our Q2 financial results is limited as has been accounted for in the financial guidance for the quarter.

Speaker 2

All of Himax's revenues and nearly all of our cost of sales are U. S. Dollar denominated, providing the natural hedge for buying and selling activities. In addition, the bulk of our R and D expenses, save for employee salaries are also U. S.

Speaker 2

Dollar based. For employee compensation, the major item of our operating expenses, while our employees are paid in the low currency of their location for their salaries, their bonuses are all U. S. Dollar based. Other major non U.

Speaker 2

S. Dollar expenses, mostly anti dollar denominated, include utilities and income tax expenses. While we don't hedge for currency risk upon our U. S. Dollar based operating expenses as the cost of such hedging would usually outweigh the benefit, we do purchase NT dollar in advance to cover the income tax payable, thereby minimizing the currency risk of a major expense item.

Speaker 2

Now I would like to comment on the recently announced U. S. Tariff measures, which have intensified global trade tensions, triggered volatility in capital markets and heightened macroeconomic and market demand uncertainty. Currently, tariffs have not had a significant direct impact on Himax's business as our IP products are not directly exported to The U. S.

Speaker 2

Instead, they are assembled into panels or modules by customers outside The United States and they sell into global market, including The United States. Just a negligible portion, about 2% of Himax's products are shipped directly to The United States. Only customers for these products are subject to U. S. Tariffs.

Speaker 2

Almost all of these products are manufactured in Taiwan. Some customers have requested early shipments to avoid tariff duties, many others have opted to deter their orders amid ongoing tariff related uncertainties. Our conservative Q2 revenue guidance reflects the highly cautious stance of our customers in general towards the global economic outlook and end market demand amid ongoing tariff development. Looking to the second half of the year, overall market visibility remains low with the world continuing to closely monitor the development of tariff negotiations. As the tariff driven supply chain restructuring gains momentum, Himax is deepening its way to supply chain in Taiwan, while further strengthening its supply chain presence in China, Korea, Singapore and other regions to ensure production flexibility and cost competitiveness and to better mitigate geopolitical risks.

Speaker 2

Amid the volatile macro environment, most panel customers have adopted a make to order model and are keeping inventories lean. In response, we are carefully monitoring wafer starts, maintaining low inventory levels and rigorously controlling operating expenses. Currently, we are further optimizing costs by diversifying both foundry and back end packaging and testing, while mitigating risks and enhancing manufacturing flexibility. This approach is exemplified by the major milestone recently achieved in automotive display IC collaboration with NextShip in China, with products now in mass production and adopted by leading automakers. This not only validates our diversified supply chain strategy, but also underscores our steadfast commitment to scaling capacity and cost optimization.

Speaker 2

Turning to the automotive market. Automotive IT business currently accounts for a hedge of Himax's revenue. Having served the automotive display market for almost two decades, Himax has maintained a balanced global market share across major regions, while demonstrating technological leadership and offering the industry's most comprehensive suite of panel ICs spanning LCD to OLED. Combined with over a decade of loyal relationship with global Tier one suppliers and automotive brands, These trends help mitigate potential risk from tariffs and reinforce the long term stability of our automotive business. In addition, Himax remains committed to a number of innovative fields, namely ultra low power AI, AR glasses and co packaged optics or CPO.

Speaker 2

Technologies in these areas are approaching maturity and offer substantial growth potential. As a pioneer and leader in key technologies enabling these novel areas, Himax is working closely with supply chain partners from technology development through two mass production to actively expand new business opportunities. These innovative fields are relatively less affected by macroeconomic fluctuations and customer development efforts have not slowed due to tariff uncertainties. We expect these businesses to contribute meaningfully to both revenue and gross margin in the years ahead. Despite the volatile geopolitical environment, Himax continues to actively explore high growth markets, establish close partnerships with industry leading companies and continue to expand our global footprint while developing long term competitive advantages.

Speaker 2

In our latest cross border cooperation, we established a three party strategic alliance with PowerChips and Tata Electronics, a subsidiary of Tata Group, India's largest and most influential conglomerate. This collaboration combines Tata Electronics' deep manufacturing and lower supply chain integration strengths, power chips, mature wafer manufacturing capabilities and Himax's leading display IC and wide side ultra low power AI sensing technologies to jointly create a powerful ecosystem. The collaboration echoes the Make in India strategy of the Indian government for high-tech areas while exploring the huge potential demand of the Indian market. With that, I will now begin with an update on the large panel driver IC business. In Q2, large display driver IC sales are expected to decline by a single digit sequentially, driven by customers pull forward orders placed in prior quarters against the backdrop of Chinese government subsidies boosting domestic consumption.

