AXT Inc (AXTI) 2024 Q2 法說會逐字稿

Good afternoon, everyone, and welcome to AXT's second quarter 2024 financial conference call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fisher, Chief Financial Officer. My name is Christina and I'll be your coordinator today. (Operator Instructions) Thank you.

大家下午好，歡迎參加 AXT 2024 年第二季財務電話會議。今天主持會議的是執行長 Morris Young 博士和財務長 Gary Fisher。我叫克里斯蒂娜，今天我將擔任您的協調員。（操作員說明）謝謝。

I would now like to turn the call over to Leslie Green, Investor Relations for AXT.

我現在想將電話轉給 AXT 投資者關係部門的 Leslie Green。

Thank you, Christina, and good afternoon, everyone.

謝謝克里斯蒂娜，大家下午好。

Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company, market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions including trade tariffs and import and export restrictions, our ability to increase orders in succeeding quarters, to control costs and expenses, to improve manufacturing yields and efficiencies, or to utilize our manufacturing capacity.

在我們開始之前，我想提醒您，在本次電話會議期間，包括針對您的問題發表的評論，我們將提供有關未來財務業績等的預測或其他前瞻性聲明。在我們的基板上製造的晶片或設備的新興應用、我們的產品組合、全球經濟和政治狀況，包括貿易關稅和進出口限制、我們在接下來的季度增加訂單、控製成本和費用，以提高製造產量和效率，或利用我們的製造能力。

We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events or results to differ materially.

我們希望提醒您，此類陳述涉及未來事件，基於管理層當前的預期，並受到可能導致實際事件或結果產生重大差異的風險和不確定性的影響。

In addition to the matters just listed, these uncertainties and risks include but are not limited to, the financial performance of our partially owned supply chain companies, increased environmental regulation in China, and COVID-19 and other outbreaks of a contagious disease.

除了剛剛列出的事項外，這些不確定性和風險還包括但不限於我們部分持股的供應鏈公司的財務業績、中國加強的環境監管以及 COVID-19 和其他傳染病的爆發。

In addition to the factors just mentioned or that may be discussed in this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations.

除了剛才提到的或本次電話會議中可能討論的因素之外，我們建議您參閱該公司向美國證券交易委員會提交的定期報告。這些可透過我們網站的連結在線獲取，並包含有關可能導致實際結果與我們當前預期產生重大差異的風險因素的附加資訊。

This call will be available on our website at axt.com through August 1, 2025. I also want to note that shortly following the close of market today, we issued a press release reporting financial results for the second quarter of 2024. This information is also available on the investor relations portion of our website at axt.com.

本次電話會議將於 2025 年 8 月 1 日之前透過我們的網站 axt.com 進行。我還想指出，今天收盤後不久，我們發布了一份新聞稿，報告 2024 年第二季的財務表現。此資訊也可在我們網站 axt.com 的投資者關係部分取得。

I would now like to turn the call over to Gary Fischer for a review of our second quarter 2024 results.

我現在想將電話轉給加里費雪 (Gary Fischer)，以審查我們 2024 年第二季的業績。

Thank you, Leslie, and good afternoon to everyone.

謝謝你，萊斯利，祝大家下午好。

Revenue for the second quarter of 2024 was $27.9 million, up 23% from $22.7 million in the first quarter of 2024, and up 50% from $18.6 million in the second quarter of 2023. To break down our Q2 2024 revenue for you by product category, Indium phosphide was $7.7 million, reflecting continued demand from data center applications, including AI, as well as passive optical networks.

2024年第二季的營收為2,790萬美元，較2024年第一季的2,270萬美元成長23%，比2023年第二季的1,860萬美元成長50%。按產品類別細分我們 2024 年第二季的收入，磷化銦為 770 萬美元，反映了包括人工智慧和被動光網路在內的資料中心應用的持續需求。

Gallium arsenide also grew to $9.1 million, with broad-based improvement across a number of applications. Germanium substrates were $2.9 million, up from the prior quarter, with renewed strength and demand for satellite solar cells. Finally, revenue from our consolidated raw material joint venture companies in Q2 was $8.2 million, up substantially from Q1 on growing demand.

砷化鎵也成長至 910 萬美元，在許多應用領域都有廣泛的改進。隨著衛星太陽能電池的強勁成長和需求的恢復，鍺基板的銷售額較上一季成長，達到 290 萬美元。最後，由於需求不斷增長，第二季度來自我們合併的原材料合資公司的收入為 820 萬美元，較第一季大幅成長。

In the second quarter of 2024, revenue from Asia Pacific was 78%, Europe was 17%, and North America was 5%. The Top five customers generated approximately 31.8% of total revenue, and no customer was over the 10% level.

2024年第二季度，來自亞太地區的營收為78%，歐洲為17%，北美為5%。前五名客戶的收入約佔總收入的31.8%，沒有客戶超過10%的水平。

Non-GAAP gross margin in the first quarter was 27.6% compared with 27.3% in Q1 and 9.8% in Q2 of 2023. For those who prefer to track results on a GAAP basis, gross margin in the second quarter was 27.4% compared with 26.9% in Q1 and 9.2% in Q2 of 2023.

第一季非 GAAP 毛利率為 27.6%，而 2023 年第一季為 27.3%，第二季為 9.8%。對於更喜歡以 GAAP 計算業績的人來說，第二季的毛利率為 27.4%，而 2023 年第一季的毛利率為 26.9%，第二季的毛利率為 9.2%。

Moving to OpEx, total non-GAAP operating expense in Q2 was $8.9 million compared with $8.7 million in Q1 of 2024 and $7.8 million in Q2 of last year. On a GAAP basis, total OpEx in Q2 2024 was $9.5 million compared with $9.4 million in Q1 of 2024 and $8.6 million in Q2 of 2023. We expect OpEx to hold at approximately this level throughout the balance of 2024.

轉向營運支出，第二季的非 GAAP 營運支出總額為 890 萬美元，而 2024 年第一季為 870 萬美元，去年第二季為 780 萬美元。以 GAAP 計算，2024 年第二季的總營運支出為 950 萬美元，而 2024 年第一季為 940 萬美元，2023 年第二季為 860 萬美元。我們預計 2024 年營運支出將維持在這一水準左右。

Our non-GAAP operating loss for the second quarter of 2024 is $1.2 million compared with the non-GAAP operating loss in Q1 of 2024 of $2.5 million and the non-GAAP operating loss of $5.9 million in Q2 of 2023. For reference, our GAAP operating line for the second quarter of 2024 was a loss of $1.9 million compared with an operating loss of $3.3 million in Q1 and an operating loss of $6.8 million in Q2 of last year.

我們 2024 年第二季的非 GAAP 營運虧損為 120 萬美元，而 2024 年第一季的非 GAAP 營運虧損為 250 萬美元，2023 年第二季的非 GAAP 營運虧損為 590 萬美元。作為參考，我們 2024 年第二季的 GAAP 營運虧損為 190 萬美元，而去年第一季的營運虧損為 330 萬美元，去年第二季的營運虧損為 680 萬美元。

Non-operating other income and expense and other items below the operating line for the second quarter of 2024 was a net gain of $369,000. The details can be seen in the P&L included in our press release today. For Q2 of 2024, we had a non-GAAP net loss of $800,000, or $0.02 per share, compared with a non-GAAP net loss of $1.3 million, or $0.03 per share, in the first quarter of 2024. Non-GAAP net loss in Q2 of 2023 was $4.2 million, or $0.10 per share.

