HIMX - Earnings call transcript Q4 2020 | Himax Technologies, Inc.

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Operator

Hello, ladies and gentlemen. Welcome to the Himax Technologies Incorporated Fourth Quarter 2020 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 is being recorded. to conference like host, to now Mr. would turn over the your I MZ Schwalenberg Group. Mark from ahead. go Please

Mark Schwalenberg

Welcome everyone fourth to Himax's call. quarter XXXX earnings

Joining Mr. questions Q&A prepared Eric remarks, are in today Chief IR/PR Chief a Jessica the have the Wu, Li, Chief from company's After Pan, and and Ms. Executive allocated Mr. Officer; session. Financial we Officer. President Officer; us Jordan company time for

a on If Access copy portals not you received of HIMX@mzgroup.us. copy release yet please a at the results, download press website www.himax.com.tw. financial today's or e-mail Himax's have from

result of in with to ended filings, XX-F financials, filed events products, Himax, continued December but filed for XXXX Before and company's general in company's for March which the and everyone year economic and subjected full auditing and its we consolidated number in begin materially statements SEC results of state non-driver formal remarks, and the risks prepared the market business is to obligation information, including developed XX, competitiveness a call, forward-looking by conference future audited SEC growth market some semiconductor revise I'd the March are industry, for SEC independent products by regarding statements and well XXXX to, Factors conditions, those XX-F the Except vary conference provided described a were the yours. the differ like success to or we statements will cause acceptance an financial the industry statements or generated cause technological from and risks external identified Mr. for statements application the entitled driver of and Eric, future and involve in in the consolidated described annual The from Such financial end-use subject financial Li. which remind materially financial XXXX. is as and limited the with information the not the other turn and and to accounting. year as procedures call. same Risk internal of company's of as risks included is uncertainty of to and and our of unaudited challenges from demand including time may in financial scrutiny, consolidated otherwise. accordance events review differ company those the including the expected auditor, period. information and innovations not with other and this publicly this operational same forward-looking the to time section the undertakes Form to that in call could the no whether this XXXX, floor could in internally been update call audits are Factors conference described that include, any that uncertainties events materially that now over or or results in I conference Eric new call, these this information to results IFRS XX, actual has actual from on

Eric Li

you Thank for name everybody, I Chief IR/PR the and and Mark. you, Thank Eric Officer. is thank joining Li, us. My am you,

business. and CFO. financial After quarter the performance Joining and consolidated On we our by the followed first of year me our Pan, will questions. Jordan take Himax for outlook. give then update will on the CEO; Jessica full the first are Jordan which, our will XXXX quarter call, Wu, review status XXXX, today's an I fourth

has The compensation persisted of We financials COVID-XX impact and acquisition-related will financials IFRS review non-IFRS on basis. our non-IFRS globally. both share-based The charges. and exclude

social evolving. dynamically economic science, New activity are all life and practice

shortage the key January and revenues capacity preliminary financial foundry prudent November and and for revenues, reported in first the strong X and long-lasting inferences implement we with revenue, exclusion fourth guidance issued XXXX. for gross the for record broadly Today, gross environment, exceeding steadily the these all the favorable, XXXX. component, way. of to business is strong margin demand the margin gross device in preannounced with pre-announced XX, quarter In quarter electronics in high all such and continue deliver result semiconductor the of which the in performance challenging but result business results. began. a on unexpected We on the One are EPS is hit our margin EPS Both line along and

of from our the XX% XX.X% of quarter million, around from same IFRS increase period recorded net significantly guidance an compared margin an of Gross ADS strong exceeded diluted of guidance third to remote was $X.XXX, $X.XX. results. outperformed due around from The driver XX.X% of sales distance sequentially last and continuous the was exceeded growth Non-IFRS revenues and to demand sequentially as improved the and per increase and better-than-expected we notebook XX.X% and decline $X.XXX. Smartphone grew to in from monitor, year-over-year. economy. stay-at-home our a XX% display in to to drivers the exceeding sequentially ADS revenues than and the of home better DDICs. including XX% display TDDIs of up up other momentum per previous of sequential image offset increase fourth million, Strong an of and the a segments. robustly $XX.X XX.X% XX.X% major total TV, education. year. was up by business improved XXXX. sales of across for ICs million, of with prior tablet profit cents sequential third to quarter, the of grow to continued mid-single-digit for ICs better-than-guided and earnings fourth XXX.X% slightly diluted of thanks more $X.XXX ongoing decline XX.X% Large all large the but a the monitor, $X.XX up fourth exceeding increase entertainment quarter-over-quarter and the year-over-year. working and guidance guidance ago. products, IT TV Revenue gross contributed around quarter guidance XX.X% CMOS XX.X% The contributed XXXX a drivers was margin quarter strong quarter, quarter $XXX.X driven $X.XXX, by $XXX.X our this profit for For around Small revenues panel driver and in automotive quarter-over-quarter, to XX.X% demand of sensor of was segments. compared was our display and the to accounted sequential of year revenue revenue XX.X% medium-sized up guided, the derived

in by growth, Small- shortage. was accounted compared sales demonstrated foundry constrained tablet of medium-sized capacity yet total the For for growth the year-over-year severe perspective, both to sales smartphone and and segment quarter, XX.X% extraordinary the XX.X% for XXXX than year-over-year. sequentially and up our year sales It of quarter the more and ago. XX.X% total sales revenue growing Smartphone represented QX. in X.X% continued fourth quarter, XXX.X% third XX% a $XX.X million, reaching in with of

compared of DDICs have customers our is supplier around period clientele. up we XX% strategy long-term the same smartphone to sequentially fell those major The the last were growth smartphone than whom XX% same of by prioritize sales both XXX% to traditional around last with capacity and our year. business around XX% In sequentially the and or up to to TDDI year. period relationships. product Sales support favorable limitation, from Our up of due more mix and consideration were sequential was are

traditional we by As are TDDI quickly have repeatedly and being DDICs smartphone indicated, AMOLED. replaced

