Himax Technologies Q2 2025 Earnings Report

Himax Technologies EPS Results

• Actual EPS: $0.10
• Consensus EPS: $0.10
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.17

Himax Technologies Revenue Results

• Actual Revenue: $214.80 million
• Expected Revenue: $212.00 million
• Beat/Miss: Beat by +$2.80 million
• YoY Revenue Growth: -10.40%

Himax Technologies Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 8:00AM ET

Himax Technologies (NASDAQ:HIMX), a fabless semiconductor company, provides display imaging processing technologies in China, Taiwan, the Philippines, Korea, Japan, Europe, and the United States. The company operates in two segments, Driver IC and Non-Driver Products. It offers display driver integrated circuits (ICs) and timing controllers that are used in televisions, PC monitors, laptops, mobile phones, tablets, automotive, ePaper devices, industrial displays, and other products. The company also provides automotive IC solutions, including traditional driver ICs; advanced in-cell touch and display driver integration; large touch and display driver integration; and local dimming timing controllers, as well as active matrix organic light-emitting diode (AMOLED) solutions, including AMOLED drivers, timing controllers, and touch controller ICs. In addition, it offers application specific IC services; liquid crystal on silicon and micro-electro mechanical system products; Power ICs; complementary metal oxide semiconductor image sensor products; wafer level optics products; 3D sensing products; and ultralow power WiseEye smart image sensing products. The company markets its display drivers to panel manufacturers, mobile device module manufacturers, and manufacturers of end-use products. Himax Technologies, Inc. was incorporated in 2001 and is headquartered in Tainan City, Taiwan.

Himax Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Our Q2 revenue of $214.8 million was essentially flat sequentially (down 0.2%) and came in above guidance, while gross margin of 31.2% exceeded expectations.
• Positive Sentiment: The automotive driver segment, accounting for ~50% of revenue, outperformed guidance with only a single-digit sequential decline and delivered a 3.2% year-over-year increase.
• Negative Sentiment: For Q3, we forecast revenues to decline 12%–17% sequentially, a gross margin around 30%, and an adjusted loss of $0.02–$0.04 per ADS, largely due to our annual bonus expense.
• Negative Sentiment: Macroeconomic headwinds—including intensifying US tariff measures and significant NT dollar depreciation—have increased demand uncertainty and operating costs.
• Positive Sentiment: We continue to invest in long-term growth areas such as WiseEye AI ultra-low-power sensing, CPO optical interconnects and smart glasses microdisplays, with mass-production ramps and key design wins expected in 2026.

Presentation

[Operator]

Hello, ladies and gentlemen. Welcome to Himax Technologies Incorporation Second 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]

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

[Karen Tiao, Head - IR at Himax Technologies]

Welcome everyone to the Himax second 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 and Jessica Tan, 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 result release, please email hxirhimex dot com.

[Karen Tiao, Head - IR at Himax Technologies]

Kw or hinxsmvgroup 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 the 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 of 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 this conference call is unaudited and consolidated and prepared in accordance with IFRS accounting.

[Karen Tiao, Head - IR at Himax Technologies]

Such financial information is generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and external audits by independent auditors, to which we subject our annual consolidated financial statements and may vary materially from audited consolidated financial information for the same period. The company undertakes no obligation to publicly update or revise any forward looking statements, such as the result of new information, future events or otherwise. On today's call, I will first review Haimet's consolidated financial performance for the second quarter twenty twenty five, followed by our third quarter outlook. Jordan will then give an update on the status of our business. And after which we will take questions.

[Karen Tiao, Head - IR at Himax Technologies]

You can submit your questions online through the webcast or by phone. We will review our financials on an IFRS basis. During the second quarter, broadening U. S. Tariff measures continued to intensify global trade tensions, heightening macroeconomic and demand uncertainty.

[Karen Tiao, Head - IR at Himax Technologies]

This was compounded further by the abrupt and significant depreciation of the NT dollars against The U. S. Dollar during the quarter. Jordan will elaborate on the impact of NT dollar fluctuations on our financials in a moment. Despite these headwinds, we are pleased to report our Q2 gross margin exceeded the guidance provided on 05/08/2025, while the GAAP revenue and profit came in within the projected range.

