奇景光電 (HIMX) 2022 Q2 法說會逐字稿

Hello, ladies and gentlemen, welcome to Himax Technologies, Inc. Second Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Mark Schwalenberg from MZ Group. Please go ahead.

女士們，先生們，大家好，歡迎來到 Himax Technologies, Inc. 2022 年第二季度收益電話會議。 （操作員說明）作為提醒，此電話會議正在錄音中。我現在想將會議轉交給您的主持人，來自 MZ Group 的 Mark Schwalenberg 先生。請繼續。

Thank you. Welcome, everyone, to the Himax Second Quarter 2022 Earnings Call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer; Ms. Jessica Pan, Chief Financial Officer; and Mr. Eric Li, Chief IR/PR Officer. After the company's prepared comments, we have allocated time for questions in a Q&A session. If you have not yet received a copy of today's results release, please e-mail himx@mzgroup.us, access the press release on financial portals or download copy from Himax's website at www.himax.com.tw. Unless otherwise specified, we will discuss our financials based on non-IFRS measures. You can find the related reconciliation to IFRS on our website. Before we begin the formal remarks, I'd like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth are forward-looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this conference call.

謝謝你。歡迎大家參加奇景光電 2022 年第二季度財報電話會議。加入我們公司的是總裁兼首席執行官Jordan Wu先生；傑西卡潘女士，首席財務官；以及首席投資者關係/公關官 Eric Li 先生。在公司準備好評論後，我們安排了問答環節的提問時間。如果您尚未收到今天發布的業績副本，請發送電子郵件至 himx@mzgroup.us，訪問財經門戶網站上的新聞稿或從 Himax 網站 www.himax.com.tw 下載副本。除非另有說明，否則我們將根據非 IFRS 措施討論我們的財務狀況。您可以在我們的網站上找到與 IFRS 的相關對賬。在我們開始正式發言之前，我想提醒大家，本次電話會議中的一些陳述，包括關於預期未來財務業績和行業增長的陳述是前瞻性陳述，涉及可能導致的許多風險和不確定性實際事件或結果與本次電話會議中描述的事件或結果存在重大差異。

A list of risk factors can be found in the company's SEC filings, Form 20-F for the year ended December 31, 2021, in the section entitled Risk Factors as may be amended. Except for the company's full year of 2021 financials, which were provided in the company's 20-F and filed with the SEC on March 23, 2022. The financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFRS accounting. Such financial information is generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and external audits by an independent auditor to which we subject our annual consolidated financial statements and may vary materially from the audited consolidated financial information for the same period. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

風險因素清單可在公司提交給 SEC 的文件中找到，即截至 2021 年 12 月 31 日止年度的 20-F 表格，標題為可能修訂的風險因素部分。除了公司的 2021 年全年財務數據，這些財務數據在公司的 20-F 中提供並於 2022 年 3 月 23 日向美國證券交易委員會提交。本次電話會議中包含的財務信息未經審計，並根據國際財務報告準則會計準則編制。此類財務信息由內部生成，並未接受相同的審查和審查，包括我們對年度合併財務報表進行審計的獨立審計師的內部審計程序和外部審計，並且可能與本年度的經審計合併財務信息存在重大差異同一時期。公司不承擔因新信息、未來事件或其他原因而公開更新或修改任何前瞻性陳述的義務。

I will now turn the call over to Mr. Eric Li. Eric, the floor is yours.

我現在將把電話轉給 Eric Li 先生。埃里克，地板是你的。

Thank you, Mark, and thank you, everyone, for joining us. My name is Eric Li, Chief IR/PR Officer, at Himax. On today's call, I will first review Himax' consolidated financial performance for the second quarter 2022, followed by our third quarter 2022 outlook. Jordan will then give an update on the status of our business, after which we will take questions. The second quarter presented a challenging business environment, yet we continue to diligently focus on navigating with opticals while positioning ourselves for long-term sustainable growth. [Asset rating] interest rate hikes to combat rising inflection, ongoing rolling breakdown -- lockdowns in China and the Russia-Ukraine War continue to affect business activities and reduce consumer confidence. The (inaudible) visibility of our end customer led to reduced and shorter forecast, along with the more stringent inventory control across the board from brands to panel houses. We revised our guidance on June 20, 2022, to better reflect these soft conditions.