2024 年第二季的非營運其他收入和支出以及營運線以下的其他項目淨收益為 369,000 美元。詳細資訊可以在我們今天新聞稿中包含的損益表中看到。2024 年第二季度，我們的非 GAAP 淨虧損為 80 萬美元，即每股 0.02 美元，而 2024 年第一季的非 GAAP 淨虧損為 130 萬美元，即每股 0.03 美元。2023 年第二季的非 GAAP 淨虧損為 420 萬美元，即每股 0.10 美元。

On a GAAP basis, net loss in Q2 was $1.5 million, or $0.04 per share. By comparison, net loss was $2.1 million, or $0.05 per share in the first quarter of 2024. And the GAAP net loss in Q2 of last year was $5.1 million, or $0.12 per share. The weighted average basic shares outstanding in Q2 was $43.1 million. Cash, cash equivalents, and investments increased by $2 million to $43.3 million as of June 30. By comparison, at March 31, it was $41.3 million.

以 GAAP 計算，第二季淨虧損為 150 萬美元，即每股 0.04 美元。相比之下，2024 年第一季的淨虧損為 210 萬美元，即每股 0.05 美元。去年第二季的 GAAP 淨虧損為 510 萬美元，即每股 0.12 美元。第二季已發行加權平均基本股為 4,310 萬美元。截至 6 月 30 日，現金、現金等價物和投資增加 200 萬美元，達到 4,330 萬美元。相比之下，截至 3 月 31 日，這一數字為 4,130 萬美元。

Depreciation and amortization in the second quarter was $2.2 million. Total stock comp was $700,000. Net inventory was down slightly in the second quarter to $85.8 million. This includes inventory added through our recycling program. 34% of the inventory is raw materials and WIP is 64%. Finished goods makes up only about 2%. With improving demand, we hope to continue to bring our total inventory down in 2024.

第二季的折舊和攤提為220萬美元。總股票補償為 700,000 美元。第二季淨庫存小幅下降至 8,580 萬美元。這包括透過我們的回收計劃添加的庫存。庫存的 34% 為原料，WIP 為 64%。製成品僅佔2%左右。隨著需求的改善，我們希望在 2024 年繼續降低總庫存。

Okay, this concludes the discussion of our quarterly financial results.

好的，我們季度財務表現的討論到此結束。

Turning to our plan to list our subsidiary, Tongmei in China, on the STAR Market in Shanghai. We continue to make positive progress and have been in active discussions with the Shanghai Stock Exchange. Recent developments have been encouraging. We have kept our application current while many other Shanghai Stock Exchange applicants in the queue have been dismissed for business, financial, or other shortcomings.

談到我們計劃將中國子公司同美在上海科創板上市。我們繼續取得積極進展，並一直在與上海證券交易所積極討論。最近的事態發展令人鼓舞。我們一直保持我們的申請處於最新狀態，而排隊中的許多其他上海證券交易所申請人已因業務、財務或其他缺陷而被駁回。

We expect to continue to work through this process during the summer and hope to have more news in the fall. As we've consistently said, this is a lengthy process but we continue to believe that Tongmei is an excellent candidate for the listing.

我們預計將在夏季繼續完成這一過程，並希望在秋季收到更多消息。正如我們一直所說，這是一個漫長的過程，但我們仍然相信同美是上市的絕佳候選人。

Okay. With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris?

好的。現在，我將把電話轉給莫里斯楊博士，以審查我們的業務和市場。莫里斯？

Thank you, Gary. Q2 was another solid quarter of growth with our revenue up 23% sequentially and more than 50% year-over-year. In addition our non-GAAP net loss was smaller than our earlier guidance. We saw good performance in indium phosphide substrates and healthy growth in gallium arsenide and germanium substrates.

謝謝你，加里。第二季度又是穩健成長的季度，我們的營收季增 23%，年增超過 50%。此外，我們的非公認會計原則淨虧損小於我們先前的指導。我們看到磷化銦基板的良好性能以及砷化鎵和鍺基板的健康生長。

Our raw material business was also up substantially over Q1. Overall, we're encouraged by the science of addition adoption in new applications such as AI as well as ongoing broader based market recovery. The magnitude of the revenue improvement is good news, we are encouraged. We're expecting the recovery to be somewhat lumpy quarter-to-quarter as the various segments work their way back to more normalized seasonality.

我們的原料業務也較第一季大幅成長。總體而言，我們對人工智慧等新應用程式的進一步採用以及正在進行的更廣泛的市場復甦感到鼓舞。收入改善的幅度是好消息，我們感到鼓舞。我們預計，隨著各個細分市場逐漸恢復到更正常化的季節性，季度與季度之間的復甦將有些起伏。

As we come into the second half of this year, we're feeling very good about our progress as a company and our ability to support exciting new growth, new high-value applications. Looking individually at our product lines, indium phosphide grew 67% in Q2 over the same quarter a year ago. That growth has been a function of continued recovery in the power market and a meaningful increase in demand related to high-speed optical connectivity and AI.

進入今年下半年，我們對公司的進步以及支持令人興奮的新成長、新高價值應用的能力感到非常滿意。從我們的產品線來看，第二季磷化銦比去年同期成長了 67%。這種成長是電力市場持續復甦以及高速光連接和人工智慧相關需求顯著增長的結果。

Today, AI applications are primarily using gallium arsenide VCSEL for shorter-range transmissions, which require a relatively small amount of substrate material. But as the industry moves to 800 gig for medium to long distance transmission beginning in 2025, and then to 1.6 terabit speed, we expect that indium phosphide will be a necessary material.

如今，人工智慧應用主要使用砷化鎵 VCSEL 進行短距離傳輸，這需要相對少量的基板材料。但隨著該行業從 2025 年開始將中長距離傳輸速度提升至 800 gig，然後再提升至 1.6 太比特速度，我們預計磷化銦將成為必要的材料。

We're already seeing development work happening today with next generation silicon photonics devices and electro-absorption modulated lasers or EMLs for high-speed data center receivers. Those technologies use significantly more material than a gallium arsenide VCSEL.

今天，我們已經看到了用於高速資料中心接收器的下一代矽光子元件和電吸收調製雷射或 EML 的開發工作。這些技術使用的材料比砷化鎵 VCSEL 多得多。

We have strong contribution in Q1 and Q2 from these applications. And while we always caution investors that the timing of pre-production orders can vary, market trends and customer data points give us confidence in the growth potential of these emerging applications over the coming years.

這些應用程式在第一季和第二季做出了巨大貢獻。雖然我們總是提醒投資人預生產訂單的時間可能會有所不同，但市場趨勢和客戶數據點讓我們對這些新興應用在未來幾年的成長潛力充滿信心。

Our gallium arsenide outside revenue grew 22% in Q2 and are up 50% from our revenue level in Q4 of 2023. This increase reflects demand across a broad base of applications, including HPT power amplifiers, applications for wireless switches, high-power industrial lasers, and LEDs.