[Karen Tiao, Head - IR at Himax Technologies]

Second quarter revenues registered $214,800,000 representing a sequential decline of 0.2%, better than the midpoint of guidance range, which was 5% decline to 3% increase. Gross margin was 31.2, outperforming our guidance of around 31% and improving from 30.5% in the prior quarter, primarily driven by favorable product mix. Q2 profit per diluted ADS was $0.95 within the guidance range of $8.5 to $0.01 $15 Revenue from large display driver came in at $24,900,000 representing a slight decline of 0.6% from the previous quarter. Both notebook and monitor IP sales declined in Q2, while TV IP sales outperformed guidance with a single digit sequential increase driven by higher shipments to key customers after several of the few quarters. Sales of large panel driver IC accounted for 11.6% of total revenue for the quarter compared to 11.6% last quarter and 16.3% a year ago.

[Karen Tiao, Head - IR at Himax Technologies]

Revenue from the small and medium sized display driver segment totaled $144,500,000 reflecting a sequential decline of 4%. However, Q2 automotive driver sales, including both traditional DDIC and PTGI, outperformed our guidance of meeting sequential decline, posting only a single digit decrease quarter over quarter. The sequential decline reflected the combined impact of tariffs and the capturing effect of Chinese automotive subsidy program. Net loss automotive driver sales for the 2025 still recorded a 3.2% year over year increase, indicating resilient underlying demand despite global softness in automotive sales. Our automotive business comprising DDIC, TDDI, T PON and OLED IC sales remained the largest revenue contributor in the second quarter, representing approximately 50% of total revenue.

[Karen Tiao, Head - IR at Himax Technologies]

Meanwhile, Q3 smartphone IP sales outperformed our guidance of the mid teens sequential decline, showing a slight increase from the prior quarter, mainly driven by rush order from a leading customer. Tablet driver sales increased as expected, supported by renewed demand from a leading customer following several quarter of softer demand. The Snowy Media and Site Discrete driver IC segment accounted for 67.3 of total sales for the quarter compared to the 70% in the previous quarter and 66.3% a year ago. Our Q2 non driver sales reached $45,100,000 a 14.7% increase from the previous quarter. The sequential increase was primarily attributable to the increased shipment of for automotive and monitor products.

[Karen Tiao, Head - IR at Himax Technologies]

Himax continued to hold an undisputed leadership position with a dominated market share in automotive TCOM, particularly in solutions featuring local streaming functionality. Our growing pipeline, now exceeding 200 design wins, is poised to transition into a net reduction over the next few years. TTECON business accounted for over 12% of total sales with notable contributions from automotive TTECON. Non driver products accounted for 21.1% of total revenues as compared to 18.4% in the previous quarter and 7.4% a year ago. Second quarter operating expenses were $48,900,000 an increase of 6.9% from the previous quarter and 3.3% from a year ago.

[Karen Tiao, Head - IR at Himax Technologies]

The appreciation of the NT dollar against The U. S. Dollar in Q2 was the key factor behind the sequential increase. Similar factors drove the year over year increase, though it was partially offset by the decline in employee bonus compensation due to the decline in the annual bonus expenses for the amortized tranches of the previous year's bonuses. Excluding the impact of anti dollar appreciation, second quarter operating expenses would have been remained flat year over year.

[Karen Tiao, Head - IR at Himax Technologies]

Amid ongoing macroeconomic challenges, we remain vigilant in influencing budget and expense control. Second quarter operating income was $18,100,000 representing an operating margin of 8.4% compared to 9.2% last quarter and 12.2% for the same period last year. Operating profit declined 8.6% sequentially, mainly due to higher operating expenses, partially offset by the interest in gross margin and gross profit. Excluding the impact of NT dollar appreciation on Q2 expenses, operating income increased slightly compared to the previous quarter. Operating profit declined 38.1% year over year, primarily due to lower sales and reduced gross margin.

[Karen Tiao, Head - IR at Himax Technologies]

Second quarter FX profit was $15,500,000 or $0.95 per diluted ADS compared to $20,000,000 or $0.01 $14 per diluted ADS last year and down from $29,600,000 or $0.01 $59 in the same period last year. Turning to the balance sheet. We have three and thirty two point eight million dollars of cash, cash equivalents and our financial assets as of 06/13/2025. This compared to $253,800,000 at the same time last year and $281,000,000 a year ago. The sequential increase was mainly driven by strong positive operating cash flow of $50,500,000 in the second quarter.