謝謝你，馬克，也謝謝大家加入我們。我是 Himax 首席 IR/PR 官 Eric Li。在今天的電話會議上，我將首先回顧 Himax 2022 年第二季度的綜合財務業績，然後是我們對 2022 年第三季度的展望。喬丹隨後將提供我們業務狀況的最新信息，之後我們將回答問題。第二季度呈現出充滿挑戰的商業環境，但我們繼續努力專注於光學導航，同時為長期可持續增長做好準備。 [資產評級] 加息以應對不斷上升的拐點、持續的滾動崩潰——中國的封鎖和俄烏戰爭繼續影響商業活動並降低消費者信心。我們最終客戶的（聽不清）可見性導致預測減少和縮短，以及從品牌到面板公司的全面庫存控制更加嚴格。我們於 2022 年 6 月 20 日修訂了我們的指引，以更好地反映這些軟狀況。

Our second quarter revenues, gross margin and EPS were all in line with the updated guidance range. Second quarter net revenues of $312.6 million decreased 24.3% sequentially, but were within our updated guidance of a decline of 22% to 27%. Our gross margin came in at 43.6%, a decrease from 47% last quarter, but within our initial guidance of around 43% to 45%. Non-IFRS profit per diluted ADS was $0.439, an upper range of the updated guidance of $0.40 to $0.45. IFRS profit per diluted ADS was $0.404, at high end of the updated guidance of $0.365 to $0.415 Revenue from large display drivers was $68.6 million in Q2, a decrease of 38% sequentially. TV and notebook IC revenues were down double digits sequentially due to customers' inventory control on the backdrop of slowing end market sell-through and reduce the business visibility. Monitor IC sales declined sequentially in Q2, but increased more than 100% year-over-year for the 6 months ended June 30, 2022. Thanks to substantial shipment growth for high-end areas such as

我們第二季度的收入、毛利率和每股收益都符合更新後的指導範圍。第二季度淨收入為 3.126 億美元，環比下降 24.3%，但在我們更新的下降 22% 至 27% 的指導範圍內。我們的毛利率為 43.6%，低於上一季度的 47%，但在我們最初的 43% 至 45% 左右的指導範圍內。每攤薄後 ADS 的非 IFRS 利潤為 0.439 美元，是更新後指引 0.40 美元至 0.45 美元的上限。 IFRS 每攤薄後的 ADS 利潤為 0.404 美元，處於更新後的 0.365 美元至 0.415 美元指引的高端，第二季度大型顯示器驅動器的收入為 6860 萬美元，環比下降 38%。電視和筆記本 IC 收入環比下降兩位數，原因是在終端市場銷售放緩和業務能見度降低的背景下客戶控制庫存。顯示器 IC 銷售額在第二季度環比下降，但在截至 2022 年 6 月 30 日的 6 個月內同比增長超過 100%。得益於高端領域的出貨量大幅增長，例如

(technical difficulty)

（技術難度）

Hello. This is Eric. Hi, Mark. Can you hear us now?

你好。這是埃里克。嗨，馬克。你現在能聽到我們的聲音嗎？

Yes. So there is some interruption in our connectivity, but we are using the smartphones. So we will carry on, Eric.

是的。因此，我們的連接出現了一些中斷，但我們正在使用智能手機。所以我們將繼續，埃里克。

So I'll probably start from the revenue for our large display drivers. So our revenue from the large display driver was $68.6 million in Q2, a decrease of 38% sequentially. TV and notebook IC revenues were down double digits sequentially due to customers inventory control on the backdrop of slowing end market sell-through and reduce the business visibility. Monitor IC sales declined sequentially in Q2, but increased more than 100% year-over-year for the 6 months ended June 30, 2022, thanks to substantial shipment growth for high-end area, such as the high-frame rate gaming monitor.