in than grew one sales another of reached sequentially fourth XX.X% Our record than equally QX that weighted indicating year-over-year. tablet smartphone of throughout of market XX% bigger our for $XX.X much sales tablet capacity toward tablet XXX.X% that market. quarter, of leading contributors the were our fourth segment, higher revenue, than of having total tablet, sales high. a the smartphone our fourth slightly revenue sales The in and The favorable for quarter, our allocation top smartphone. Despite reflection more XXXX, million accounted for tablet our the and size quarter, position

high-end increased production XXXX. robust third sole since Improved quarterly TDDI, quarter and the market, It XX%. the demand consecutive over Revenue but supplier the ascribed of initial helped where marked first decreased to with of fourth main XX.X% significantly This traditional growth satisfactory sequential Android in year-over-year improvement. revenue tablet tablet customer margin for end-customers. driver are discrete the or sequentially, active For overall increased reflects leading the sales with our stylus in in product the mass mix we strong by from also increase source the all increasing tablet the shipments to XX.X% products ICs quarter.

of automotive QX fourth car as year-over-year, resumed sequentially a driver XXXX. for million, production response to demand and up revenue global XX.X% in up IC automotive amounted to Our quarter XX.X% makers from recovery $XX.X

capacity to more of this up fast scale accounted However, demand we customers IC were enough revenues. Automotive unable for than surging all due meet to for driver XX% total to shortage.

we with Tcon notebook high-resolution increase rate demands of as more result The expect display products Jordan Fourth and high a further down level and driver our than IC strong our sequential to from for minutes. X.X% CMOS in million, current was year-over-year. market a non-driver from coming sensor shipment increased on quarter XX%. automotive but business few mainly will camera ICs sequentially, of applications. this from web elaborate image revenue of $XX.X was up well XXXX, X.X% During the share displays frame as

quarter up quarter from due gross customer. categories compared severe X,XXX XXXX better across on notably meeting a to decrease we and gross period last to the reasons: and growth were all sequentially third all Gross to of shortage. decrease rising that material drivers, products the strong fourth and a favorable as to the Tcon tablet in increase margin anchor in XX.X% overall industry reduction quarter shipments. products assembly the points outpaced product reflected demands, the shipments of same ascribed thereby ago. was margin offset However, demands up XX.X% was The enhancing be shortage. basis allocate other limited Non-driver for margin. with corporate XX.X%, by gross TDDI, can in The year accounted our main product for a Not much-improved also to product XX.X% The sales revenues, better products, mix pricing year. sales basis total capacity quarter, during foundry, the able XXX testing, and higher year-over-year of capacity fourth costs of in points and for automotive margins. the X undergoing capacity leap to margin and in margin WLO WLO the of was an The

and minus the XX.X% Our with salary operating in bonus in million decrease in along higher expense quarter, year-over-year better-than-expected XX.X% higher financial the increase up RSU in but to year expenses. sequential XX.X% operating QX and bonus, sales $XX.X up The QX offset prior The XX% for the gross difference Non-IFRS profit profit operating in million, quarter fourth reward the R&D expenses, the per quarter last for quarter ADS, or was a was the profit in quarter in the XX.X% was fourth diluted earnings per a operating in X.X% for from the were the X.X% from ago. operating quarter $XX.X period quarter the Reflecting better quarter from $XX.X X.X% a cash last year. XX.X%, expenses, margin of a in expenses from $X.X the or per the ADS quarter increased $X.XXX result of expenses our million, and negative Despite and $X.XXX was same non-IFRS Fourth for management non-IFRS up up down XXXX were last $X $X.XXX from period per million, higher diluted last or operating $XX.X with non-IFRS same or million million, or previous ADS, year $XX.X and period up diluted compared $XX.X quarter XXXX, careful reflecting IFRS quarter as XX.X% reduced increase million, to over X.X% operating of sales million, year. or caused X.X% by per increased $X.XXX last $X.XXX XXXX. from and $XX.X to of expenses. million, ago. the Fourth was and was IFRS million, minus year-over-year fourth sales, from quarter, diluted higher year. or profit for diluted in $XX from profit reported margin, from diluted results, fourth ratio of employees expenses. non-IFRS quarter ADS, $X.X by compared cash of same $X.XXX we ADS previous per and last IFRS or operating further up million, to ADS profit from call, R&D was preceding same

in million China full market. XXXX on overview the totaled a XXXX. XXXX, In of Revenue quick on the performance. COVID-XX first a U.S. year year, sanctions have brought turbulence let's financial and the XX.X% Now, $XXX.X to over growth half

throughout half categories, the new growth medium-sized with business rebounded drivers the million. year-over-year Among X by highest XXXX our brought major product the our totaling stay-at-home strongly $XXX.X fresh However, sales second demands posted in of and XX.X% economy. display small- with

leading XXXX. tablet XXXX, rebounded, and display As totaled $XXX.X Revenue solutions global increase adopted panel Android in TDDI a mild smartphone brands drivers for extraordinary million we business our X.X% year-over-year. all areas saw both large in product momentum from of sales

half and due XXXX was mainly Gross by anchor by year-over-year During mainly need XXXX. second X.X% and increase demand display was high-single-digit growing around Tcon camera which rate the was was sales, and in The due negatively by teens however, weakness to declined strong product the to product IT from TV and as for and favorable boosted increase of amidst drivers COVID-XX mix. impacted decreased. of the in due of pandemic, monitor totaled was the web product notebook WLO, margin TV by in strong an XX.X% increase frame high drivers in legacy high to gradually surge high-resolution education. up up in for in displays, Non-driver customer global CIS sales sales more XX% our from improvement This a offset year-over-year outbreak. sales the demand and XX.X%, continuous year-over-year up an display million, respectively. $XXX.X online The notebook year-over-year. the work-from-home market

was in U.S. because, but enabled Taiwan $XXX.X we R&D around denominated, robust bulk NT while pushed well a were foundry severe lower expenses stronger dollar as expenses of as the mentioned, paid increase the salaries NT Notably, bonus, came of pricing. in to operating as incurred constraints The previously our much travelling expenses to or U.S. year. of contributed from expenses the X.X%, $X.X XXXX our turn fees. share-based million more salary, by dollar last level As compensation, to $X.X against accounting demand better increase in higher expenses up which IFRS operating employee capacity our dollar. as million, cash dollar well in million, offset locally compared