Speaker 2

Monitor and notebook IT sales are expected to decrease in Q2, whereas our TV ID sales are set to increase sequentially, driven by higher shipments to key end customers. Looking ahead, in the notebook sector, we are observing a growing trend for premium notebooks to adopt OLED displays and advanced touch features, partially fueled by the rise of the IPC. Himax is well positioned to capitalize on this trend, offering a comprehensive range of ICs for both LCD and OLED notebooks, including DDIC, TCAR touch controllers and TDDI. In addition, we are expanding our high speed interface product portfolio to support faster data transfer rates, lower latency and improved power efficiency, features that are critical for next generation displays. We have made progress over next generation EDP 1.5 display interface for T Con for both LCD and OLED panels.

Speaker 2

This high speed interface supports high frame rates, low power consumption, adaptive sync and high resolution. Key features essential for next generation IPCs Through ongoing portfolio expansion and continued technology innovation, Himax is well positioned to lead in the rapidly evolving landscape of AIPCs and premium networks. Turning to the small and medium sized display IC business. In Q2, small and medium sized display driver IC business is expected to decline single digit from last quarter. We expect Q2 automotive driver IC sales, including both TDDI and traditional DDIC to decline mid teens sequentially, reflecting the combined impact of tariffs and the waning effect of China's automotive subsidy program.

Speaker 2

Despite these near term headwinds, automotive TDDI adoption continues to expand across the globe, driven by growing demand for more intuitive, interactive and cost effective touch panel features essential in modern vehicles. Himax's cumulative shipments of automotive TDDI has outpaced competitors with nearly five year design in projects secured to date, majority of which have yet to enter mass production. On top of a continuous influx of new pipelines and design wins across the board, we are well positioned for continued growth, further reinforcing our leadership in this space. For automotive DDIC, we continue to see solid shipments for automotive DDIC for non touch applications, including cluster displays, SUVs, AMEA, and and side view mirrors. Our competency is further strengthened by the growing proliferation of advanced technologies such as LCD, LTE, or large touch and display driver integration in large display car models.

Speaker 2

Himax is a pioneer in LTE DI technology, which supports seamless integrated large touch display panels, typically larger than 30 inches or spanning pillar to pillar across the entire width of the cost fit. The OTDR also features high density touch functionality for responsive performance, making it ideal for next generation smart cabinet designs that emphasize large displays and intuitive touch interaction. Additionally, we have seen an increasing number of customers choosing to adopt our integrated Tilti DI and T Card solution as the standard platform for their ultra large automotive display development. Such panels typically require four or more LCD and chips and at least one over dimming TCOM panel. This growing platform adoption of more high axis automotive IC offerings not only reflects strong customer loyalty to our technologies, but also signifies an increase in content value for us on a per panel basis.

Speaker 2

Multiple projects with global leading car brands are set to begin mass production starting the end of twenty twenty five. Himax continues to lead the global automotive display market, holding a 40% share in DDIC, over 50% in TDDI and even and an even higher share in cutting edge, low beam, TCOM technologies. Moving to smartphone and tablet IP sales, we expect Q2 smartphone IP revenues to decline mid teens from last quarter, while tablet IP sales are poised to grow by high teens sequentially, driven by renewed demand from leading customers following several quiet quarters. Next, for an update on our OLED business. In the automotive OLED market, we have forced strategic alliances with leading panel makers in Korea, China and Japan.

Speaker 2

As OLED technology expands beyond premium car models, Himax is well positioned to become the partner of choice and accelerate OLED adoption in vehicles by capitalizing on our strong presence and proven track record in automotive LCD displays. Leveraging our first mover advantage, we offer a comprehensive suite of solutions, including DDIC, T Con and on sale touch controllers. It's worth noting that our advanced OLED on sale touch control technology boasts an industry leading signal to noise ratio exceeding 45 dB, delivering reliable performance even under challenging operational conditions such as glove wearing or wet finger. The solution entered mass production in 2024 and an increasing number of leading global brands are rapidly adopting it for their premium car models. We expect to be a key beneficiary of the shift to OLED displays for the automotive industry over the next few years, unlocking the new growth driver for us that further reinforces our market leadership.