[Karen Tiao, Head - IR at Himax Technologies]

Looking ahead to Q3, we anticipate a decline in cash, cash equivalents and other financial assets, primarily due to a payment of $64,800,000 for annual dividend to shareholders, which was made on July 11. In addition, subject to final Board decision, we would distribute a total of approximately $13,300,000 for employee bonus awards at the end of the third quarter, which includes around $7,200,000 for the immediate vested portion of this year's award and $6,100,000 for the vested award granted over the past three years. Our quarter end inventory were $134,600,000 higher than the $129,900,000 last quarter, but lower than the $203,700,000 a year ago. After ten consecutive quarters of inventory decline from this picture in the industry wide supply shortage, Q2 inventory has slightly increased, it's now still at a healthy level. Sustainable economics on uncertainty limits visibility across the ecosystem.

[Karen Tiao, Head - IR at Himax Technologies]

We will continue to manage our inventory conservatively. Accounts receivable at the June 2025 was $219,000,000 a slight increase from the $217,500,000 last quarter, but down from $242,400,000 a year ago. DSO was ninety two days at the end of the quarter end as compared to ninety one days last quarter and ninety nine days a year ago. Second quarter capital expenditures were $4,600,000 versus $5,200,000 last quarter and $4,600,000 a year ago. Second quarter CapEx was mainly for R and D related equipment for our ICT design business and the construction in progress for the new preschool near our Thailand headquarters built for Yipollin children.

[Karen Tiao, Head - IR at Himax Technologies]

As of 06/13/2025, Himax had a 174,300,000.0 ADS outstanding decline from last quarter. And on a fully diluted basis, the total number of ADS outstanding for the second quarter was 174,500,000.0. Now turning to our third quarter twenty twenty five guidance. We expect third quarter revenues to decrease 12% to 17% sequentially. Our gross margin is expected to be around 30% depending on product mix.

[Karen Tiao, Head - IR at Himax Technologies]

The third quarter loss attributable to shareholders is estimated to be in the range of $02 to $04 fully diluted ADS. As we have done historically, we will grant employees annual bonus, including RSUs and cash awards on or around September 13 this year. Our third quarter guidance of a loss per diluted ADS has taken into account the expected twenty twenty five annual bonus, which, subject to Board approval, is now assumed to be around $7,500,000 all of which $7,200,000 will be vested and expensed immediately on the grant date. As a reminder, the total annual bonus amount and the immediate vesting portion are our current best estimate, only actual amount could vary materially depending on, among other things, our Q4 profit and the final Board decision for the total bonus amount and the vesting fee. As is the case for previous years, we expect the annual bonus grant in 2025 to lead to higher third quarter operating expenses compared to the other quarter of the year.

[Karen Tiao, Head - IR at Himax Technologies]

In comparison, the annual bonus for the 2024 and 2023 were $12,500,000 and $10,400,000 respectively, up with $11,200,000 and $9,700,000 effective immediately. In providing our Q3 financial guidance, the Q3 expenses related to the employee bonus is estimated to be $8,200,000 roughly 74 point dollars 0 per diluted ADS before tax comprised of $7,200,000 but immediate vested portion of leasing bonus of status above and a $1,000,000 the amortized portion of the unvested bonuses from previous years. For the sake of completeness, employee bonus expense in each of the last three quarters was also around $800,000 I will now turn the call over to Jordan to discuss our Q3 twenty twenty five outlook. Jordan, the floor is yours.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Thank you, Karen. Uncertainties surrounding tariff policies persisted across the global economy throughout the same quarter and into July. However, starting in August, The U. S. Began clarifying these tariff measures toward most of the countries, including major economies such as Japan and the EU.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

These developments have helped reduce uncertainty in the global trade environment. That said, less than twenty four hours ago, the U. S. Government announced plans to impose tariffs of approximately 100% on semiconductor chips imported from companies that do not manufacture in The United States. As the details of the new tariff plan have yet to be released, we are unable to comment further regarding its potential impact at this time.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

We are closely monitoring the situation and we'll respond accordingly. It is worth noting that tariffs have not had a significant direct impact on Himax's business as our IC products are not directly S. Instead, they are integrated into panels or modules by customers outside The United States and then sold globally, including into The U. S.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Market. Only a negligible portion, about two percent of Himax's products are shipped directly to The U. S. In the automotive sector, The U. S.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Recently reached separate agreements with EU, Japan and Korea. These carrier agreements among the world's major automotive manufacturing and consumption regions help ease market uncertainty, and trade and shipments among these markets are expected to gradually normalize. Notwithstanding these early signs of clarity regarding automotive tariffs, given the timing of the announcement, which were made just days prior to this earnings call, we have not yet received any customer adjustments in demand for automotive licensees in response to the new tariffs. The situation remains dynamic and subject to further observation. Overall, automotive market demand visibility remains low, with customers continuing to adopt a cautious stance by maintaining low inventory levels and delay new product introductions.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