However, expenses. XXXX, due loss of $XX.X and the of of from to operating IFRS operating expense in reduced higher income gross was our was to XX.X% XXXX, in from sales to management million, ratio million operating margin. indicating XXXX a contrast XX.X% higher consistent $XX.X

of For million [sic] $XX.X [$XX.X the reason non-IFRS from $XX.X same of operating income was million loss million] XXXX. $XX.X million, in an increase a

margin upswing year-over-year $XX.X in was Our expenses. the or XXXX per $XX.X IFRS result $X.XXX ADS, or a sales loss million, $X.XXX ADS. $XX.X operating diluted diluted $XX.X from million million of profit last $X.XXX, of for was up of or income higher million million, loss year. The was gross better and with for profit a well-managed along year $XX.X versus Non-IFRS a per

of restricted borrowings sheet. compared million We preceding $XXX.X loans end and $XXX.X $XXX.X guarantee as at amount. $XX.X cash ago. which same balance the current unsecured had a for Restricted as was higher quarter $XXX The assets to short-term year to $X time to year cash the operating of the of $XX.X million the ago. mainly QX, compared an $XXX million XXXX, million financial other was same was as same the million QX, of quarter. portion. quarter, at of cash We of used December balance end the last long-term secured equivalents had was the the the inflow of cash, XX, a during to cash cash million a of and Turning million result million of The

end, XX Our down from last XXXX XXXX last million, quarter the at of $XXX.X as and December XX, and December the $XXX.X receivable compared end million DSO days $XXX.X Accounts were up year-end quarter. as the the inventories year a from ago. of million was million, to million from year days a at quarter $XXX.X last up year $XXX.X of million end was $XXX.X ago and ago. a at year days XX XXX

and million to last as come. million to $XX.X will low design and to inflow year as $X.X R&D of the year. million quarter of quarter our activities $X.X As earnings a WLO in expenditure CapEx for related expenditures Cash given mainly inflow $XXX.X capacity which at a compared $XX.X in level for equipment. for million the stay Total was was the last highlighted of was was the tools an amounted quarters capital Net the comparison, the inflow of of cash fourth XXXX. an relative the and quarter for shortage, level million last to land, capital XXXX operating inflow vast operations expansion. from inventory Fourth XXXX foundry compared backend and related $XX.X a in ago. $XX.X fourth $X.X million, from million $X.X construction for period calls, last same was for in capacity million, majority $X.X million, quarter the In for million and versus was R&D The building new CapEx equipment. purchase year the quarter the

As diluted XXX.X total little had basis, XX, ADS number quarter. of outstanding ADS of a Himax fully the outstanding, changed from XXXX, million XXX.X On million. December last is

guidance. Now turning to our XXXX first quarter

uptick of high. of Gross first further quarter, sectors. growth and shall reach we quarterly could the For margin business QX from the another XXXX already expect revenue in another most high our level see

margin, attributable substantially in quarter. to and to first range first the both gross ADS. on is IFRS expected product increase floor the of EPS shareholders and depending over of XX% fully to net be in $X.XXX to increase profit income this quarterly final mix. Jordan. is be be likely shareholders all sequentially. to $X.XX the diluted With quarter, XX% the With margin reach by now to diluted to we range per expected I of per in quarter. Gross call is the the $X.XX will will profit XX% revenue the increase revenue yours. around to attributable Non-IFRS expect Jordan, that, shall Revenues, For to is to fully $X.XXX turn X% to ADS. expected during highs margin

Jordan Wu

Eric. you, Thank

previous shortage As we long-term capacity highlighted call, before our a phenomenon. earnings appears be to on

assembly to has include backend the more entered shortage we even severe As XXXX, has year that testing. the extended facilities become and and

As superior vendor diversify with the and pool, along reached engineering have shipment. and the a more enlarge peak resources industry business we long-term as leading capability successfully suppliers, QX compared foundry with securing XXXX when we early of to the in for XXXX to backend recent and with and player relationships both level engaged quarterly capacity

addition, the allocation right at capacity among to fabs is capacity meaningful a for making products are foundry the by supply aim us. increase secured right we have optimizing with suppliers product In an capacity is overwhelming. semiconductor fully also for we where shortage Among utilize which global the the to areas diversified the our accessible automotive,

the further We available capacity will increase us capacity. quarter-by-quarter continue our to securing in efforts and in expect total XXXX to

extensive In Himax far as soon As we while increase expected. any is to likely vendor persist will sizable supplier pool demand overall significant longer supply preferred not than product can a offerings. our time such work see, an industry to with diversified and for environment, any is the scale, semiconductor strong have

high margin margin businesses our help a ongoing in of efforts. also number strength will Our improvement

gross controller, from one be year our business being margin in solid growth and margin upcoming non-driver remain, can in beyond. our expected gross business notably will we this sensing. margin will high our ultralow this tablet represents improvement position margin products, to the example, as our strong continues. XD for ensure come sales new Android timing contribution robust the WiseEye anticipate Again, leading margins support demand preferred display also for AI, high-end Moreover, with major for power major expansion For a our automotive high years. of vendor are Likewise, goals for and for the names always

an start us driver update the with on Now business. panel IC large let

increase low the driver display IC expect by For to teens first sequentially. we revenue quarter, large

quarter remote and continuation the quarters, quarter from demand IC substantially the previous high of from from notebook persisting extension segment, QX, a derived in another working For e-learning. growth we impressive due to of anticipate increasing previous strong

first expect meet monitor shortage other IC we sales, demand. for the the As all capacity as to on hand, decline sequential the the quarter to a we are due in unable

sequential TV Tcons, our momentum TV As shortage TV anticipation saw the demand remains we pandemic. a set aggressive drivers better of XX% segment seasonal end proceeding panel customers during that in strong promotion first require high-end to strong Recently, than models sustained the for sell-through high-resolution growth. entertainment in and quarter home looks with increases, with and of around

in Tcon from packaging, shipments However, our by supply foundry shortage still are driver demand despite display capped and IC and firm customers.