所以我可能會從我們的大型顯示驅動程序的收入開始。因此，我們在第二季度從大型顯示器驅動器獲得的收入為 6860 萬美元，環比下降了 38%。由於終端市場銷售放緩和業務能見度降低的背景下客戶控制庫存，電視和筆記本 IC 收入環比下降兩位數。顯示器 IC 銷售額在第二季度環比下降，但在截至 2022 年 6 月 30 日的 6 個月內同比增長超過 100%，這得益於高幀率遊戲顯示器等高端領域的出貨量大幅增長。

Large panel driver IC sales accounted for 22% of total revenues for this quarter compared to 26.8% last quarter and 23.4% a year ago. Moving on to our small and medium-sized display driver segment. Revenue was $201.6 million, a decline of 22% sequentially. Our automotive business, as was the case in Q1, was once again the largest revenue contributor in the second quarter, representing over 30% of total sales. We expect this upward trend in automotive sales contribution to continue throughout 2022. Meanwhile, for AMOLED business, we successfully piloted the production of our total solution covering DDIC and Tcon for the premium tablet for a global leading name as the sole source supplier.

大型面板驅動器 IC 銷售額佔本季度總收入的 22%，上一季度為 26.8%，一年前為 23.4%。繼續我們的中小型顯示驅動程序部分。收入為 2.016 億美元，環比下降 22%。與第一季度一樣，我們的汽車業務再次成為第二季度最大的收入貢獻者，佔總銷售額的 30% 以上。我們預計汽車銷售貢獻的這種上升趨勢將在整個 2022 年持續。同時，對於 AMOLED 業務，我們成功地為全球領先品牌作為唯一來源供應商試制了涵蓋 DDIC 和 Tcon 的高端平板電腦整體解決方案的生產。

Our AMOLED business in the second quarter accounted for more than 4% of total sales. Small and medium-sized driver IC segment accounted for 64.5% of total sales for the quarter compared to 62.6% in the previous quarter and 63.1% a year ago. The automotive IC sales in Q2 decreased low teens sequentially, but the market was adversely impacted by logistical hurdles brought on by China city lockdowns. However, on a year-over-year basis, automotive IC sales for the quarter were up almost 100%, thanks to broad design win coverage and better product mix.

我們第二季度的AMOLED業務佔總銷售額的4%以上。中小型驅動IC部分佔本季度總銷售額的64.5%，上一季度為62.6%，一年前為63.1%。第二季度汽車 IC 銷售額環比下降，但市場受到中國城市封鎖帶來的物流障礙的不利影響。然而，與去年同期相比，該季度的汽車 IC 銷售額增長了近 100%，這得益於廣泛的設計獲勝覆蓋率和更好的產品組合。

Our automotive IC sales in the first half were up 130% year-over-year despite macroeconomic headwinds and the supply chain disruption. Second quarter smartphone and tablet revenues both declined double digits sequentially as channel inventory across panel houses, OEMs and end brands remained stubbornly high against the backdrop of continued sluggish demand. Both the smartphone and the tablet driver IC sales represented almost equal sales weighting in the second quarter. Our e-paper business grew more than 100% sequentially in the second quarter, stemming from increasing demand by a leading customer, along with the catch-up shipments that were delayed last quarter due to logistical disruption from lockdowns in China.

儘管宏觀經濟逆風和供應鏈中斷，我們上半年的汽車 IC 銷售額同比增長 130%。第二季度智能手機和平板電腦收入環比下降兩位數，因為在需求持續低迷的背景下，面板廠商、OEM 和終端品牌的渠道庫存仍然居高不下。智能手機和平板電腦驅動 IC 銷售額在第二季度的銷售額比重幾乎相等。我們的電子紙業務在第二季度環比增長超過 100%，原因是主要客戶的需求增加，以及上季度由於中國封鎖造成的物流中斷而推遲了補貨。

Second quarter nondriver revenue was $42.4 million, slightly down from a quarter ago. Our Tcon business was flat sequentially, supported by increasing Tcon shipment for automotive, AMOLED for tablet and high-end displays. Tcon business represented over 8% of our total sales in the second quarter. Nondriver products in Q2 accounted for 13.5% of revenues as compared to 10.6% in the previous quarter and 13.5% a year ago.