As a result, we are maintaining a conservative outlook for the third quarter and continuing our strategy of strict expense controls while actively reducing procurement costs and enhancing supply flexibility. At the same time, we are accelerating the geographic diversification of our foundry and backend vendors to address customers' diversified deployment needs stemming from geopolitical considerations. This strategy aims to strengthen our global manufacturing resilience and reduce risks associated with regional concentration. In the automotive sector, we remain optimistic about our long term business outlook, primarily driven by the continued upgrade of smart cockpits, where displays serve as a key component fueling market growth. With nearly two decades of dedicated experience in the automotive field, Himax offers the industry's most advanced and comprehensive automotive display IC solutions, spanning LCD to OLED technologies.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Himax holds the number of global market share across all segments of automotive display ICs with an overwhelming lead over competitors. Looking ahead, we expect continued growth in automotive TDDI and T Con technologies, both of which are relatively new and advanced display solutions for vehicles. To date, these technologies have been successfully designed into hundreds of projects worldwide, with just approximately onethree already in mass production and the remainder expected to enter mass production within the next few years. In the area of traditional automotive DDIC, although DDICs have gradually been replaced by TDDI in panels with touch functionality. Traditional DDICs remain essential for applications such as dashboard, SUVs, headwear and side view mirrors, which do not require touch integration.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

In addition, Himax has spent years cultivating its automotive OLED business in close collaboration with leading panel makers. The number of new project engagements is rising rapidly. And starting in 2027, automotive OLED related growth momentum is expected to accelerate significantly, making it one of our key long term revenue drivers. Despite limited visibility to the second half of the year, the recent fabrication of tariff policies and continued low inventory levels as panel customers provide some positive signals. We will remain prudent in navigating market dynamics by continuing to closely monitor customer demand.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Throughout this ongoing macroeconomic uncertainty, we remain committed to expanding beyond display ICs into new business areas characterized by high growth potential, high value and high technological barriers, areas expected to drive our long term growth. Himax has been deeply engaged in this field for one or two decades, establishing significant technical barriers and securing a robust portfolio of key patents. All these efforts begin to bear as all these efforts begin to bear fruit, they are expected to inject strong momentum into future operations. First, in the WiseEye AI domain, we continue to collaborate with several leading notebook brands such as Dell and Acer, achieving significant results. We expect this growth to continue over the coming years by adding more leading notebook customers and introducing further AI features to the notebook.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

In addition, Himax has made both technological and market breakthroughs in additional battery powered applications such as small door locks, power recognition and smart home, jointly developing unprecedented and innovative AI applications with top tier global customers. These applications are mostly battery powered, showcasing Wi Fi's unique advantage in ultra low power computing. Further, the recent major application addition is in smart glasses. Huawei's side has gained strong design traction due to the stringent power efficiency requirements of smart glasses. Looking ahead, the Wi Fi business is entering the phase of rapid growth after years of customer and application development, becoming one of our key growth drivers.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

In the field of co packaged optics, or CPO, Himax is a proprietary WLO technology plays a critical role. Together with our partner, ForeSee, we have achieved significant breakthroughs in silicon photonics technology with the first generation solution being validated by our anchor customers partners. We are working towards the goal of entering mass production in 2026. Meanwhile, Himax and Foci are collaborating with several heavyweight customers and partners to jointly develop future generation high speed optical transmission technologies to meet the explosive bandwidth demands of HPC and AI applications, while also helping to address the pain point of overheating associated with high speed transmission. Turning to smart glasses.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

After years of lukewarm consumer reception, smart glasses are getting extraordinary market attention of late and becoming a segment of strategic importance for Himax. With the adoption of generative AI and large language models, AR and AI glasses are widely expected by the industry to become the next breakout market. Numerous world class hyperscalers and specialized smart glasses developers from around the globe are actively investing in the development of new smart glasses, with China, in particular, leading the way in terms of number of players. Himax stands out as one of the new or Himax stands out as one of the few companies in the industry to process three critical enabling technologies for smart glasses, namely ultra low power intelligent sensing, microdisplay and nano optics. Giving it a unique competitive advantage in this emerging field.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