the display and IC tablet, small- turn supply. business. smartphone surpassing capacity major the quarter, shipping issue market. let's same for our Android Foundry smartphone Now, with both tablet capability. are first as continuous favor medium-sized In supplier we remains dominant see TDDI that pool, we foundry demand capacity the we to the and driver and tablet sales of sharing strong impacts the still in a adversely strategically With tablet in allocate

consumer well penetration. another QX by sales, TDDI needs we for and growth fueled tablet high-single-digit as demand learning remote For higher working as home sequential expect

increase slightly growth and demand contributors revenue continue penetration XXXX was the its stay-at-home mid-single-digit, projected is by smartphone driven TDDI to expect and in further names TDDI by declining trend. frame resolution To market strong moved our Android rate, and offering TDDI fast-rising its toward has our higher sales for to Tablet sales tablet economy. solidify TDDI higher top larger smartphone and sized of broaden the position, largely which solutions. screen our the product smartphone in consecutive We to one mid-teens would QX have thanks

enhanced better accuracy drawing. active stylus and our We also through leading for design handwriting touch have quality

to highly is before, stated As AMOLED committed technology. Himax

from wearable, and automotive. smartphone, extended to and has Our development started tablet

course. We IC growth and panel with small business become the leading some have in believe driver drivers panel report was for one soon encouraging major our to in XXXX. AMOLED medium IC progresses makers We of Chinese and due driver will

of industry. Turning has semiconductor shortage The automotive to challenges the global sector. to great automotive components brought world's the

world's return displays offering expected never supply by years embracing towards the technologies shifting relationships sophisticated more who gains the further this to a large-scale hope in Already the fast-growing see end, our for as orders production and even to tightening like mid-teens some suspended As the driver foundry sectors. display ICs on other most components days new with technology schedules. new lockdown to we strategically models the is capacity coming already secured an further facing demand, into due capacity first market demand or production car combined increase reportedly help left unceasing forward. now end-customers, By of consideration across rely sudden to volume have severe Customers to more customers, higher periods emerging preserve continents, display surge shortages, tier-Xs electric business, market. in and In automotive accelerate leader industry with larger, to before. in With in sequential Limited IC enlarged we weeks. the performing compared foresee foundry delivery share have meet shortage supportive we deliver just-in-time their our worked sales quarter. in pent-up panel capacity, automotive quickly even vehicles market different and next-big-thing, production market with can going of we adjustments production shortage, makers, and an and new our tight of amidst segment logistics, while managing swift of customers' in the

interface such with dimming, competitive sustain a touch, to offering comprehensive continue position in-cell LTDI high-speed new local product in-cell TDDI display. for for bridging as point-to-point our functions, cascade-topology connection, We and features for larger advanced

in the technology, we TDDI As anticipated meaningful reminder, automotive first XXXX. with design displays started starting which shipping for launched volume first a world's XXXX

EV prowess grows separate for driving us As for generation autonomous display from develops, the our next technological popularity in automotive. peers and continues to

production around to small- revenue as major factor surpass driver Capacity rapid unexpected to a demand unable by expected medium-sized with shortage, remains been quarter, to our respond growth. continuing IC is business the quickly first high-single-digit, supply. enough for the For the again, has increase to and

non-driver Now, make let IC me of some we quarter. progress the in the last share the on businesses

The our been major adopted display timing drivers, I as by controllers, timing TV leading high-end benefit Tcon TV controller. widely on that First brands, as as business, earlier, multiple promotion by will aggressive have our mentioned end-customers. well XK

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limited shortage the packaging, in revenue by Tcon by first Our expected quarter, capacity high while IC in is sequentially. teens increase to

quick revenue result WLO. on The a is a that Next shipments reported update was Eric quarter WLO to of earlier, customer. lower fourth decline, an anchor

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segment. an update Next, let on me give XD non-smartphone for you sensing

we their As our proprietary sensing solution wish own light-based customers before, provide with to structured decoder XD mentioned IC. XD who design

security image processing It face and privacy. authentication. standard best-in-class was Chinese decoding, the timely leading already offer accelerate local recognition of operation Our for accurate XD can strict decoder payment by certified requirements and data electronic with

design-in new throughout last shipments started volume have on order further pipeline the decent and sockets quarter We with this in the way. year

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gears switching WiseEye solution. sensing to the Now, smart

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a joint by start way for ramp-up automotive IoT commercial efforts industrial on door-lock, end of engagements XXXX. and with and uses. other such solid the the our partners, further more applications various to and algorithm subsidiary production for doorbell, are expect as EMZA We devices With

thrilled achieved. are about progress the business We

vision up can ultralow generate to For with export Google AI model, user the as and provide AI can AI and Plus range be board. call has into AoS online earlier, Developers Edge it WE-I retail their access developers the onto AI-enabling evaluation partnered to are WE-I obstacles for processor reported and developers. power December Plus SparkFun components, AI direct computing ultralow key sensor interface. a our a establish adopted button technologies directly SparkFun, and single computer power. where lowered. modules. distribute framework Impulse, Plus and reach easily with AI TensorFlow our transform for Edge developers activities broaden On unrivaled products. now The press WE-I successfully which carrying Furthermore, we board model intuitive AI within market and store, platform, of Himax with with our neural can In other we therefore offering an demonstrated high we business Lite platform, capability latest end-to-end contacts Microcontrollers with real Together and evaluation Edge from usually partners, now network technical concept, Impulse leading with teamed the dramatically who seconds, our out provides more developer wide WiseEye's the we promotional face XXXX,

everywhere most jointly recently low-power world's extremely webinar get hosted help platform an As machine embedded Impulse discussing enabling illustration, Himax and with developers started to the learning a powerful that consumption. at aims Edge ways