第二季度非司機收入為 4240 萬美元，略低於上一季度。我們的 Tcon 業務環比持平，這得益於汽車 Tcon 出貨量、平板電腦和高端顯示器的 AMOLED 出貨量增加。 Tcon 業務占我們第二季度總銷售額的 8% 以上。第二季度非驅動產品佔收入的 13.5%，而上一季度為 10.6%，一年前為 13.5%。

Non-IFRS gross margin for the second quarter was 43.6%, a decrease from 47% of last quarter and 47.5% of the same period last year. As we previously reported, there were 2 primary factors that adversely impacted our margin profile. First, price adjustments in support of our nonautomotive customers amidst soft demand worldwide. Second, our cost of goods sold for Q2 reflected the higher foundry prices for the previous quarters.

第二季度非國際財務報告準則毛利率為43.6%，較上季度的47%和去年同期的47.5%有所下降。正如我們之前報導的，有兩個主要因素對我們的利潤率狀況產生了不利影響。首先，在全球需求疲軟的情況下調整價格以支持我們的非汽車客戶。其次，我們第二季度的銷售成本反映了前幾個季度較高的代工價格。

IFRS (sic) [Non-IFRS] gross margin was also 43.6% for the quarter. Our non-IFRS operating expenses for the second quarter were $45 million, up 2.1% from the previous quarter and up 14.4% from a quarter ago -- from a year ago. The sequential increase was caused mainly by increased R&D expenses, while year-over-year expenses increased because of higher salary and R&D expenses.

IFRS (sic) [Non-IFRS] 本季度毛利率也為 43.6%。我們第二季度的非國際財務報告準則運營費用為 4500 萬美元，比上一季度增長 2.1%，比上年同期增長 14.4%。環比增長主要是由於研發費用增加，而同比費用增加是由於工資和研發費用增加。

IFRS operating expenses were $52.6 million for the second quarter, up 2.1% from the preceding quarter and up 32.9% from a year ago. The higher IFRS figures were mainly due to the tranche of annual bonus compensation, which we award employees at the end of September each year. The 2021 annual bonus compensation, including RSU and cash awards totaled $74.7 million, out of which $24.8 million was immediately vested and recognized in the third quarter of 2021.

國際財務報告準則第二季度的運營費用為 5260 萬美元，比上一季度增長 2.1%，比去年同期增長 32.9%。較高的 IFRS 數據主要是由於我們在每年 9 月底向員工發放的年度獎金薪酬部分。包括 RSU 和現金獎勵在內的 2021 年年度獎金薪酬總額為 7470 萬美元，其中 2480 萬美元在 2021 年第三季度立即歸屬和確認。

The remainder will be equally vested in 3 tranches the first, second and third anniversary of the grant date. The remaining compensation expenses will be recognized on a straight-line basis over the vesting period of each change.

剩餘部分將在授予日期的第一、第二和第三個週年紀念日分三批平均分配。剩餘補償費用將在每次變更的等待期內按直線法確認。

The second quarter non-IFRS operating income was $91.5 million or 29.3% of sales versus 36.3% of sales in the last quarter and 36.8% of sales from a year ago. Non-IFRS after-tax profit was $76.8 million or $0.439 per diluted ADS, decreased from $121.9 million or $0.697 per diluted ADS last quarter.

第二季度非國際財務報告準則營業收入為 9150 萬美元，佔銷售額的 29.3%，而上一季度佔銷售額的 36.3%，佔去年同期銷售額的 36.8%。非國際財務報告準則稅後利潤為 7680 萬美元或每股攤薄後的 ADS 0.439 美元，低於上一季度的 1.219 億美元或每股攤薄後的 ADS 0.697 美元。

Turning to the balance sheet. We had $461.6 million of cash, cash equivalents and other financial assets as of June 30, 2022, compared to $270.4 million at the same time last year and $447.1 million a quarter ago.