In intelligent sensing, Timex's wide side AI delivers all day ultra low power contextual awareness with average power consumption of just a few milliwatts. It significantly enhances the interactivity and perception of smart glasses while preserving battery life and data privacy. The technology has been widely adopted and successfully integrated into the next generation smart glasses of multiple customers. In microdisplay, Himax's latest strongly telco microdisplay features 350,000 nits of brightness, exceptional optical power efficiency and outstanding image quality, all in an extremely compact and lightweight form factor. It is considered the most commercially viable solution closest to the ideal microdisplay for see through AI glasses.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Since its debut at Display Week twenty twenty five, the module has drawn strong attention and is soon entering sampling stages with multiple customers. In the field of nano optics, Himax offers proprietary WLO technology for advanced nano optical foundry service to selected customers, developing waveguide solutions, which can significantly enhance both flight transmission and display efficiency of AI glasses. Looking ahead, we expect revenues from AR and AI glasses related applications to grow substantially over the next few years, becoming a key driver of the company's mid- to long term growth. Lastly, and before I get into comments on specific sectors. Regarding foreign exchange, while Himax is a Taiwan based company, our financial statements are U.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

S. Dollar dominated. Since both of our revenue and total results are in U. S. Dollars, This provides a natural hedge for Himax's trade activities.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Additionally, a portion of our operating expenses are also in U. S. Dollars, offering further natural hedging. The nonUSD denominated operating expenses primarily include employee salaries and utility costs. Other nonUSD dollar expenses are mainly corporate income tax.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Overall, the impact on currency fluctuations of Himax's financials is relatively limited. Based on internal estimates and at around current revenue levels, a 1% appreciation of the NT dollar against the U. S. Dollar will reduce operating margin by approximately 0.15. Himax's third quarter financial guidance is calculated based on NT29.4 against the U.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

S. Dollar, which is equivalent to the daily average of the quarter after the day before the earnings call. With that, I will now begin with an update of the large panel driver IC business. In Q3, large display driver IC sales are expected to decline double digit sequentially. Amid the volatile macro environment, most panel customers remained cautious, adhering to a make to order model and maintaining lean inventories in response to a murky demand outlook.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

The absence of traditional seasonal shopping momentum, coupled with customers pulling forward purchases in previous quarters, is expected to drive declines across all three product lines in the large panel driver IC segment for Q3. In the local sector, we continue to focus on the growing trend among premium models to adopt OLED displays and adjust touch features. This shift is driven in part by the rise of AIPCs and increasing demand for more interactive technologies by enhanced user experience, boost productivity and support creative applications. Himax is well positioned to capitalize on this trend by offering a comprehensive range of ICs for both LCD and OLED notebooks, including DDIC, GCAM, touch controllers and TDDI. In addition, we are expanding our high speed interface product portfolio to support faster data transmission, low latency and improved power efficiency, features that are critical for next generation displays.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Turning to the small and medium sized display driver IC business. In Q3, small and medium sized display driver IC business is expected to decline single digits from the last quarter. Q3 automotive driver IC sales, including TDDI and traditional DDIC, are set to decline slightly quarter over quarter as customers adopt their cautious stance, delay orders amid ongoing tariff negotiations. Despite near term headwinds, global adoption of automotive TTi continues to expand, fueled by growing demand for intuitive, interactive and cost effective touch features in modern vehicles. Himax remains the leader in this market with cumulative shipments already exceeding 100,000,000 units, representing a market share well above 50, far outpacing growth of our competitors.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

To date, we have secured around five gs design in projects across a wide range of global automotive brands and Tier 1s, spanning entry level to high end vehicle models, Supported by a continuous flow of new project pipelines and widespread design wins, we are well positioned to maintain our growth momentum and reinforce our leadership in the market. While traditional automotive DDIC sales declined in Q3 due to partial replacement by TDDI, the transition remains gradual as many automotive displays such as dashboard, SUVs and rear and side view mirrors do not require touch functionality and typically have long product life cycles. Himax holds a solid 40% market share in the traditional DDIC and remains the go to supplier for both legacy and next generation of mobile display applications. HiMesh also continues to lead in automotive display IP innovation by pioneering solutions across a wide range of panel types, addressing diverse design needs and cost considerations. For ultra large touch displays, we offer LTDI, where we led the industry by introducing the technology and commencing its mass production in Q3 twenty twenty three.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Additional LTDI projects with multiple leading global brands are on track to atomized production in the third quarter, with small programs expected to follow as we move into 2026. For smaller displays with tight form factor and budget requirements, we provide single chip designs that combine TDDI and the homo dimming TCAM. This enables advanced low dimming in small sized displays, reduces overall system costs and improves power efficiency. Meanwhile, High Max is recognized for its dominance in low dimity TCAM technology, which I will elaborate in a few minutes. We continue to lead the global automotive display market with a 40% share in TDDI, over 50% in TDDI and even higher market share in lower DCT count.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Moving to smartphone and tablet IC sales. We expect revenues for both segments to decline quarter over quarter as customers pull forward purchases in prior quarters. Excuse me. Next, for an update on our OLED business. In the automotive OLED market, we have established strategic partnerships with digital panel makers across Korea, China and Japan.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