We it believe forward. our bottom business going top aim contributing lines offerings later campaigns the major marketing online such make We will WiseEye pursue aggressively growth. this to start to continue and to year. contributor a to long-term will our We

new to update. for conferences camera turning and sensor CMOS as signs our sensors the business demand Now, continuous see of notebook surging no norm image web We of shows receding. virtual image CMOS for

bezel has shipment facial the by sensor the market actual our Separately, penetrated conferencing However, mode power foundry stylish super-slim been AI and CMOS available badly image RGB industry-first our that for video laptop capped X-in-X the mode for recognition supports to designs. capacity for ultralow has most us.

quantity small expect the fourth more ship shipped have quarter during XXXX. and We to in

various CMOS Regarding targets in such image which promising customers applications, getting sensor or ultralow as always-on design adoptions from power are markets, in-battery powered recorders, expected QX, feedback smart electronics. and demand always-on CIS we surveillance, mid-single-digit all and home meters, the the although sequentially, cannot appliances drones, due we electric foundry to In capacity revenue consumer up constraint. to car is be fulfill still

low joining That And we teens by are concludes we you revenues report today's quarter. to business, you Himax. appreciate ready for interest my for in IC expect sequentially take call. to For now quarter. the questions. first Thank your increase We in this non-driver

Operator

ready we are questions at this And time? to take

Mark Schwalenberg

Yes.

Operator

[Operator with Instructions] Jerry Su the question comes of from first Credit line Your Suisse.

Jerry Su

and Jordan for the taking Eric. Thank good results. Hi, you congratulations on my and question

the us eased Himax? is environment or - can what about quarters, you. then, we think next I think you fulfillment more And industry-wide the think you should capacity the bit the constraint industry I about in Can for be And color first for a pricing give couple that the for upcoming is Thank the of quarters? now? do supply how right little question rate your think surrounding for constraint.

Jordan Wu

on I fulfill will I customers our so-called trying specifics guess give and watching because rate, not you, Honestly, Jerry. rate our Thank average. their against be compare our rather to fulfilling

that kind tell I topic. But a you, So not high. very sensitive is of it's can

right? you demands, with we some demands And to wonder I those demands. they about we the shortage, some to I mean, demands whether them their to have demands But real support customers Although foundation. inflating of obviously, try the We if of say, try doubts out. solid those XXX% so, screen because whether sometimes are certainly of are have

the how really and of is I is end predict our Obviously, cannot an I'm situation industry-wide till As ease far I shortage think during going least last capacity this that year, the the as at economist, economy to to view the whether going year. will is evolve. the not

and with During also pandemic this the vaccination. year, the

reason a is aside, assuming the I'm So I'm simply setting our see that use even voltage, think to that, to of there putting consume driver and that in up mean, seeing while we a very new increase that I'm And we which have output mature always for - any are capacity, persist technology. the year. applications I we we're technology more simple i.e., and not assumption, And just meaningful going mature I not likely ton to are capacities. capacity during of those strong to rebound constraint high IC, requires this queuing with are display

any this capacity one we of So, receded base I our driver point think kind not and my on I touched within view, not capacity constraint users briefly of are anytime Having certainly the of major sign certainly have ICs' though, remarks. year. are those seeing certainly we prepared of soon, said from that of the

think this say to output, right, that, And the we us, are are foundry we various capacity can expected over I'm us, are year. think happy, meaning - prepared for we available for capacity I the - of comparing to I well I our partners. but by our

we this stronghold, with are we leader. And expect believe and world I in see the from I even last our last And output, quarterly the QX of output quarter, we output last peak So comparing year. to market quarterly quarterly when on during meaning I'm we year. we want driver quarter-by-quarter reached comparison, of we to number our year's right? where very know, display numbers year, highest IC, the the to is year those emphasize have output, to as comparing think basis last increases to automotive I'm QX expecting - our of this increase So notably, in expect all particular,

number one highest, that to the obviously the have a increase We market year. most share an result. is have But compared and the area the secured last is meaningful we also pressure capacity as

that, our good us, to get increase. who dialogues a meaning us, increase low-end the roadmap continue we customers, So direct better with And year not year. that's have established good a have to very including believe next often capacity well, for as we just of for customers, from this news you feel very for has about that the capacity

of is continuous And pretty product year. display secured areas. with particular, I our So say for in Only major for the this of increase meaningful automotive That can the good think highest much degree other most for the that I for Himax ensures as I same revenue news well. all can us. say, certainty kind have that and IC growth we probably capacity, very on

something I wish highlight. that's to So

sorry, answer I to question color situation give I'm exactly didn't good overall for now. capacity of a I right your Himax But So hope do try situation directly. I the

Jerry Su

improve is think Okay, X, which you. how you And ASP then, about pricing, I from going How that's to great. of margin coming in XX%, much of increase. terms about to XX%, And think then, X point guided Thank pricing should percentage increase? that we is forward? the gross

Jordan Wu

mean, you know. the And secondly, as it's really to all It's rather have cost because down as bear compare, mind confidential. knock you overall well, significantly, hard in increase I hard it's to increase guys firstly, well. - cost

share little often without better So, and this directly going what why on by customers certainly bit the we mix. going Meaning, - we margin to And, mean giving least transfer want like in constraint probably actually means how comes improvement that that, year, forward directly, at talk the better can right? without increase bit margin how more. It as from better you, capacity firstly, with this So, to to we product pricing tracing do I And you about number, position perspectives. right? outlook product very be for I a is and the and us, cost mix several well. a can elaborate