我們的砷化鎵外部營收在第二季度成長了 22%，比 2023 年第四季的營收水準成長了 50%。這一增長反映了廣泛應用的需求，包括 HPT 功率放大器、無線開關應用、高功率工業雷射和 LED。

Coming off two quarters of strong growth and some fluctuation in the industrial market, we're expecting a moderation of our gallium arsenide sales in Q3. But we don't believe there is much excess inventory in the supply chain. We expect to continue to benefit from strengthening global demand as it occurs.

經過兩個季度的強勁成長和工業市場的一些波動，我們預計第三季砷化鎵銷售將放緩。但我們不認為供應鏈有太多過剩庫存。我們預計將繼續受益於全球需求的增強。

In addition, our gallium arsenide recycling effort has been highly successful. We are now fully licensed and processing materials that we collected over time but did not have the capability to recycle. This is visible to the investment community in both our revenue and gross margin at JinMei, one of our raw material joint venture up companies. These efforts also advance our ESG commitments and drive meaningful efficiencies in our manufacturing.

此外，我們的砷化鎵回收工作也非常成功。我們現在擁有完全許可，可以處理我們長期收集但沒有能力回收的材料。投資界可以從我們的原料合資公司之一的金美收入和毛利率上看到這一點。這些努力也推進了我們的 ESG 承諾，並顯著提高了我們的製造效率。

Turning to germanium substrates. Demand for satellite solar cells, which was down substantially throughout 2023, is now showing recovery. Our sales more than doubled in Q2 over the prior quarter. With renewed strains in Europe and Asia, a portion of the strains was due to the timing of orders, which fell into Q2 rather than Q3. As such, we don't expect to see quite as strong results in Q3 of this year, but still a significant improvement from this time last year.

轉向鍺襯底。衛星太陽能電池的需求在 2023 年大幅下降，但目前已出現復甦。我們第二季的銷售額比上一季成長了一倍以上。隨著歐洲和亞洲疫情再次出現緊張，部分緊張是由於訂單時間安排造成的，訂單時間落在第二季而不是第三季。因此，我們預計今年第三季的業績不會那麼強勁，但仍較去年同期有顯著改善。

And finally, our raw material business. It grew more than 40% in Q2, both on growing demand and the success of our recycling effort. Our portfolio of joint ventures, raw material companies, continues to be a strategic value to our business and they are contributing positively to our results.

最後是我們的原料業務。由於需求的成長和我們回收工作的成功，第二季的成長超過 40%。我們的合資企業、原材料公司組合仍然對我們的業務具有戰略價值，它們為我們的業績做出了積極貢獻。

In closing, we are optimistic about the growth and expansion of our business over the coming quarters. Across our portfolio products, the style of recovery are tangible, and though we expect some lumpiness quarter-to-quarter. We have positioned ourselves well for success in this highly dynamic technology landscape.

最後，我們對未來幾季業務的成長和擴張感到樂觀。在我們的投資組合產品中，復甦的方式是有形的，儘管我們預計每個季度都會出現一些波動。我們已做好充分準備，以便在這個高度動態的技術領域中取得成功。

Looking ahead, new catalysts such as AI are providing strong incremental opportunity that is likely to accelerate as we move into 2025. This can significantly benefit our indium phosphide business. Further, we remain highly focused on accelerating our return to profitability and looking forward to reporting to you our progress.

展望未來，人工智慧等新催化劑正在提供強大的增量機會，隨著我們進入 2025 年，這種機會可能會加速。這可以顯著有利於我們的磷化銦業務。此外，我們仍然高度關注加速恢復盈利，並期待向您報告我們的進展。

With that, I will turn the call back to Gary for third quarter guidance. Gary?

這樣，我將把電話轉回給加里，尋求第三季的指導。加里？

Thank you, Morris. In keeping with our comments today, we expect Q3 revenue to be between $25.0 million and $27.0 million. We expect our non-GAAP net loss will be in the range of $0.06 to $0.08 and GAAP net loss will be in the range of $0.07 to $0.09. We expect share count will be approximately 43.1 million shares.

謝謝你，莫里斯。根據我們今天的評論，我們預計第三季營收將在 2,500 萬美元至 2,700 萬美元之間。我們預計非 GAAP 淨虧損將在 0.06 至 0.08 美元之間，GAAP 淨虧損將在 0.07 至 0.09 美元之間。我們預計股票數量約為 4310 萬股。

Okay, this concludes our prepared comments. Morris and I would be glad to answer your questions now. Christina, operator, you can take over now.

好的，我們準備好的評論到此結束。莫里斯和我現在很高興回答你的問題。克里斯蒂娜，接線員，你現在可以接手了。

(Operator Instructions) Charles Shi, Needham.

（操作員說明）Charles Shi，Needham。

Hey, good afternoon. Maybe the first question, I want to get a little bit more color on the Q3 guidance. Looks like $26 million at the midpoint, slightly down from the Q2 level. I think in the preparing marks, you already mentioned maybe some degree of moderation in gallium arsenide.

嘿，下午好。也許是第一個問題，我想對第三季的指導意見有更多的了解。中間值看起來為 2600 萬美元，略低於第二季的水平。我認為在準備過程中，您已經提到了砷化鎵可能有一定程度的節制。

Maybe even you talk about some of that in germanium as well. But wonder, is indium phosphide a raw material, is the other two product categories holding up or what's the general sense right now?

也許你也談過一些關於鍺的事情。但想知道，磷化銦是一種原料嗎？

Sure, Charles. I think raw material is probably going to hold up. I think it's probably going to be the same level as Q2. Indium phosphide, my feeling is, the order we got from AI for Q1 and Q2, we're not counting on it to continue as of yet.

當然，查爾斯。我認為原料可能會持續下去。我認為這可能會與第二季相同。磷化銦，我的感覺是，我們從 AI 獲得的第一季和第二季的訂單，我們目前還不指望它會繼續下去。

But because it's a sort of a startup business, so order can come in anytime. If that were to come in, then we can probably sort of maintain our same level as Q2. But at this point, we’re not -- we're discounting that. So with that, say negative, indium phosphide standard will provide the growth.

但因為它是一種新創企業，所以訂單可以隨時收到。如果發生這種情況，那麼我們可能可以維持與第二季度相同的水平。但在這一點上，我們並沒有——我們正在低估這一點。因此，從負面來看，磷化銦標準將提供成長。

And as you know, telecom and datacom -- regular datacom business, there are still some inventory to be digested in Q3. So that's not going to provide growth. So as I said, I think we had a very good strong growth provided by AI applications in Q1 and Q2. And Q3, we are not counting on that at this point.

如您所知，電信和數據通訊——常規數據通訊業務，第三季仍有一些庫存需要消化。所以這不會帶來成長。正如我所說，我認為人工智慧應用在第一季和第二季帶來了非常強勁的成長。第三季度，我們目前並不指望這一點。

Yeah, what I would add too is that the orders are a bit, jumping around some. Some of the stuff that we thought was going to come in Q3 came in in Q2. But I think the key thing for us is we are getting the orders. We're not losing market share and we're in very close communication with our customers and there's lots of transparency on both sides. So I think we're in a good spot.