As OLED technology gains broader adoption for premium vehicles, Himax is well positioned to become the partner of choice, leveraging our nearly two decades of experience and strong foothold in the automotive display market. Capitalizing on our first mover advantage, we offer a comprehensive suite of solutions, including DDIC, TCOM and on sale touch controllers. Our automotive OLED driver and TCOM solutions began production for EVs of leading carmakers a few years ago. We now also offer standardized seats ready for broader deployment. In parallel, we are collaborating with leading panel makers of custom ASIC developments.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

In addition, our advanced OLED off cell touch control technology features an industry leading signal to noise ratio, ensuring reliable performance even in challenging conditions such as glass use or web features. The OLED on sale touch ICs entered mass production in 2024 and are being increasingly adopted by major global automotive brands for their upcoming car models. Looking ahead, we expect OLED panel adoption in automotive displays to accelerate starting in 2027. Himax is well positioned to be a key beneficiary by launching a new growth engine that further strengthens our leadership in the automotive display market. We have also expanded our comprehensive OLED portfolio into the tablet and notebook markets, covering DDIC, TCOM and touch controllers.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

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 new technologies for value added features such as active stylus, ultra slim phasor design and gaming models to further differentiate our products and reinforce our competitive edge. In the smartphone OLED market, we are making solid progress in our collaborations with customers in Korea and China, with mass production of track starting the end of this year. I would like to now turn to our non driver IC business update, where we expect the third quarter revenue to decline double digit sequentially.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

First, for an update on our TTEC business. We anticipate Q3 teacup sales to decrease by double digit sequentially, but increase by single digit year over year. The zero decline is primarily a result of customers putting forward inventory purchases of T car for monitor, notebook and TV products during the prior quarters against the backdrop of Chinese government subsidies to steep domestic consumption. In automotive, Q3 sales are set to increase by single digits sequentially, fueled by a strong pipeline of over 200 design win projects gradually entering mass production. We believe our automotive telecom business is well positioned for sustained growth in the years ahead.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

We continue to lead the industry in the innovation of automotive TCOM technology. Our new generation global team in TCOM offer advanced features such as edge sharpness and high dynamic range, ideal for customers looking to upgrade their displays for better panel performance. Switching gears to WiSAi ultra low power AI sensing solution. The cutting edge endpoint AI integration feature in the three d ultra low power AI processor, always on single image sensor and CNN based AI algorithm at this core. Amid the rapidly evolving AI landscape, OneSide AI stands out by delivering on device AI inferencing with industry leading ultra low power, mainly a few milliwatts, alongside a compact form factor and industrial grade security, enabling AI functionality in battery powered endpoint devices.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

With always on sensing and intelligent low power perceptual input, Wi Fi serves as an ideal front end for LLMs, supporting multi model AI that goes beyond vision, language, audio and intent to include rich contextual awareness, such as motion, proximity and behavior for smarter, more responsive user experiences. Wi Fi adoption is accelerating the growth diversification, including notebook, tablet, surveillance systems, access control, smart home and more recently smart glasses and many others. On notebooks, following our major design win with Dell, we are pleased to report that Acer has also adopted WiSight for its latest AIPC. WiSi is now being integrated by other leading notebook vendors with some entry production later this year and expanding further into 2026. WiSi's advanced local inferencing capability goes beyond human presence detection, supporting a broad set of intelligent features, including proximity detection and pressure and presence awareness alerts, posture reminders and automatic cursor teleporting to the display the user is viewing.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