Firstly, to allocate products you your to a obviously, obvious. output have right, more when that's you're of very margin tendency to shortage, make more money, facing higher

we produce notebook, capped, smartphone, products. want we right? the as TV, that's leader tendency, well, first most the our similar industry Himax secondly, recognize applies our obvious been to have point. and And a customers more everything, reason, that. tablet, I customer also that when for higher-end is I think, capacity So total mean, And our automotive, And monitor, to

lesser products, to is while they capped, higher-end us leaving those want competitors. So when low-end our they're to probably capacity on focus our those of more products some

are on profit already us. average businesses. which sectors happens a a typically ASP better gross happening, average and better growing better margin is certainly, They to weighted basis, that our margin. - which other weighted on enhance few enjoy historically. our means And that thirdly, So for And certainly,

timing across if IC very low this would the is I the for to said will say, I'm good And think the automotive, automotive, rebound different So level sector a in, I about the all talking and obvious, it'll one, automotive, controller, of highest tablet growth driver - that's are be for timing me there confidence higher-end TDDI we you very year, controller. from ask is industries enjoy last say, which I with year.

happens TDDI other from well. the enjoy to going very our likely. our businesses, outgrow is as to margin best it that Tablet So And products.

the we right? year. tablet I so a and this mark, Now, is XX%. growth right? big estimate think, grow So about it's TDDI But year know. for this pandemic it's tablet, year market, our to XX% last penetration don't to about enjoy for I said us, the to question last tablet TDDI And year, on, is is about penetration

right. offer gaming certainly Android monitor are and, Tcon to especially margin dominant TDDI will tablets So total us represent Again, automotive, right? TDDI us, those shortage. and for TDDI on, with more start notebook, big TV, the I'm tablets to even talking more suffering benefits time stylus, - is that Now is the of about because timing we growth packaging active tremendously, so same higher-end which for the IC for talking for market units about market, in you're provider and number controller, of XX% from

excited warn do guys notably making. prospect those the really about about good So, our that, I'm better higher-end think pretty for us gross personally - to products. to I both I our of for think WiseEye, promising. on so our again, you are margin limited are allocating off I certain non-driver-IC-products, term, I customers Longer for and year. our we focus progress reasons, feel resources this extremely Right, is

our we have. mass-production-ready the my engagement, in activities the have already degree have lot a sample look the talked about in last only at I We out that September. remarks. of And engagement, prepared

And providing high is we feel that, going with So that. devices I low commence unique after the in end the where again, very power. very of a very so for is AI role of want to the to don't I this mass But thing year. long products, terms it's ultralow we high-energy ASP play production exciting, will important repeat are towards such margin a high tail, barrier, believe

So I long-term think our good about that gross enhancing very something feel margin overall. is I

I So pretty thoroughly. hope your questions of kind addresses that

Jerry Su

Yes.

Thank you. you, Jordan. Thank Okay.

Jordan Wu

Thank you, Jerry.

Operator

[Operator Instructions] Tristan from comes next the of line Your Gerra question Baird. with

Tristan Gerra

Hi, good evening.

the peak? the supply the of about have companies how Just potential look this supply margin, in questions should the prior following mix by up half automotive amount constraint, slow gross back helped and at talked the of on clearly at second coming Some also timing we about to point market. for in double that probably of there is the alleviate a currently the some presumably would constraint. little ordering, potential some tightness given year, bit given that calendar down, which the There's

that's to a mind you in of half Is when supply what So trying gets as this whether when have potentially? may you that get you're the constrained normalization see than a something catch do now. automotive, when up of do continues in you constrained? way it second sense starting a year? do supply Or to demand? that will less of in to timing And is It think even is, assess I'm to think happen supply actually a eventually meaning bit be there

Jordan Wu

I on customers customers back visibility think, of the to be my no segments. automotive Jerry's and which the is about answer ordering, suspended. are customers. demand end prepared be sector, to I previous how year orders the rather our non-cancelable shipments I degree for to pretty in on by It's there's beyond my not we of in customers, production serious. serious, I And end. think to tier-Xs, question, me, will again, receding, in by sign line with different picked back the our different end highest They by from product than way do worry order mean, orders, more or or pretty double just make panel is fact, worry are place carry for honestly, orders which for disappearing. And want confidence now,

a ship don't about talking cannot are because because single want cup, driver We we critical IC - they display, have that will no right.

I customers we the are arrangements actually very, different our for that different and with is that, very sure partners, to and more the - and is visibility and suspended. throughout outputs production So their which on And low. we contractual we can focus are more what ecosystem. with through doing think just customers, many they're foundry making our schemes what We of making know not are capacities going securing are secure in doing we

are for certainly demand, So harder economy about don't I a example, all honestly, say, the bit, worry right. to it's IT automotive, and talking for but people I that the stay-at-home

is that how situation So know, and I crystal the I to evolve demand a vaccination COVID-XX the have going that. with don't don't all and ball,

TV who have dialogues otherwise, for different that visibility our phone customers but they But their very end business makers, closer shipment interest are having So are discussions what thing, we now the customer's much our our is do end with related is, Typically And in or right. leading gets are improved, right, panel we extremely frequent particular again, direct we that customer. or direct cell one production with throughout respective various follow certainly or orders not we certainly industry notebook customers or closely. directly automotive different sectors, a now, is and the there customers. sector, and in end

And sometimes to secure customer capacity you'll decisions. see and, stepping self-education in the end

ICs right. and than should to our A panel shipped so on, For of panel maker example, B, maker be rather certain

production we a as right. we customers. close direct customers end make visibility again, through to even have So demand I don't work all as through And about our end the just very think, status have we we - are ball, and sure crystal have level, the a the inventory hard we start possible backlog, to get customers, that, the and status, the will and to

now, concerned. but we display But seen demand constraint the I very simply Because, tell there's across far different as capacity So industry. signs we this no meaningful is IC not right watch driver any strong at the We've to the in have again, increase XD. closely. as They're is just receded. can very, very sectors, mean of

Tristan Gerra

then providers obviously early great very follow-up, few a that. AR with high device years traction And had content. a from but That's Okay. Thanks you leading and with color. ago, some for

by a was over trigger, displays, the You in which also presumably lot companies similar to about next devices maybe of given basically potential holographic ago talked about, and up would have to that to for devices year, you launch Apple And do you opportunities AR your a year engagement also time. your How both on technology potential position? leveraging that's [ph] timing have holographic think and technology? the feel of initial LCOS What and in you on type both displays? AR [wider what's and lens]