是的，我還要補充的是，訂單有點跳躍。我們認為將在第三季推出的一些內容在第二季推出。但我認為對我們來說最重要的是我們得到訂單。我們並沒有失去市場份額，而且我們與客戶保持著非常密切的溝通，雙方都有很大的透明度。所以我認為我們處於一個很好的位置。

Yeah, Thanks. Morris, I think there are some new languages around your AI opportunity this quarter. I thought we went through this exercise for a few quarters. And I think you and I were thinking maybe the indium phosphide opportunity you were seeing in the prior quarters are more for like photo detectors, some really advanced photo detector.

是的，謝謝。Morris，我認為本季圍繞您的人工智慧機會出現了一些新語言。我認為我們已經進行了幾個季度的這項練習。我想你和我都在想，也許你在前幾個季度看到的磷化銦機會更多地適用於光電探測器，一些真正先進的光電探測器。

But this quarter sounds like you're gaining some confidence that the indium phosphide substrates are actually going into the optical transceivers. Wonder if there's any new data points that lead to this slight change in how you think about the end application of the indium phosphide?

但本季聽起來您似乎對磷化銦基板實際上進入光收發器有了一些信心。想知道是否有任何新的數據點導致您對磷化銦最終應用的看法發生微小的變化？

Well, I'm not so sure. I've got the, I mean, we have the confidence it’s going into AI, but I'm not sure what specific application it is. It is a -- I think it is a transceiver. But I think what we are -- we're not seeing a continued order from our customer as of now yet. We're seeing maybe there are some market adoption for the time being. And it will come, hopefully, later this quarter and definitely to the second part of this year.

嗯，我不太確定。我的意思是，我們有信心它進入人工智慧領域，但我不確定它的具體應用是什麼。它是一個——我認為它是一個收發器。但我認為我們現在還沒有看到客戶的持續訂單。我們看到暫時可能有一些市場採用。希望它會在本季晚些時候到來，而且肯定會在今年下半年到來。

And I'm not sure we're intelligent in terms of knowledge level to know precisely where the indium phosphide is going into AI. There may be more than one application within AI.

我不確定我們的知識水平是否足夠聰明，能夠準確地知道磷化銦將進入人工智慧的哪個領域。人工智慧領域可能有不只一種應用。

Yeah, as we discussed with you, I think we know that our end customer definitely told us it's for AI. Our second level, in other words, epi customers are telling us it's for AI and they're also telling us who they are selling to. And end customer application, I don't want to name them now, I discovered this, but I think it's well known. But it's what specific application is used for, we don't know yet.

是的，正如我們與您討論的那樣，我想我們知道我們的最終客戶肯定告訴我們這是針對人工智慧的。換句話說，我們的第二層是 Epi 客戶告訴我們這是用於人工智慧的，他們也告訴我們他們的銷售對像是誰。至於最終客戶應用程序，我現在不想命名它們，我發現了這一點，但我認為它是眾所周知的。但具體用途是什麼，我們還不知道。

Absolute knowledge, yeah. When you find out, Charles, let us know though, okay?

絕對的知識，是的。查爾斯，當你發現後請告訴我們，好嗎？

Okay. So maybe the last question I still want to ask about this indium phosphide. I think over the past three months, we did hear from some of the optical transceiver companies basing the North America, talking about the potential indium phosphide shortage over the next five years, as well things like you mentioned the 800 gig plus transceivers ramps up in higher volume.

好的。所以也許我仍然想問的最後一個問題是關於磷化銦的。我想在過去的三個月裡，我們確實聽到一些北美光收發器公司的消息，談論未來五年潛在的磷化銦短缺，以及像您提到的800 gig 以上收發器在2019 年增加的情況。

We know you're important player, but you do have a competition. So want to get your thoughts on whether you see a shortage, could be an issue or not, and whether that particular end customer talking about shortage, are they talking about any specific supplier in mind or they're giving a broad market comment which could mean something quite positive for AXT going into the next few years as AI ramps up.

我們知道你是重要的球員，但你確實面臨競爭。因此，想了解您是否認為短缺可能是一個問題，以及特定的最終客戶是否在談論短缺，他們是否在談論任何特定的供應商，或者他們正在給出廣泛的市場評論，這可能會導致供應商短缺。

Yeah, I would definitely think in our end as far as substrate is concerned, Charles, we're confident we have the best technology in terms of EPD, in terms of commercial availability, and ability to expand our expansion, because we have a very good supply chain, supplier through our joint ventures.

是的，我肯定會認為，就基材而言，查爾斯，我們相信我們在 EPD、商業可用性和擴展能力方面擁有最好的技術，因為我們有良好的供應鏈，透過我們的合資企業供應。

And as you know that our indium phosphide revenue at this point is only half of what we, the peak level was. So definitely we can we can grow to that level. And as you also recall on that upcycle we grew our indium phosphide revenue 50% year-over-year for two years in a row. Okay.

如您所知，我們目前的磷化銦收入僅為峰值水準的一半。所以我們絕對可以成長到那個層次。您還記得，在這個升級週期中，我們的磷化銦收入連續兩年年增 50%。好的。

So we definitely don't feel any difficulties of expanding our capability to provide more substrate. As far as technology is concerned, we are developing six-inch indium phosphide capability And our four-inch is growing very good. On technology front, we also applied two very good technology development over the last six months or so.

因此，我們絕對不會覺得擴大我們提供更多基材的能力有任何困難。就技術而言，我們正在開發六英寸磷化銦能力，而且我們的四英寸發展得非常好。在技​​術方面，我們在過去六個月左右的時間裡也應用了兩項非常好的技術開發。

So that enables us to have much better yield and so we can have better quality material and controlling our costs. So if you know anybody who feel there’s a potential shortage of indium phosphide, go talk to them and we can sign long-term deals. We will guarantee supplies.

這使我們能夠獲得更好的產量，從而獲得更優質的材料並控製成本。因此，如果您認識任何認為磷化銦可能短缺的人，請與他們交談，我們可以簽署長期協議。我們將保證供應。

I'm not sure that's my business but thanks for the answers. Thanks, Morris. Thanks, Gary. That's all for me.

我不確定這是我的事，但感謝您的回答。謝謝，莫里斯。謝謝，加里。這就是我的全部。

Good questions, Charles.

好問題，查爾斯。

Richard Shannon, Craig-Hallum Capital Group.

理查德·香農，克雷格-哈勒姆資本集團。

Hi, Morris and Gary. Thanks for taking my questions as well. I guess someone to take a point of view past this third quarter you just guided to where your body language sounds fairly positive across most of your business here and maybe kind of push you to give us some sense of what you're seeing not only for the fourth quarter qualitatively.

嗨，莫里斯和加里。也感謝您回答我的問題。我想有人在第三季之後採取了一種觀點，你剛剛引導到你的肢體語言在你的大部分業務中聽起來相當積極，也許會促使你讓我們對你所看到的有所了解，而不僅僅是為了第四季度的品質。

Are you seeing any improvement or possibility of improvement across any of these segments? And then maybe more broadly and higher level, how or what kind of -- what your conversation with customers give you about confidence going into 2025?