轉向資產負債表。截至 2022 年 6 月 30 日，我們擁有 4.616 億美元的現金、現金等價物和其他金融資產，而去年同期為 2.704 億美元，上一季度為 4.471 億美元。

The higher cash balance was mainly from $9.1 million of operating cash inflow during the quarter. And payments received from customers to secure their long-term chip supply. We had $49.5 million of long-term unsecured loans as of end of Q2, of which $6 million was the current portion. It was worth noting that our cash balance at the end of the third quarter will be substantially reduced following the annual cash dividend payout of $217.9 million in July. The annual dividend of $1.25 per ADS is equivalent to 50% of last year's net profit. The payout ratio was lower than our historical average, reflecting our decision to reserve cash in the light of macroeconomic uncertainty.

較高的現金餘額主要來自本季度 910 萬美元的經營現金流入。以及從客戶那裡收到的付款，以確保他們的長期芯片供應。截至第二季度末，我們有 4950 萬美元的長期無抵押貸款，其中 600 萬美元是流動部分。值得注意的是，繼 7 月份派發 2.179 億美元的年度現金股息後，我們在第三季度末的現金餘額將大幅減少。每份 ADS 的年度股息為 1.25 美元，相當於去年淨利潤的 50%。派息率低於我們的歷史平均水平，反映了鑑於宏觀經濟不確定性我們決定儲備現金。

Our quarter end inventory as of June 30, 2022, were $337.3 million, up from $253.1 million last quarter and up from $134.2 million a year ago. Our high inventory level reflected the abrupt drop in demand triggered by strict customer inventory control due to sluggish end market demand and reduced visibility, which led to growing customer inventory, particularly in consumer electronics.

截至 2022 年 6 月 30 日，我們的季度末庫存為 3.373 億美元，高於上一季度的 2.531 億美元，高於一年前的 1.342 億美元。我們的高庫存水平反映了由於終端市場需求低迷和可見度降低導致嚴格的客戶庫存控制引發的需求突然下降，這導致客戶庫存增加，尤其是消費電子產品。

The halt in demand adversely affected our sales and in turn cost elevated inventory level as our production always begins months in advance. Accounts receivable at the end of June 30, 2022, was $371 million, down from $442.2 million last quarter, but up from $329 million a year ago. DSO was 93 days at the quarter end as compared to 88 days a year ago and 96 days from last quarter. Second quarter capital expenditures were $2.5 million versus $3.6 million last quarter and $1.4 million a year ago. The second quarter CapEx was mainly for R&D-related equipment for our IC design business.

由於我們的生產總是提前幾個月開始，因此需求停止對我們的銷售產生了不利影響，進而導致庫存水平上升。截至 2022 年 6 月 30 日，應收賬款為 3.71 億美元，低於上一季度的 4.422 億美元，但高於一年前的 3.29 億美元。季度末 DSO 為 93 天，而去年同期為 88 天，上一季度為 96 天。第二季度資本支出為 250 萬美元，上一季度為 360 萬美元，一年前為 140 萬美元。第二季度資本支出主要用於我們 IC 設計業務的研發相關設備。

As of June 30, 2022, Himax has $174.3 million ADS outstanding, unchanged from last quarter. On a fully diluted basis, total number of ADS outstanding for the second quarter was $174.8 million.

截至 2022 年 6 月 30 日，Himax 擁有 1.743 億美元的未償 ADS，與上一季度持平。在完全稀釋的基礎上，第二季度未償還的 ADS 總數為 1.748 億美元。

Now turning to our third quarter 2022 guidance. We expect third quarter revenue to decrease 35% to 39% sequentially. Non-IFRS gross margin is expected to be around 35.5% to 37.5% depending on final product mix. Non-IFRS profit attributable to shareholders is expected to be in the range of $0.116 to $0.156 per fully diluted ADS. The third quarter IFRS profit attributable to shareholders is estimated to be in the range of $0.2 to $0.42 per fully diluted ADS. Similar to our usual practice, we will grant employees' annual bonus, including RSU and cash awards on or around September 30 this year. The third quarter guidance for IFRS profit per diluted ADS has taken into account the expected 2022 annual bonus, which subject to board approval, is now assumed to be around $40 million, out of which $17.6 million or $0.08 per diluted ADS will be vested and expensed immediately on the grant date.