Speaker 2

In addition, we have expanded our comprehensive OLED portfolio into the tablet and notebook markets covering DDIC, T Con and touch controllers through partnerships with leading OLED panel makers in Korea and China. Several new projects are slated to enter mass production with top tier brands later this year. Meanwhile, we are developing value added features such as active sliders and gaming models to further enhance our product differentiation and competitive edge. In the smartphone OLED market, we are making solid progress in our collaborations with customers in Korea and China and expect mass production to start later this year. I would like to now turn to our non driver IC business update, where we expect the second quarter revenue to increase low teens sequentially.

Speaker 2

First, for an update on our TCAM business. We anticipate Q2 TCAM sales to increase high teens sequentially, primarily due to increased shipment of TCAM for notebook and automotive products. Automotive T Card sales are set to increase by double digits in Q2, fueled by a strong pipeline of over 200 design win projects gradually entering mass production. With a steady influx of new projects coupled with growing validation and widespread adoption of our global teaming T Con in both premium and mainstream car models worldwide. Himax continues to maintain an unchallenged leadership position with a dominant market share.

Speaker 2

In the second quarter, we expect T CAR business to account for over 12% of total sales with notable contributions from automotive T CAR. Meanwhile, head up display or SUV is emerging as a major growth area within automotive displays where normal dimming T Con adoption is accelerated. Our industry leading low dimming T Con eliminates the post car effect often seen in SUVs caused by backlight leakage typical of conventional TLCD panels, delivering crisp high fidelity images on the windshield. Additionally, efficient advanced transparency detection to prevent the display from obstructing the driver's view, thereby ensuring driver safety. With several SUV projects already underway and increasing inquiries, we are excited about the potential opportunity ahead.

Speaker 2

Our automotive TIGAR business is well positioned for growth over the next few years. Switching gears to the WiseEye ultra low power AI sensing solution, a cutting edge endpoint AI integration featuring industry leading ultra low power AI processor, always on CMOS image sensor and CNN based AI algorithm. In the rapidly evolving AI landscape, Wi Fi AI technology stands out for expertise in off device categorized by remarkably low power consumption operating at just single digit maybe once and enabling AI functionality in battery powered endpoint devices. Additionally, Wi Fi AI significantly extends battery life and improves overall data processing efficiency by offloading tasks from the main processor. These attributes unlock new opportunities across a wide range of everyday battery powered endpoint applications evidenced by production of Wi Fi AI across diverse applications, including notebooks, tablet, smart door lock, surveillance system, access control, smart retail and many others.

Speaker 2

On notebook, building on the success of their notebooks, Wi Fi AI is expanding into additional use cases across other leading notebook brands with some entering production later this year and expanding further into 2026. The current assumption is further fueled by the rise of AIPC as Wi Fi's ultra low power off device inference capabilities align seamlessly with the industry's shift towards more intelligent, context aware and energy efficient computing. WiSight's advanced local inferencing technology enables real time, high precision user engagement detection by analyzing presence and motion, supporting a broad set of intelligent features such as tech pose estimation, gaze tracking, facial expression recognition, voice command, adaptive screen dimming, secure identity authentication and many others. These features enhance interactivity and user comfort without compromising battery life or system performance, making it fit for the demands of high performance and energy efficient naturalization AI PCs. WiSAi also continues to achieve significant market success across various sectors such as smart door lock, where we introduced the world's first smart door lock with 20 fourseven Century monitoring and real time event recording.

Speaker 2

We are now expanding globally by collaborating with a number of leading door lock makers worldwide to integrate a suite of innovative AI features, including PowerMED biometric access, parcel recognition and NI pinch protection. Several of these value added solutions are slated for mass production later this year. Wi Fi also powers smart retail exemplified by our collaboration with E Ink of eSignage. It's always on AI detects viewers attributes such as gender, appearance and age, followed by real time personalized ads and nearby product recommendations, creating immersive engagement that elevates the in store shopping experience. Next, for an update on our WiFi module business.