Jordan Wu

true in particular by your critical rather gadgets, through. With but continue know, micro-display which lot, a products and Tristan. of A major that the question, right. well, related terms role we these feature of we and than products. talk the the certainly, customers for were business image, about real you there AR, and And unfortunately, we is those for results thank because play say launch very AR/VR back, providing a in is real blocked eyesight we And optics few all the to unfolding Well, requires the ICs as years VR, VR.

technology see when our needed. So through is you

want say don't again up - still to I can does of because optimistic I I are become happened I to whenever about ahead to And pick the our I the for real don't goggles a to affordable industry of both in us, form want up a about comment barriers this talking to customers degree to confidence and Apple So own. and be role. real lots says product of business and pick technical AR general with play overly But if this, for honest, Apple. see the we going be again, a other in that want are certainly to good people momentum, a think in people,

will certainly way are but, on steel warning too marketplace. price. previous the But insider certainly. expensive, I industrial - substantially. comment that right, I to But consumer's a affordability. too follow then they're been Again, technically way if want seen It's very barriers into are I in not of I've successfully, right. any give the it does other the again, and low see, we'll how something people mean, both beyond And which in optimistic usual and I a can't products technically Apple being launch so specific that use, about are specifics the then customers. And any mean, anybody's to lower you we I the are, price the volume means they switching lessons think just

right. company it it cannot something, a not is meaningful, So for something a scale, be large very

content. of image you image metadata, image of if color, do how not content, XD price? the lot you to involves then barrier about of achieve yet that attractive, a is kind do the you processing power that and the the is, do and can you right, find average attractive size, create create challenge the the a next reduce kind How have consumer the how the so on, kind also substantially enough just optics. And that create consumption, will So the but that, power you

be that all things we that overspend to projects. us the feel again, to I sector is think we and and of good we engaging player, our already we still kind application lot investment and honest. total X our to just - for But a just really display, relationship years, whole beyond have costs we we think on until is issues. optimistic, control, want feel, optics have and We people we with for to and I it over and overly So can't a be to provider. key panel to cover are - really But down overspend remain display, the are do those on - happen. don't wait a just customers we come hand And of it

Tristan Gerra

Very for Well, the thanks Great. it. appreciate color. much

Jordan Wu

Thank you, Tristan.

Operator

next Donnie Nomura Your from Teng question line Securities. comes with of the

Donnie Teng

Congratulations on Hello, the good Eric. and results. evening, CEO

X I think I have quick questions.

most what node future? kind example, used when likely first be it by the this to think example, one think like be or well capacity But you as be, used be tight as the are it's return, be that you likely XX-inch be to X-inch reality, in is migration, in be the that one will For products I difficult talking be used? capacity it will to the will will products, future considering think most one likely is if about So in and capacity the the and people of So which how we the which question. to is most for first the the break to used. different down expansion

Jordan Wu

which inches. easy the it's and XX-inch those Okay, X and question. good XX about But guess, Donnie. talking automotive which answer, for on easy makes, industry well, either is plus for strictly as It's not It's will to automotive, IC, than are combination entire question. exclusively totally other or of a I'm I I driver an right, not mean, display age because have still

into automotive with the be few momentum XX-inch which as we at expected automotive, next industry well. lead years. are will leader moment, TDDI we good moving for the TDDI, are pioneer Now, the in

and engineering both So now, of although which then secure - earlier, X-inch, have business to I super we earlier. is capacity surely but and automotive, engagement increase, good tight, our for is is earlier been so able mentioned X-inch we if because preparations, tight. X-inch

about guess you as for well. a for Himax, industry if XX-inch, talk So understand. And we XX-inch for all I

memory For well. TDDI, a logic you right. cases it's And and certain tablet smartphone as because lot required XX-inch, in processes, of all

more you do XX-inch the advanced So need nodes.

capacity has though, to inch, XX-inch X-inch, For constraint and X-inch back. a take large because large panel is has and started place and right, to a years of to combination move XX panel, primarily, it of that few of

been of of this constraints years this into not is to like now. aggressively alleviate starting Himax X-inch capacity to a issue one the do drivers. it's moving display certainly So of ago, very few has the XX-inch the pioneers industry for as large way capacity industry, because whole A is

we large XX-inch, So, for typically represent move XX-inch then to we most mature process panel, of example. the when right, for

So well, reasons it's are example, enlarge TDDI an to as for smartphone talking Certainly nanometers. as a and technology about mainly there XX-nanometer but XXX-nanometer, we as now are to tablet mainstream, XX capacity. moving XX is to from

nodes, against different move new applications, Now, into are right. as set a competing we other we new of

example, So people now to is display our the for for the mass XX. smartphone XX-nanometer. and for is are thing AMOLED has to IC, going AMOLED driver next production the be moving is But big included mainstream

competing a So with we're XX, where different right. other applications, of with set

accessible move not of example, move is more Driver capacity, sense to if versa, So a XX that semiconductors. consuming IC tight. answer have in is then appears into to extremely on spectrum I've difficult just tight, - XX kind super bit more a product seen, consuming the more is right. capacity a case, people for as If for I - XX think then is or if for we the XX. while tight, is extremely which product vice an be big were is XX They aggressively probably

So of does right. tightness difference move are But because also it's very tend both, as to of our different move where make tight, a they the in well, is technology somebody level terms knows. reactionary, when

mean, think far see, can now but as I as even XX So tight. is right very, I it's - I very

don't don't automotive, blame claim not see tell they out, but I for And them, to they nanometer they And, occupied, or occupied applications. right tight, logic more priority and given automotive which you talking so process, are me I why about node are are people XX example, now. you really those XX you by so blame can't So right? - is people

just So, XX in XX, loosening quarter, to I situation, change my then response the certainly, mean, I mind, comment, capacity XX, my little next XX of sign in But I preparation hedge crossing and may technology knows, products But X mean, different tend is to watch our different to the of bets, industry boundaries, have different even right. very the have we geometries, benefit our just closely. to situation that my