您是否發現這些細分市場有任何改進或改進的可能性？然後，也許更廣泛、更高層次，您與客戶的對話如何或以何種方式讓您對進入 2025 年充滿信心？

Sure, Richard. I think, from my perspective, I think obviously, we cover a lot of market segment, okay? So if I were to pick one of my favorite, which is indium phosphide, I think the excitement of using it in AI, it definitely excites me.

當然，理查德。我認為，從我的角度來看，我認為顯然我們涵蓋了許多細分市場，好嗎？因此，如果我要選擇我最喜歡的一種，那就是磷化銦，我認為在人工智慧中使用它的興奮感絕對讓我興奮。

We are in talk with customers about potentially running in commercial applications, although I don't know the exact timing of it, but I think our customers are increasing their trial order from 100 wafers to 200 wafer per month and whether they start coming the first quarter or first quarter of next year, that's questionable.

我們正在與客戶討論可能在商業應用中運行的問題，雖然我不知道確切的時間，但我認為我們的客戶正在將他們的試訂單從每月100 片晶圓增加到200 片晶圓，以及他們是否開始第一個來明年季度或第一季度，這是值得懷疑的。

And as far as the PONs market and telecom market is concerned, I mean, we hear there are data center business is still sort of lagging and telecom market is not doing very well. But I think things this will start to digest its inventory and hopefully, that we can have some recovery for the PONs market as well as the regular data center market, right?

就 PON 市場和電信市場而言，我的意思是，我們聽說資料中心業務仍然有點滯後，而電信市場表現不佳。但我認為這將開始消化其庫存，並希望 PON 市場以及常規資料中心市場能夠有所復甦，對嗎？

So as far as gallium arsenide is concerned, we are seeing good growth in terms of HPTs because our customers are sort of worried about diversifying their supply chain for wireless HPTs. So we hope that HPT would continue to grow, as far as industrial applications, we are seeing some softness in the LEDs where customers are telling us that they are seeing the third quarter slowing down a bit.

因此，就砷化鎵而言，我們在 HPT 方面看到了良好的成長，因為我們的客戶有點擔心無線 HPT 供應鏈的多樣化。因此，我們希望 HPT 能夠繼續成長，就工業應用而言，我們看到 LED 出現一些疲軟，客戶告訴我們，他們看到第三季的成長略有放緩。

But I don't know whether it's going to continue in Q4 or not, that I don't know. As far as industrial laser for gallium arsenide is concerned, again, it's softer for Q3 than Q2, but I don't have much visibility into Q4 yet. As far as satellite communication is concerned, I think Q2 was a very strong quarter and Q3 slowed down a bit.

但我不知道第四季是否會繼續，我不知道。就砷化鎵工業雷射而言，第三季比第二季更軟，但我對第四季還沒有太多了解。就衛星通訊而言，我認為第二季度是一個非常強勁的季度，第三季度略有放緩。

But if you hear that the low orbit satellite, which is going to fill in the gap for 5G Plus telecom network, then I think Elon Musk is talking about launching another 40,000 satellite and China has a plan to launch another 15,000. So that market can grow rapidly, although I think I'm worried about that market a bit is because germanium material is a fairly sensitive part of our cost of goods sold.

但如果你聽說低軌道衛星將填補 5G Plus 電信網路的空白，那麼我認為馬斯克正在談論再發射 40,000 顆衛星，而中國計劃再發射 15,000 顆衛星。因此，這個市場可以快速成長，儘管我認為我有點擔心這個市場，因為鍺材料是我們銷售商品成本中相當敏感的部分。

So although the market potential to grow is very, very big, but we will need to see what's the cost of goods sold or raw material is going to be. And our raw material is shaping up to be a very good supply chain supply line. You can see that we have almost 40% growth last quarter. And I think Q3 is going to hold up on the same supply, and we have more supply chain joint ventures to join us in the coming quarters. So I think our supply chain joint venture is giving us good growth opportunity as well.

因此，儘管市場成長潛力非常非常大，但我們需要看看銷售商品或原材料的成本是多少。我們的原料正在成為一個非常好的供應鏈供應線。您可以看到上個季度我們的成長率接近 40%。我認為第三季的供應量將保持不變，並且在未來幾季我們將有更多的供應鏈合資企業加入我們。因此，我認為我們的供應鏈合資企業也為我們帶來了良好的成長機會。

Yeah. I want to add a perspective that I think is useful and it sort of differentiates us from the traditional sort of chip companies in the semiconductor industry, which is that we have a record where our products and product segments have a very long positive trajectory.

是的。我想補充一個我認為有用的觀點，它在某種程度上將我們與半導體行業的傳統晶片公司區分開來，那就是我們的產品和產品細分市場有著非常長的積極發展軌跡。

So we all know that if you're making chips, you've really got to rotate one out and a new one in, maybe every 18 months. But we first got traction in indium phosphide with passive optical networks back in 2013 and '14, but it's still a market that exists.

所以我們都知道，如果你正在製造晶片，你確實必須更換一個晶片，然後更換一個新晶片，也許每 18 個月一次。但我們在 2013 年和 14 年首次透過被動光網路引入磷化銦，但它仍然是一個存在的市場。

And so almost all the markets that we touch, while they may go up and down some, but the long five to 15-year path is generally upward and to the right. So we think we're well positioned for growth across a number of markets and gives us the ability to deliver strong results going into 2025. The strong second quarter that we just had puts our first half run rate just over $50 million. So we're now targeting to be in triple digits once again. So that just gives a little color, I think so. Next question.

因此，幾乎我們接觸的所有市場，雖然它們可能會上下波動，但 5 到 15 年的漫長路徑通常是向上和向右的。因此，我們認為我們已做好在多個市場實現成長的有利準備，並使我們有能力在 2025 年之前取得強勁業績。我們剛經歷的第二季的強勁表現使我們上半年的運行率略高於 5000 萬美元。因此，我們現在的目標是再次達到三位數。所以這只是給了一點顏色，我想是的。下一個問題。

Thanks for all that. Maybe I'll dig in a little bit on the indium phosphide and AI angle here. Maybe you can give us a perspective of the customer base here and really kind of digging not just into your direct customer but the end customer, which you seem to have visibility in certain cases.

感謝這一切。也許我會在這裡深入探討一下磷化銦和人工智慧的角度。也許您可以讓我們了解這裡的客戶群，並且不僅深入挖掘您的直接客戶，還深入挖掘最終客戶，在某些情況下您似乎可以看到最終客戶。

To what degree are these transceiver and ultimately end users, which I assume are to a large degree, hyperscalers, to what degree are those Chinese or Western world customers?

這些收發器和最終用戶（我認為在很大程度上是超大規模用戶）在多大程度上是中國或西方世界的客戶？

I think at this point, we understand it's definitely Western world customers. So the way I understand, Richard, this is, okay, I mean, if I look at it from 25,000 feet up, what is AI? You need competition, you need data source, and lastly, you need to transfer this data very rapidly and a massive amount, okay?

我想在這一點上，我們知道這絕對是西方世界的客戶。理查德，我的理解是，好吧，我的意思是，如果我從 25,000 英尺高的地方看，什麼是人工智慧？你需要競爭，你需要資料來源，最後，你需要非常快速、大量地傳輸這些數據，好嗎？

I think the first one to go is a short distance, which is VCSEL using the optical cable. And as the short distance communication speeds up, then you're looking at sort of medium range and long range. I think that's where I think indium phosphide will start to shine.