Speaker 2

Equipped with pre trained, no code or low code AI, our WiFi modules simplify AI integration and support diverse use cases, including human presence detection, gender and edge recognition, gesture recognition, face mesh, voice commands, thermal image sensing, power and authentication and people flow management. Among them, the Himax power band module has generated strong engagement across several industries. Multiple design wins have been secured with mass production underway by global customers for smart access, workforce management and smart door lock as we continue to explore additional application opportunities. Meanwhile, to meet growing demand for flexible access control in various settings, the upgraded Wi Fi apartment suite now combines Powerband recognition and facial recognition with peephole camera input underpinned by an advanced lightness check for high precision multi modal authentication. This upgraded Power WAN module not only enhances security by offering multiple layers of biometric verification, but also ensures adaptability across a range a wide range of environments.

Speaker 2

These attributes make it particularly appealing to global brands looking to differentiate their products with enhanced security, greater use convenience and flexible customization. We anticipate increasing sales contribution from Widesight, Powertrain across a diverse array of applications starting next year and are excited about its long term growth potential. Looking ahead, Widesight is poised to scale rapidly across the broader AIoT market and emerge as a key growth driver for Himax in the years ahead. Separately, we are bringing intelligent ultra low power always on AI sensing to AI glasses. Powered by real time context aware AI running at single digit milliwatt, WiSAi uniquely delivers the two essentials for AI devices, instant responsiveness and all day battery life.

Speaker 2

These advantages have already led to Wi Fi AI being adopted by a leading AI glasses platform with ongoing engineering engagements involving several other prominent global AI or AR techniques for the upcoming AI glasses. Our Wi Fi supports always on auto sensing, enabling AR glasses to detect and analyze the surrounding environment in real time. This empowers instant response and key functionality such as object recognition, navigation assistance, translation and environmental mapping, greatly enhancing the overall AR experience. Website also enables precise indoor sensing, detecting subtle eye movements, gaze direction, pupil size and blinking, providing critical data for more intuitive and natural user interactions in their applications. Next for an update on WLO.

Speaker 2

As you may recall, in June 2024, Himax in partnership with 4Sea, the world leader in silicon photonics connectors unveiled a state of the art silicon photonics packaging technology, a critical technology to enable co packaged optics or CPO technology. This innovation of CPO integrates silicon photonic chips and optical connectors within mother chip modules, replacing traditional metal wire transmission with high speed optical communication. The technology significantly enhances bandwidth, boosts data transmission rates, reduces signal loss and latency, lowers power consumption and significantly minimizes the size and cost of SCM. Currently, several shipments of our third generation silicon photonics packaging solution for engineering validation and trial production are proceeding as planned, with volumes set to increase in the coming quarters. In addition, Himax continues to advance its technology roadmap in close collaboration with Fosy, top tier AI companies and foundry partner through the joint development of future generation CPU solutions to meet the escalating bandwidth requirements driven by AI and HPC applications.

Speaker 2

We are pleased to see our partner, ForeSee, achieving significant advancements in silicon photonics packaging with notable improvements in automated production and testing. Together, we are actively progressing in process validation and yield optimization to enable full scale production for leading AI customers. Himax is exceptionally positioned to capitalize on future growth opportunities in high performance computing, AI inference and data center markets. Alongside the CPO progress, certain global technology leaders are now engaging our WLO expertise to develop next generation waveguides for AR glasses, a testament to the market's growing confidence in Himax WLO technology. With strong growth opportunities from CPO and their glasses in the making, we are as optimistic as ever that our WLO business can emerge as a significant revenue and profit engine for us in the years ahead.

Speaker 2

Moving on to our latest advancement in the EIOCO's microdisplay technology. At Display Week twenty twenty five next week in San Jose, we will debut our ultra luminous miniature dual edge from the Lyricos microdisplay. This industry leading solution integrates both the illumination optics and Lyricos panel into an exceptionally compact form factor as small as 0.09cc and weighing only while targeting up to 350,000 nits brightness and wide lumen output at just two fifty milliwatt maximum total power consumption, demonstrating arterial optical emissions. The luminous breakthrough ensures excellent high level visibility even in bright ambient conditions, while its compact form factor enables the development of sleek everyday eyeglasses. With industry leading compact form factor superior brightness and power efficiency.