So be visibility. move we certain with will to able degree of

Donnie Teng

from much and able is we from quick I second XX-inch? a before just to the quantify how Are So, that question. sales now asked how follow-up, is right much we have X-inch

Jordan Wu

have me, right number probably I probably still X-inch much, certainly although our other XX% again, in outgrowing is rest. of revenue, the total than less XX-inch which of the don't now front is than but automotive, outgrowing - about our much or is larger now. is mean, right I

our of total large sales, And right. So, of XX% - represents panel X-inch, of that And a is totally in total southern that XX-inch. and portion large portion panel. plus panel is large

And other portion X-inch. is some

XX-inch about automotive, well. X-inch combined almost exclusively So I'm They they you now all and smartphone. sales and that already than more small us. our tablet other are then for is as have And, XX-inch than others. all talking right. panel are and XX% And small of relatively is controller timing

Donnie Teng

it. Got business. driver automotive on is question And display Okay. second

about you secured meaningful already. quite a mentioned, you have that, capacity As

last year - it's pushed automotive year. think say impressive, then the the would second because point, that in from all at I I last conducted order time very companies half large this capacity

at decision point. So like making it looks this time a

kind elaborate the you is every give volume in can growth how the be TDDI of or call driver you of what just seeing you if could bigger how in or you Thank us combination on more IC? you. automotive migrating car? grow display display more terms As to much trends size kind you So like are value color screen will structural of inside mentioned or on the will on different of even of a the

Jordan Wu

question. good Very

forecast. and remember, even that because, including right. in Firstly, end-customers, showing, cutting our to some our I going X, going tier And everybody, are guess capacity, we their and get first be shortage going kill to Europe such U.S. last of in all year, are to are orders we around across the that, customers indeed, and half don't actually you're you're back what, overdo that telling

A arrangement. to And engage process fab when our visibility, to and both we it our long-term fact, is is individual back down fabs. very to it started to fab foundry certain And it inventory also forecasts, our enter key really as contractual during for didn't So into preparedness, tied - bad the from of in year, QX, of porting that customers cutting are, QX that into although also we capacity arrangement slow that obvious products last our in time was our certainly we and, going new developments, increase actually also capacity in our during foundry was And their supplier to are run us secure because B to capacity that involves we shortage. well.

we and go that think our, - now moves, So, around are pretty even make we I are well we prepared. thankfully, we telling those end-customers can

but pleased still Although we customers in way are year. by our that capacity can we meaningful way to suffering hear actually quarter the quarter very our from to think I a all shortage, enlarge next are rather

going very capacity for at common very as So, And as going can that don't stage have with the you the I - I industry But number us. is how important is share And far vehicle, per X-inch I exactly content remain is having is our is that X-inch that very display that to is it understanding this tight. obviously think said driver and now to though, unfold. IC tight, consumption tight. trend

secure large can automotive panel also we terms which capacities, tablet, is of are introducing although feasible So, new more, smartphone it more or or unlike and needed. in when

For automotive all we it is notoriously hard as understand.

XX-inch, So fighting it. the traditional not on, and to driver discrete worth with of to rather than having qualification, moving the almost it's so deal get barrier right, IC, and into

XX again what, guess we into TDDI, have And of into to all foundry they pool So, right. we our tablet, adoption. to by customers capacity are which are TDDI of and and on all their for a are sort targeting also, know, speed The entered XX, for XX example, track contractual encouraging with XX-inch to basically kind smartphone is our occupied TDDI, the certain XX migrate partners. arrangement And up we XX-inch. we TDDI primary, as our are a but

TDDI compared for of our for So smartphone demand or is right. the for total terms total - and, - tablet, automotive in amount not would nothing certainly, demand to

will in safe think, TDDI So, we of be terms I automotive. for there pretty XX-inch

there as prepared well pretty are we capacity for So well. over

that the so, trend. And is big

included lot agree a customers customers think and of I with us.

capability up That industry space the popular, So, I'm for will is more displays glass, screen a freeform, are thing. of the such when piece not be a second right? cars the one size. of infotainments. large thing flat roomy, need is whole seeing meaning be do it's inside in you to EV qualification And the screen is stupid TDDI right. And the typically becoming passenger roomy, larger And, mobilized and adoption when more to for no be your you it's larger automotive. - more solid so of screen, your more With need speed and

a large displays. we larger, freeform. But in-cell need order the then in it's in So the actually to you rate trend, that - terms as a And your And again, when freeform, display need - to partners, achieve display then soon, you be display. becomes larger. when to we requires necessity - for it's design production first year in very pioneer to to the for you world's a of needs reasonable need have passenger are therefore, And special display size the when hopefully to then is small needs freeform have industry ordinary again, very panel are very room opposed And in-cell selected large working TDDI. think have in-cell display. the introducing, display our with a display is is makers, I because whether automotive. - required, And to important larger, it for TDDI be partners, very going because

are that industry of leading of we kind the in developing So, terms TDDI.

- again, happy we get also again, of with such likelihood, are reasons into up. progress. because in mentioned, speed all the display very we the touch are this I I automotives think all penetration So, And will screen of

most us. think it's business I the overall, automotive, for exciting So,

We have industry-leader.

signs and And are We end-customers. long seeing are the high with tier leading deeply term. technology. growth are us for very potential. engaged X in And All these very are we good we now

Thank you. you, thank the Donnie, So, questions. for

Donnie Teng

so thank much, - Yeah, so Congratulations again. you Jordan. you yeah, thank

Jordan Wu

Thank you.

Operator

Jordan back There for Mr. further I over to now will the in remarks. no conference questions are closing queue. hand Wu

Jordan Wu

investor marketing who As a final maintained note, continue conferences. to investor Eric activities, Officer, attend Li, have and and our IR/PR Chief

details you day. So we nice the and they announce will come as Thank about. have a

Operator

This conference participating. for concludes you thank gentlemen, and call. Ladies today's

may You disconnect. now

Himax (HIMX) 4 Feb 212020 Q4 Earnings call transcript