我覺得第一個走的是短距離，就是利用光纜的VCSEL。隨著短距離通訊速度的加快，您將開始考慮中距離和長距離通訊。我認為這就是磷化銦將開始發光的地方。

And so you're talking about whether it's going to be an EML or silicon photonics, okay? And as the speed goes up, as the data transfer needs to get more and more, definitely that we're confident it's going to grow, okay? And it doesn't need a whole lot of market growth to move our needle, as you know.

所以你討論的是 EML 還是矽光子學，好嗎？隨著速度的提高，資料傳輸的需要越來越多，我們肯定有信心它會成長，好嗎？正如你所知，它不需要大量的市場成長來推動我們的發展。

And I think the other thing is, I think if you look at indium phosphide now, it looks like it's sort of waiting for its next growth opportunity. But look at it, I mean, when the consumer products started to grow two years ago, our revenue on indium phosphide zoomed almost 50% year-over-year for two years in a row.

我認為另一件事是，如果你現在看看磷化銦，它看起來像是在等待下一個成長機會。但我的意思是，當消費產品兩年前開始成長時，我們磷化銦的營收連續兩年年增近 50%。

And so that shows that we have the capability to make the supply chain satisfied. I mean, customers are very happy with us. I mean the fact that they didn't adopt in the next-generation form is not because of us. And I know there are other customers and other applications potentially that are using indium phosphide such as following eyeball or glucose monitoring or --

這顯示我們有能力讓供應鏈滿意。我的意思是，客戶對我們非常滿意。我的意思是他們沒有採用下一代形式並不是因為我們。我知道還有其他客戶和其他應用可能正在使用磷化銦，例如眼球或血糖監測或--

Consumer applications.

消費者應用程式。

Yeah, consumer applications. It's poised to grow because it's a special ability to work in the far infrared range. So it's not because of us. It's material characteristics. It will just shine in certain applications. I think it will come.

是的，消費者應用程式。它有望發展，因為它具有在遠紅外線範圍內工作的特殊能力。所以不是因為我們。這是物質特性。它只會在某些應用中大放異彩。我想它會來的。

Okay. Fair enough. Kind of a two-part question. It's probably mostly for Gary, kind of more on the financial side here. But last quarter, you talked about driving inventory down $10 million. This quarter, you just said downwards is $10 million still possible there. And then also on the last conference call, you talked about the potential for hitting breakeven in the fourth quarter. Just curious whether you still think that's possible. Thanks.

好的。很公平。這是一個由兩部分組成的問題。這可能主要是為了加里，更多的是為了財務方面。但上個季度，您談到將庫存減少 1000 萬美元。本季度，您剛才說仍有可能下降 1000 萬美元。在上次電話會議上，您談到了第四季度實現損益平衡的潛力。只是好奇你是否仍然認為這是可能的。謝謝。

Breakeven, I think, is still possible. Again, as we've said before, it's going to depend on volume, of course, and mix. So it's definitely something that we would strive to achieve. So bringing inventory down remains a priority for us. What clouds the picture a bit is that we've had great success in our recycling program. So you don't see the full effect of our inventory reduction efforts in the numbers.

我認為，盈虧平衡仍然是可能的。同樣，正如我們之前所說，這當然取決於數量和混合。所以這絕對是我們會努力實現的目標。因此，降低庫存仍然是我們的首要任務。令人有點困惑的是，我們的回收計畫取得了巨大的成功。因此，您無法從數字中看到我們減少庫存努力的全部效果。

Our largest target is indium phosphide for inventory reduction. And as our revenue grows, we expect to be in a good position to bring the inventory down. I have to say openly to the community that it's taking longer than I thought. But we understand why, and we're working it. So we haven't taken our eye off the ball. It just hasn't happened as quickly as I hoped.

我們最大的目標是磷化銦，以減少庫存。隨著我們收入的成長，我們預計能夠處於有利地位來降低庫存。我必須公開地向社區表示，這比我想像的要花更長的時間。但我們明白其中的原因，並且正在努力解決。所以我們並沒有把注意力從球上移開。只是事情沒有我希望的那麼快發生。

Yeah. Richard, I think Gary is definitely right about indium phosphide inventory and because the demand all of a sudden drops in Q3 -- I mean, 2023, that sort of forced us to have -- as you know, you need to build inventory to supply into the customers and all of a sudden, they put a stop to it, that's why the buildup was. But I think the good part of it is that those indium phosphide would never be written off or written down because they are as good as gold. I mean, if anything, the value will go up rather than go down.

是的。理查德，我認為加里關於磷化銦庫存的說法絕對是正確的，因為第三季度的需求突然下降——我的意思是，2023 年，這迫使我們——如你所知，你需要建立庫存來供應進入客戶，突然之間，他們停止了這種行為，這就是堆積的原因。但我認為其中好的部分是，那些磷化銦永遠不會被註銷或減記，因為它們和黃金一樣好。我的意思是，如果有的話，價值將會上升而不是下降。

Okay. Fair enough. Thanks, guys.

好的。很公平。謝謝，夥計們。

Thanks, Richard.

謝謝，理查。

Tim Savageaux, Northland Northland Capital.

薩瓦喬 (Tim Savageaux)，北國北國首都。

Hi, good afternoon. I wanted to go back to the kind of capacity/shortage question. You mentioned, Morris, I think, talking about indium phosphide trial orders for customers going from 100 to 200 wafers. And I'm getting the sense that a lot of what's occurred to date has been that kind of development sort of activity.

嗨，下午好。我想回到容量/短缺問題。我想，莫里斯，你曾提到為客戶提供 100 至 200 片晶圓的磷化銦試訂單。我感覺迄今為止發生的很多事情都是這種開發活動。

But I guess my question -- my first question is, are you getting a sense as we kind of move forward in the year here, what production volumes might look like in the future relative to the trial volumes that you just discussed? And I'll follow up from there.

但我想我的問題是——我的第一個問題是，隨著我們今年的進展，您是否感覺到，相對於您剛才討論的試驗量，未來的產量可能會是什麼樣子？我將從那裡跟進。

Yeah, I think, first of all, most of our customers, they gave us forward guidance, okay? I mean, one specific data center customer, silicon photonics, I mean, they gave us forward guidance. So that is production, but they can change. For instance, that customer when the market was really slow, they told us they had inventory, they went as low as, let's say, 400 wafer a month and they told us it's going to grow to 900 a month in the fourth quarter.

是的，我認為，首先，我們的大多數客戶，他們給了我們前瞻性的指導，好嗎？我的意思是，一個特定的資料中心客戶，矽光子學，我的意思是，他們給了我們前瞻性的指導。這就是生產，但它們可以改變。例如，當市場非常緩慢時，該客戶告訴我們他們有庫存，他們的庫存低至每月 400 片，他們告訴我們第四季將成長到每月 900 片。

We cannot hold them to it, but usually, they do deliver. Okay? That's one example of what customer will give us forecast. And on the pilot production customer is concerned 100 to 200 trial order, I think we're hopeful, but they don't tell us when it's going to start in production. They do give us a volume forecast. That's how we negotiate sort of a forward-looking total price package.