Speaker 2

It is ideally suited for next generation AR glasses and high mounted displays, workspace, weight, thermal constraints are critical. Great collaborations with leading global tech companies are underway. We are confident that our technological advancements would help revitalize the air glasses market, drive its expansion and unlock new opportunities for immersive visual experiences. That concludes my report for this quarter. Thank you for your interest in Timex.

Speaker 2

We appreciate you joining today's call and are now ready to take questions.

Operator

Thank you, President Wu. And ladies and gentlemen, we are now in question and answer session. Please press star key and number one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, you may press star two to cancel the the question.

Operator

Thank you. And in addition to submitting questions via phone, you may also submit questions through the webcast where the checkbox is available on the right hand side of the screen. Thank you. Now please press star key and number one on your keypad if you would like to ask a question, or you may submit your questions through the webcast system. Thank you.

Operator

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

Speaker 2

We do have a couple of questions from the online. The first question is, could you explain the validation process for CPO? The validation process is now being conducted by our leading our BINFORCE and ourselves, our leading customer and our foundry partner. And it is a work in progress at the moment. And the process involves primarily the validation of our current generation of products as well as the newly developed equipment, including manufacturing, assembly and testing equipments involved for the production of the product.

Speaker 2

And the equipment also includes the manufacturing equipment for the FAU as well as the equipment for the funding of FAU together with the cohorts. So it's going to be a challenge because not just the products, but also the extraction process are brand new. And it's primarily in house development on the side of Himax as well as 4Seed. However, we believe the process is going well, and we have good confidence of the successful validation of the of our technology. I don't want to comment exactly when, although certainly there's a timetable I can all I can say is not very distant in the future.

Speaker 2

And once the validation process is concluded, then Fosse, in particular, will embark on immediate expansion of their capacity, which will not take a long time. And that's how we will get ourselves ready for the mass production schedule for next year. And in our prepared remarks, we mentioned that the sample shipments from Himax to Fosse is slated to increase quarter by quarter this year. And by Q4, it will reach in the amount of millions of dollars for Himax. And these sample shipments are actually exactly for the purpose of such validation.

Speaker 2

So once the validation is done, and we will certainly start the next phase, which is trial production, try to make sure nothing is going to go wrong and also for yearly improvement and optimization. So that's my answer to the first question. There's another question. Do you have a guidance for 2025? How do we see the demand into second half?

Speaker 2

As you know, we since our IPO, we never provided full year guidance. And we do comment on the trend we are seeing, but we never really like the immediate quarter guidance, we never provide that. So we are certainly not doing that at this moment, especially when the macro uncertainty is so high. And what I would, however, again, make a certain qualitative comment on the visibility of the second half. And in short, this year is of particularly low visibility as we all know, especially with tariff uncertainties.

Speaker 2

And another thing is we are seeing our customers are indeed, especially for the auto demand in China, and you'll appreciate auto accounts for now about half our total sales. In China, after quite a few rounds of government stimulus programs, our customers are worried that further new government program targeted to stimulus double digit consumption may not be as effective as before because consumers have been through quite a few of such things. And now, I mean, everybody is aware of the global uncertainty in macroeconomy. So that is a major that is a concern area for customers and that is reflected in our Q2 rather conservative guidance because our customers are saying, see, for the tariff, how the tariff negotiation is going to unfold, nobody knows. And then another thing is, sure, Chinese government is in no likelihood is going to launch new programs to boost the local economy.

Speaker 2

However, whether that program will be as effective, like the one program that was launched exactly about a year ago, that was quite effective. Whether this year's program will be as effective is a major unknown. We start so we were actually able to grow our automotive business by 20% last year, which was quite good considering the global auto sales was only about flat at best. But it is actually harder to predict how overall sales will grow this year, although in terms of the our target is still to at least enjoy achieve some growth this year. And for us to achieve the growth, I think we are fairly confident in achieving growth in new technology areas, I.

Speaker 2

E, TDDI, TCOM and LPDI, because our pioneering position and the strong design win pipelines in these areas. And I would just point out again that our market share in these new technology areas are always are all way above 50% globally. And we are still seeing aggressive adoption of such new technology. So in this area, we are fairly committed. However, depending on the global automotive shipment, the overall automotive shipment, we may see some decline in the traditional DDIC area as it will continue to be partially replaced by TDDI.