現在轉向我們的 2022 年第三季度指導。我們預計第三季度收入將環比下降 35% 至 39%。非國際財務報告準則毛利率預計將在 35.5% 至 37.5% 左右，具體取決於最終產品組合。股東應佔非國際財務報告準則的利潤預計在每股完全攤薄後的 ADS 0.116 美元至 0.156 美元之間。第三季度國際財務報告準則股東應占利潤估計在每股完全攤薄後的 ADS 0.2 美元至 0.42 美元之間。與我們通常的做法類似，我們將在今年 9 月 30 日左右發放員工年度獎金，包括 RSU 和現金獎勵。 IFRS 每股攤薄 ADS 利潤的第三季度指引考慮了預期的 2022 年年度獎金，目前假設約為 4,000 萬美元，但須經董事會批准，其中 1,760 萬美元或每股攤薄 ADS 0.08 美元將歸屬和支出立即在授予日期。

As a reminder, the total annual bonus amount and the immediately vested portion are our current best estimates only and the actual amount could vary materially depending on, among other things, our Q4 profit and the final board decision for the total bonus amount and its vesting scheme. As is the case for previous years, we expect the annual bonus grant in 2022 to lead to higher third quarter IFRS operating expenses compared to other quarters of the year. In comparison, the 2021 annual bonus totaled $74.7 million, out of which $24.8 million was vested immediately.

提醒一下，年度獎金總額和立即歸屬部分僅為我們目前的最佳估計，實際金額可能會因我們的第四季度利潤和董事會對獎金總額及其歸屬的最終決定等因素而產生重大差異方案。與往年一樣，我們預計 2022 年的年度獎金發放將導致第三季度的 IFRS 運營費用高於今年其他季度。相比之下，2021 年的年度獎金總額為 7470 萬美元，其中 2480 萬美元立即歸屬。

As a side note, regarding the proposal resolution regarding the company's LTIP, long-term incentive plan, at this year's Annual General Meeting to be held on August 16, 2022, we'd like to clarify that we proposed is to extend the duration of the company's existing LTIP for another 3 years, rather than to initiate a new plan.

作為旁注，關於關於公司長期激勵計劃的提案決議，在今年將於 2022 年 8 月 16 日舉行的年度股東大會上，我們想澄清一下，我們提議延長該公司將現有的LTIP再延長3年，而不是啟動新的計劃。

As mentioned earlier, we grant an annual bonus, including cash and RSU to employees on or around September 30 every year to award them for their devotion to the company. The existing LTIP, which was initiated in 2011 for a duration of 5 years and thereafter extended a couple of time at Annual General Meeting in the past few years, will expire again on September 6, 2022. Therefore, unless the plan is extended again this year or a new claim is initiated. For this year's annual bonus, we will be able to grant only cash to employees at the end of September and lose RSU as the other means of compensation. We believe RSU is an important incentive for employees to focus on long-term success of the company. As of the end of June this year, among the total number of 20 million authorized ordinary shares of the existing LTIP, 49% have already been granted with the remaining 51% still valid to award our employees if the plan is extended.

如前所述，我們會在每年 9 月 30 日或前後向員工發放年度獎金，包括現金和 RSU，以獎勵他們對公司的奉獻。現有的 LTIP 於 2011 年啟動，為期 5 年，此後在過去幾年的年度股東大會上延長了幾次，將於 2022 年 9 月 6 日再次到期。因此，除非該計劃再次延長，否則本年或發起新的索賠。對於今年的年度獎金，我們將只能在 9 月底向員工發放現金，而失去 RSU 作為另一種補償方式。我們認為 RSU 是激勵員工專注於公司長期成功的重要動力。截至今年 6 月底，在現有 LTIP 的 2000 萬股授權普通股中，已授予 49%，其餘 51% 仍然有效，如果計劃延長，將獎勵我們的員工。

I will now turn the call over to Jordan. Jordan, the floor is yours.