我們不能讓他們堅持下去，但通常情況下，他們確實會兌現承諾。好的？這是客戶向我們做出預測的一個例子。關於試生產，客戶關心的是100到200個試訂單，我認為我們充滿希望，但他們沒有告訴我們什麼時候開始生產。他們確實給了我們銷售預測。這就是我們協商前瞻性總價方案的方式。

But I don't know whether I can hold them to that or not, but they're talking about thousands of wafers, okay? So you can say, if they go to 100 to 200, definitely the minimum level is 1,000 before we're going to give them a big discount, okay? But whether they go to 1,500 or 2,000, it's -- I mean, last time when consumer products start to boom it was in the 5,000.

但我不知道我是否可以讓他們堅持這一點，但他們正在談論數千個晶圓，好嗎？所以你可以說，如果他們達到100到200，肯定最低水準是1000，然後我們才會給他們很大的折扣，好嗎？但無論是 1,500 還是 2,000，我的意思是，上次消費品開始繁榮時是在 5,000。

Yeah, Tim, what I would say is that we have very strong convictions about these markets for indium phosphide. We don't have quite as much clarity on quarter-to-quarter. But we definitely see that these things are coming.

是的，提姆，我想說的是，我們對這些磷化銦市場抱持著非常堅定的信念。我們對季度與季度的情況不太清楚。但我們確實看到這些事情即將到來。

And I've mentioned this, I think, in the past, but I want to remind you that in the last five years, we have significantly upgraded our facility in Beijing, where we manufacture the indium phosphide. Customers have toured it and have been very impressed, and we've added capacity.

我想，我過去曾提到過這一點，但我想提醒大家，在過去五年中，我們對北京的工廠進行了重大升級，我們在那裡生產磷化銦。客戶參觀過它並留下了深刻的印象，我們增加了容量。

So I don't think -- we're not losing sleep about total capacity capabilities. So -- and we will have enough advanced knowledge and awareness when it's time to add more equipment, but that's going to be the issue. It's not -- it's probably not going to be facilities now, which is good. It will be equipment. And we're set up to be able to do that relatively quickly for a manufacturing company. So I think we're really in a great spot. And when it comes, it's going to be a lot of fun.

所以我不認為──我們不會因為總容量而失眠。因此，當需要添加更多設備時，我們將擁有足夠的先進知識和意識，但這將是問題所在。現在可能不再是設施了，這很好。這將是裝備。我們的目標是能夠相對快速地為製造公司做到這一點。所以我認為我們真的處於一個很好的位置。當它到來時，將會非常有趣。

All right. Looking forward to that. And along those lines, and you mentioned you're, I guess, a little bit below half your previous peak in terms of indium phosphide revenue, but my question kind of goes to what you were just saying, Gary, which is you're talking some examples here of some of these pilot volumes going up by a factor of 10 or five or 10 or something like that. But what is your -- could you estimate for us your maximum kind of quarterly revenue capacity in indium phosphide right now without adding any new gear or space?

好的。對此充滿期待。沿著這些思路，你提到你的磷化銦收入略低於之前峰值的一半，但我的問題是你剛才說的，加里，你是這裡舉一些例子，其中一些試點數量增加了10 倍、 5 倍、10 倍或類似的數量。但是，您能在不增加任何新設備或空間的情況下為我們估算一下您目前磷化銦的最大季度收入能力嗎？

I'll let Morris give the forward look, but let's just look -- I'm just quickly looking back to confirm my memory in real life, we got as high in terms of indium phosphide revenue as $17.7 million, okay? So -- and we haven't subtracted capacity. So I think it's pretty easy to say for me it's just a mere accounting thing. Well, we could at least get to $17.7 million. But I know Morris will say we could do more than that.

我會讓莫里斯展望一下，但讓我們看看——我只是快速回顧一下以確認我在現實生活中的記憶，我們的磷化銦收入高達 1770 萬美元，好嗎？所以——我們沒有減少容量。所以我認為這對我來說很容易說這只是一個純粹的會計問題。好吧，我們至少可以拿到 1770 萬美元。但我知道莫里斯會說我們可以做得更多。

Yeah, there are two factors. One is that we have substantially upped our yield. Don't tell our customers that. So that will enable us to increase our capability to deliver more wafers. But on the downside, and also will shave off our costs. But on the downside, as you know, every cycle brings the piranhas, the customer when they have the order in hand, they want lower price.

是的，有兩個因素。一是我們大幅提高了產量。不要告訴我們的客戶。這將使我們能夠提高交付更多晶圓的能力。但不利的一面是，我們的成本也會減少。但不利的一面是，如您所知，每個週期都會帶來食人魚，客戶在收到訂單時想要更低的價格。

So we are sharpening up our pencils and if a customer gives us bigger orders, we are willing to work with them. But I think what we have on savings in terms of better yields and better supply chain supply. Indium phosphide, we upped our yield. We have increased our recycling capability.

因此，我們正在削尖鉛筆，如果客戶給我們更大的訂單，我們願意與他們合作。但我認為我們在提高產量和改善供應鏈供應方面節省了成本。磷化銦，我們提高了產量。我們提高了回收能力。

And so -- and we're going to have other supply chain supplement to help us to reduce the cost, all in favor of reducing our cost to help our customers to deliver better products for the common good of all consumers.

因此，我們將有其他供應鏈補充來幫助我們降低成本，所有這些都有利於降低我們的成本，幫助我們的客戶為所有消費者的共同利益提供更好的產品。

Okay, great. And just one question on gross margins. You performed pretty strongly there in the quarter, I guess, talking about recycling being one of the contributors. But I think you had expected gross margins to come down given product mix, which looks like it's a little bit of upside, but it looks like it came in as expected.

好的，太好了。還有一個關於毛利率的問題。我想，您在本季的表現相當強勁，談論回收是貢獻者之一。但我認為考慮到產品組合，你預計毛利率會下降，這看起來有點上升，但看起來它是按預期實現的。

So I wonder what the kind of moving parts were for the gross margin strength in the quarter. And likewise, on the guide, you look to be guiding gross margins back down a bit. I wonder what are the factors driving that.

所以我想知道本季毛利率的強勁變化有哪些因素。同樣，在指南中，您希望將毛利率稍微降低一些。我想知道是什麼因素推動了這一點。

Yeah. You're following the trail pretty accurately. I think for the upside surprise, which we were pleased with, one contributor was a good performance on the gallium arsenide recycling program. And that's gotten more traction during the Q2 time period.

是的。你追蹤的軌跡相當準確。我認為，對於我們感到滿意的上行驚喜，一個貢獻者是砷化鎵回收計畫的良好表現。這在第二季度得到了更大的關注。

We were actually starting that program back in 2023, but I think it's really getting into -- it's making a difference. So what that means is that's done through one of our subsidiaries called JinMei and actually through one of their subsidiaries, so we're the grandparent, I guess. But they're doing well.

實際上，我們早在 2023 年就開始了該計劃，但我認為它確實正在發揮作用——它正在發揮作用。所以這意味著這是透過我們的一家名為金美的子公司完成的，實際上是透過他們的一家子公司完成的，所以我猜我們是祖父母。但他們做得很好。

And JinMei's contribution to gross margin on the consolidated basis was above their normal average in Q2. So that was one thing. And we also did better on manufacturing efficiencies just in general. So each little -- it's never one -- in this kind of business, it's never -- it's rarely ever one big thing. It's usually two or three or four medium-sized things. But efficiencies is one. The recycling program is another.