Speaker 2

However, I would also like to point out the traditional DDIC will never be totally replaced by TDDI as we witnessed in the smartphone market because sometimes the automotive display such as dashboard, side mirror, rear mirror and SUV will never need touch functionality. So as a reminder, we also enjoy about 40% gold market share and be the leader in the traditional DTIC market. Would you comment on the Obsidian investment? That's another question. Obsidian investment Obsidian is a Sydney, Australia based company, specular as in a very unique proprietary thermal imaging sensing technology.

Speaker 2

And we love the company because we our technology is a perfect fit because in their very unique and proprietary design, their thermal sensor needs our CMOS image sensor inside. And our optical solution can also be very effective to improve their optical design. And in addition, our actual PowerAI is a perfect fit for their thermal image sensing solution because the benefit of thermal image compared to visual imaging, such as our CMOS image sensor, it's quite clear. Thermal imaging has a major benefit of keeping privacy concern away and also it works well in total darkness in the evening, right? And that is certainly those are the weaknesses of CMOS image sensor or RGB sensor.

Speaker 2

So we love the investment because one, Obsidian, the thermal imaging is a very good supplement to our RGB sensor image. And also, there are key components actually. It's something we can supply, provide very good support for that. And also, our wide side special technology ultra low power is a perfect fit. Thermal imaging together ultra low power AI can create very good, very convincing applications for our joint customers.

Speaker 2

So we are together working on new generation of design, and we are proactively promoting the technology together, whether it will for trade shows or customer visits. And we believe Obsidian's thermal image, when it's successful, and hopefully, we are seeing next year, hopefully, we'll start to see meaningful volume. It's a very unique proprietary technology to offer thermal imaging together with AI with reasonable cost, reasonable low cost, while offering reasonable resolution and point of their strength is very, very uniquely low signal, low noise. So their application can be universal. We are seeing many, many application areas, especially in those areas, as I mentioned, where privacy is a major concern or in the evening, you need to continue to detect objects.

Speaker 2

So we are quite excited about this, and so we are going to work very closely. And what else? We see meaningful revenue contribution from CPO related products. We mentioned in the last earnings call, this year will only be simple contribution. So they are meaningful, but they are still negligible compared to our total sales.

Speaker 2

We also indicated next year, year 2026, will be the first year of mass production. And but we don't know and we are not going to comment exactly when. So I would say by the time it starts official mass production, the contribution will be meaningful. But so hopefully, that will be software next year. Exactly for next year, again, we are not prepared to comment at this moment.

Speaker 2

I think that's some questions are rather repetitive from the ones I just mentioned. The key bottleneck for the CPO project right now, again, we need to get the product and the process validated. And I think that's a key bottleneck. And certainly, our customers will have their own technical challenges to deal with. But again, I think it is everybody's objective that we are going to produce to mass production next year.

Speaker 2

And I think we are all quite confident and excited about this joint objective. I think that's about it for all the questions we received so far. Okay. Also as a final note, Karen Jiao, our Head of IRPR, will maintain investor marketing activities and continue to attend investor conferences. We'll announce the details as they come about.

Speaker 2

Thank you, and have a nice day.

Operator

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

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Key Takeaways

  • Q1 revenue was $215.1 million, down 9.3% sequentially but up 3.7% YoY, with gross margin at 30.5% and profit per ADS of $0.014 exceeding guidance.
  • Automotive IC sales grew nearly 20% YoY—driven by DDIC, TDDI, T-Con and OLED ICs—and now account for over 15% of total revenues, underpinned by a robust pipeline of 200+ design wins.
  • For Q2, management guides revenue to decline 5% or grow up to 3%, with gross margin around 31% and profit per ADS of $0.0085–$0.015, reflecting customer caution amid US tariffs and macro uncertainty.
  • Himax is diversifying its supply chain across Taiwan, China, Korea and Singapore and optimizing costs to mitigate geopolitical risks and currency fluctuations, leveraging a natural USD hedge.
  • The company is advancing key technologies—co-packaged optics with 4Sea and Fosy, ultra-low-power AI sensing (WiseEye™), silicon photonics (WLO) and Lyricos™ microdisplays—and formed a strategic alliance with PowerChips and Tata Electronics to expand in India.
A.I. generated. May contain errors.
Earnings Conference Call
Himax Technologies Q1 2025
00:00 / 00:00