In the surveillance domain, Wi Fi AI enhances security systems by combining two key capabilities, namely accurate human object distinction and event driven activation. This significantly reduces force triggers, conserving power and minimizing system overhead. Outperforming widely used conventional PIR sensors that often misidentify motion and unnecessarily activate the high power consuming NAND processor and or image sensor. In addition to the China market, where shipments to leading smart door lock vendors are already underway, we are now partnering with leading door lock vendors worldwide to introduce advanced AI features such as hardwired biometric access, parcel recognition and anti pinch protection, with several designs slated for mass production starting 2026. Recently, we achieved another competitive demonstration of our ultra low power Wise AI our WiseEye AI for motion sensing through our collaboration with Rebounding, marked by the launch of the bbonnie AI platform.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Built over six axis gyroscope, bbonnie AI empowers wearables with advanced on device capabilities such as motion analysis, posture recognition and behavior interpretation, all delivered with low latency, exceptional energy efficiency and a privacy first design. With WiseEye AI, the DeepBond AI platform can also interface with LLM, further expanding its ability to perceive, understand and interact with complex real world scenarios. This enables a wide range of real world applications, including smart, healthcare, sports, education and interactive learning. Next, for an upgrade on our WiFi module business, which integrates Himax's ultra low power image sensor AI processor and pre trained low code low code AI algorithm, enabling easy deployment across the broad spectrum of applications. Himax's biometric authentication portfolio complies with Europe's General Data Protection Regulation, or GDPR, one of the world's strictest data privacy laws, ensuring strong privacy protection and enabling adoption in highly regulated markets.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Our PowerMAN module has attracted strong interest across multiple industries, rapidly securing design wins in areas such as smart access, workforce management, smart door locks and more. With our project scheduled to enter mass production in 2026. To address the growing demand for more flexible access control, we have upgraded the Wi Fi Palm VAN suite with multimodal authentication capabilities, combining Palm VAN and facial recognitions to enable multilayer biometric verification, delivering stronger security and greater user convenience. In the field of AI sensing for AR and AI glasses, we are excited to see YSIGHT AI's growing adoption and active engineering engagements across major tech giants, traditional OEMs, brands and startups. Smart glasses makers are leveraging WiFi to enable instant responsiveness for a wide range of AI applications while ensuring extended battery life.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

More specifically, Wi Fi empowers both outward and inward vision sensing capabilities. For outward vision sensing, it enables environmental awareness and real time analysis, such as object recognition, navigation assistance and environmental mapping, significantly enhancing AI interactivity, while consuming just a few milliwatts of power concurrently for inward vision sensing. WiseEye tracks eye movements, gaze direction, pupil size and the blinks to support intuitive user interactions. Multiple projects are underway for customers' next generation AR and AI glasses, further validating Wi Fi as the preferred ultra low power AI solution for emerging wearable applications requiring real time user environment interaction. Moving on to our latest advancements in the LCOS microdisplay technology.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

Following the debut of our proprietary dual edge front lead LCOS microdisplay and display week this May, Customers across the board eagerly anticipating samples of our newly introduced AIR code solution targeted for release in September for their new see through AR glasses projects. This industry leading solution integrates both the illumination optics and their cost panel into an exceptionally compact form factor as small as 0.09cc that weigh just 0.2 grams, while achieving up to 350,000 nits of brightness and one lumen output at just two fifty milliwatt maximum power consumption. The luminous breakthrough ensures excellent high level visibility even in bright ambient conditions. While the offshore compact form factor makes sleek everyday AR glasses possible, The collaboration with leading global tech companies and specialized smart glasses vendors continue to progress steadily. We'll provide more updates as they come about.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

That concludes my report for this quarter. Thank you for your interest in IMAX. We appreciate you joining today's call and are now ready to take questions.

[Operator]

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 key and number two to cancel the question. Thank you. And in addition to submitting questions via phone, you can also submit questions through the webcast where the chat box is available on the right hand side of the screen. Thank you.

[Operator]

Now please press star key and number one on your keypad if you would like to ask the question. And you may also submit questions through the webcast screen. Thank you. We are now in question and answer session.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

I actually have a couple of questions related to our CPO status. The questions are about some updates from last quarter, our mass production timetable, next generation progress, sales contribution, etcetera. So I think I will combine the questions together and give provide the answer together. So in short, the project is on track. And we I mean, we really don't have a whole lot of progress or update.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

So together with our partner, ForeSee, we are focused on getting the first generation product validated. So 2025 this year will be a year for engineering validation with only several shipments for us. So the support shipments, certainly, in terms of revenue contribution, will be rather limited. And in all likelihood, mass production will commence next year. But at this point, we will not comment on exactly when in 2026.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

So as far as the new generation is concerned, we are actually developing more than one generation of future products. I mean, obviously, I cannot give details of the future generation design. What I can say is that these products, when successful, will represent much higher revenue for us on a per unit basis or per FAU basis, because our new design will cover a wider much wider scope of optics inside the FAU, while at the same time enable higher transmission bandwidth and lower the overall module cost for our customers. I've actually commented on the revenue potential in my last one or two earnings call. So I think I will just quickly go through that again.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