金美第二季對合併毛利率的貢獻高於正常平均。所以這是一回事。整體而言，我們在製造效率方面也做得更好。所以每一件小事——從來都不是一件大事——在這種行業裡，它從來都不是——它很少是一件大事。通常是兩個或三個或四個中等大小的東西。但效率是其中之一。回收計劃是另一個。

So -- and we're hopefully being a little bit conservative for the implied guidance on gross margin. But that's kind of our style, I think, is to be a little bit more cautious because we're not always sure.

因此，我們希望對毛利率的隱含指引保持一點保守。但我認為，我們的風格是更加謹慎，因為我們並不總是確定。

Great. Thanks very much.

偉大的。非常感謝。

You’re welcome, Tim. Good questions.

不客氣，蒂姆。好問題。

Dave Kang, B. Riley.

戴夫·康，B.萊利。

Thank you, good afternoon. First question is on indium phosphide. Just wondering if you have the data on the mix between high-speed optics for AI versus the rest?

謝謝你，下午好。第一個問題是關於磷化銦。只是想知道您是否擁有有關人工智慧高速光學元件與其他光學元件之間組合的數據？

Well, actually, at this point, AI is still relatively small. If I were to estimate, it's probably 10% to 12%

那麼實際上，從這一點來說，AI 的規模還比較小。如果我估計的話，大概是10%到12%

Of indium phosphide.

磷化銦。

Yeah.

是的。

Okay. Got it. And then second question is on any -- well, any market share data. So I'm assuming most of your -- your competitors have most of the AI market share at this point. Is that a fair assumption or like Sumitomo?

好的。知道了。第二個問題是關於任何市場份額數據。因此，我假設您的大多數競爭對手目前擁有大部分人工智慧市場份額。這是一個公平的假設還是像住友商事？

I would tend to think we -- I mean, unless we are wrong, but of course, we don't have what our competitors are doing. We don't have their financial numbers. But from what I understand from our customers, they are buying everything from us.

我傾向於認為我們——我的意思是，除非我們錯了，但當然，我們沒有競爭對手正在做的事情。我們沒有他們的財務數據。但據我從客戶那裡了解到，他們從我們這裡購買所有東西。

The reason for that is that our quality on the number of measurements, including EPD, is hands over our competitors. So keep in mind, the only serious competitor is Sumitomo and we're just better than -- on this particular product, we are viewed as orders of magnitude better. So for companies where yield counts and they don't -- where reliability counts, they're going to AXT. And we don't think that's going to change. We've got a really long head start, shall we say.

原因是我們在測量數量（包括 EPD）方面的品質優於我們的競爭對手。因此請記住，唯一真正的競爭對手是住友商事，而我們只是比——在這個特定的產品上，我們被認為要好幾個數量級。因此，對於那些重視產量但不重視可靠性的公司來說，他們會選擇 AXT。我們認為這不會改變。可以說，我們已經取得了長足的領先優勢。

Got it. And just quickly on the Tongmei listing situation. You mentioned zero companies got dropped. I mean, what are the odds that you guys are getting dropped?

知道了。剛才又快速介紹了同美上市的情況。你提到零家公司被剔除。我的意思是，你們被淘汰的幾率有多大？

Well, I think the environment for going public in China or the requirement for going to be listed on the Shanghai Stock Exchange or Shenzhen Stock Exchange or even Beijing Stock Exchange, there are three of them now there in China.

那我覺得中國上市的環境或者說上海證券交易所或深圳證券交易所甚至北京證券交易所上市的要求,中國現在有三個。

But I think the regulations to allow company to be listed has changed very dramatically this year. I mean, two years ago, there are up to about 500 or 600 companies going public on the STAR Market. And this year, I think there are probably -- I think you can count with your fingers, less than 10. And there were 300 companies asked to be not on the queue for application to be listed on STAR Market.

但我認為今年允許公司上市的規定已經發生了很大變化。我的意思是，兩年前，科創板上市的公司大約有500、600家。今年，我想可能──我想你用手指頭都能數過來，不到10個。其中，有300家公司被要求不再排隊申請科創板上市。

And we just updated our application for six months results. So that's a good sign for us. As we also -- Gary said, we have worked one of the very important issue that Shanghai Stock Exchange was looking at. So hopefully, we can resolve that. And with our six months results, hopefully, we have better deals to report in the next three to six months.

我們剛剛更新了六個月的申請結果。所以這對我們來說是一個好兆頭。正如加里所說，我們已經研究了上海證券交易所正在關注的非常重要的問題之一。希望我們能夠解決這個問題。憑藉我們六個月的業績，希望我們在未來三到六個月內能夠報告更好的交易。

Yeah. Just a little bit more on that, which is that you have to refresh your application. And a number of companies, more than several hundreds of companies were asked not to bother, don't refresh because you're not ready for prime time. They had companies going in early 2020 that had no revenue.

是的。還要多說一點，那就是您必須刷新您的應用程式。許多公司，超過數百家公司被要求不要打擾，不要刷新，因為你還沒準備好迎接黃金時段。他們有一些公司在 2020 年初開業，但沒有收入。

So they've raised the bar over the time period, but never to us in terms of saying go away. So on the contrary, they have actually told our investor bankers that this is an attractive offering. You guys have a lot of good stuff that we're in favor of.

因此，他們在一段時間內提高了標準，但從未對我們說走開。相反，他們實際上告訴我們的投資銀行家，這是一項有吸引力的產品。你們有很多我們喜歡的好東西。

So we can't guarantee that they wouldn't change their mind, but they've had plenty of time to say something negative like this, and they have not. So we're -- that's why we remain optimistic and we're just staying in the game to go for it.

所以我們不能保證他們不會改變主意，但他們有足夠的時間說出這樣的負面言論，但他們沒有。所以我們——這就是為什麼我們保持樂觀，我們只是留在遊戲中去爭取它。

Okay. Thank you.

好的。謝謝。

You're welcome.

不客氣。

And with no further questions, I'll turn the floor back over to Dr. Morris Young.

沒有其他問題了，我將把發言權交還給莫里斯·楊博士。

Thank you for participating in our conference call. This quarter, we will participate in the Needham Virtual SemiCap Growth Conference, the Jefferies Technology Summit and Evercore ISI Semiconductor, IT Hardware & Networking Conference. We hope to see you there. As always, feel free to contact me, Gary Fischer or Leslie Green if you would like to set up a call. We look forward to speaking with you in the near future.

感謝您參加我們的電話會議。本季度，我們將參加 Needham Virtual SemiCap Growth Conference、Jefferies Technology Summit 和 Evercore ISI Semiconductor、IT Hardware & Networking Conference。我們希望在那裡見到您。像往常一樣，如果您想撥打電話，請隨時與我、Gary Fischer 或 Leslie Green 聯繫。我們期待在不久的將來與您交談。

Thank you. And this does conclude today's conference call. You may now disconnect. Have a great day.

謝謝。今天的電話會議到此結束。您現在可以斷開連線。祝你有美好的一天。