So again, this year is next year, 2026, is likely to be the first year of mass production. But it's still too early to give a revenue indication for the year because, as I just said, exactly when MP will commence is yet to be determined by our customer. I've said in the Q and A of last earnings calls that our annualized CPO revenue could reach over $100,000,000 in so called early stage of mass production. And I'm still holding the same view. So by early stage, I'm thinking the early stage of MP when only mainly mostly AI switches of data center are equipped with CPO.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

And naturally, as the technology is more proven, CPO will be adopted by more end customers and penetrate further to also cover XPUs for AI data center. Now if you look further ahead, I believe automotive and humanoid robot automotive and humanoid robot are two likely new major markets where advanced high bandwidth AI are also needed. And because our WLO optics is a critical element of CPO, we are seeing this business as a major game changer for Himax. So it's something we will certainly committed to for many, many years. So regarding question when this will start ramping up, to me, is not really a question of whether or even when it will happen, but rather how fast and how much the CPO technology will penetrate.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

And we believe with always obvious benefits like raising transmission bandwidth and substantially reducing power consumption of data transmission, and all at pretty low cost compared to those of a complex AI system. The CPO technology has the potential of ramping very quickly with high market penetration. But ultimately, this is a decision, again, to be made by our end customers. So what we can do is get ourselves prepared for any ramping plan and equally important, aggressively push the boundaries of the technology. And I guess lastly, I think it's important to point out that the progress of collaboration with our customers are not affected and not deterred by the prevailing macro uncertainty or the tariff situation.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

So our customerpartner are as determined and focused as ever to push this forward as planned. So I okay, that's my answer to a few questions relating to CPL. There's actually another question about again about CTO. Can you disclose the number of planned CTO product generations and whether they are currently in preparation for validation? The validation is now being focused on the current generation only, with the next generation going through design collaboration of we foresee the design and sampling stage.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

And the number of planned CPO product generation, I'm not sure exactly what this means. Actually, I can tell you there's a longer term, rather fundamental and important advancement of CPO technology that we are working on, which if successful could cover a few generations of products. If it's successful, it's going to be a major breakthrough for what we are doing right now. But I mean, obviously, I'm not allowed to disclose too much. So I guess there's this current generation, which is, I think, validation, yield improvement and so on is this stage, and we are geared up for mass production next year.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

And there's the next generation with specs coming from the customers' collaboration, close collaboration with ourselves at ForeSee. And there are future generate for future generation further ahead technology developments that could fundamentally improve the cost and efficiency of CPO, and that can cover several generations to come if successful. Why is Himax lose money in Q3? We certainly lost based on our guidance, we are going to we are projecting to lose $02 to $04 a share in Q3. And as I just mentioned in my prepared remarks, that is because of our pretty peculiar way of expensing our employee bonuses.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

And we have been doing that almost twenty years ago ever since we got this deal in 2026. And so I'm sure for those analysts or investors following us are already familiar with this. So in short, what happens is our employee bonus or ICT expenses every year, will reach a peak in Q3 and with much, much smaller amount during Q1, Q2 and Q4. And it has been a pattern for twenty years also because of our approach of issuing employee bonuses, whereby we basically announce employee bonus every year at the September or September 30, right? So and we are just strictly following accounting rules.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

And I wish we can based on our accounting practice, we can more our RCO expenses evenly distributed across four seasons, but we are not allowed to. So if you take away the employee bonus, actually, we are going to turn we can actually turn a small profit during Q3, and we are projecting also positive cash flow during Q3. But that's just the way we do our accounting. But I mean, naturally, we are not doing well in Q3 overall. As I just mentioned, the automotive, nonautomotive, all sectors, limited visibility and tariff and whatnot, I'm not going to repeat that.

[Jordan Wu, Co-Founder, President, CEO & Director at Himax Technologies]

But there's a particular reason for our Q3 projected loss. So I guess there's no further question, at least not on my list. So as a final note, Karen, our Head of IRPR, will maintain investor marketing activities and continue to attend investor conferences. And we'll announce the details as they come about. Thank you, and have a nice day.

[Operator]

Yes. Thank you, Jordan. And ladies and gentlemen, this concludes second quarter twenty twenty five earnings conference. You may now disconnect. Thank you again. Goodbye.

Participants

Executives

• Karen Tiao, Head - IR
• Jordan Wu, Co-Founder, President, CEO & Director