我現在將把電話轉給喬丹。喬丹，地板是你的。

Thank you, Eric. Several macro level factors continue to present significant headwinds to our business, while also clouding visibility as we enter the second half of the year. Decades-high inflation, rapidly rising interest rates in addition to the ongoing war and potential for more China city lockdowns have caused widespread disruption to demand. Faced with frozen demand, piled-up inventory and eroding panel prices, end brands are downsizing their panel procurement plans. Consequently, panel makers all initiated downward and extended fab utilization adjustments along with rigorous IC inventory cuts. The sudden halt in demand together with the length of our production lead time has led to elevated inventory level for Q3. While in the midst of this inventory offloading cycle, we are naturally cutting back on new orders with suppliers. However, the contracts that we entered with foundries and back-end suppliers when the industry experienced unprecedented demand in 2021 may incur charges if the minimum purchase orders are not fulfilled. While the negotiation with suppliers are still ongoing as we seek ways to increase flexibility in executing agreements, such supplier charges have already been factored in for our Q3 guidance and is the predominant factor for the Q3 gross margin contraction.

謝謝你，埃里克。幾個宏觀層面的因素繼續對我們的業務構成重大不利因素，同時在我們進入下半年時也使能見度蒙上陰影。數十年的高通脹、快速上升的利率以及持續的戰爭以及中國可能出現更多城市封鎖，已對需求造成廣泛干擾。面對需求凍結、庫存積壓和麵板價格下滑，終端品牌正在縮減面板採購計劃。因此，面板製造商都開始向下和擴大工廠利用率調整，同時嚴格削減 IC 庫存。需求的突然停止以及我們的生產提前期導致第三季度庫存水平升高。在這個庫存卸載週期中，我們自然會減少與供應商的新訂單。然而，當行業在 2021 年出現前所未有的需求時，我們與代工廠和後端供應商簽訂的合同，如果未滿足最低採購訂單，則可能會產生費用。儘管與供應商的談判仍在進行中，因為我們正在尋求增加執行協議的靈活性的方法，但此類供應商費用已被納入我們的第三季度指導，並且是第三季度毛利率收縮的主要因素。

While we are uncertain about when the current business environment could turn it around, we believe our inventory will peak in Q3 as we curtail our new wafer starts and our customers continue to restock after inventory digestion. On the revenue front, we believe the growth will be restored in Q4, boosted by healthy demand for automotive and tablet segments, where there is better visibility. Yet LDDIC sector is still set to remain sluggish for the remainder of the year. Against the backdrop of challenging market conditions, we expect our Q4 gross margin to be still under pressure because the cost of goods sold still reflects high pricing from previous quarters while inventory offloading could lead to selling price erosion.

雖然我們不確定當前的商業環境何時可以扭轉局面，但我們相信我們的庫存將在第三季度達到頂峰，因為我們減少了新晶圓的開工，並且我們的客戶在庫存消化後繼續補充庫存。在收入方面，我們認為第四季度將恢復增長，這得益於對汽車和平板電腦細分市場的健康需求，而這些細分市場的知名度更高。然而，LDDIC 行業在今年剩餘時間內仍將保持低迷狀態。在市場環境充滿挑戰的背景下，我們預計第四季度的毛利率仍將面臨壓力，因為已售商品成本仍反映了前幾個季度的高定價，而庫存卸載可能導致售價下降。

However, the sequential decline in Q4 gross margin will likely be modest as there is still solid price support from a few product areas, notably automotive, Tcon, AMOLED and AI image sensing, which altogether now account for more than 40% of our total sales. Our automotive sales, especially, have a high likelihood of a strong fourth quarter rebound from the trough of Q3. From a longer-term perspective, we are very optimistic about our automotive business and continue to look to expand our leading market position.

然而，由於汽車、Tcon、AMOLED 和 AI 圖像傳感等幾個產品領域的價格仍然穩固，因此第四季度毛利率的環比下降可能會溫和，這些產品現在總共占我們總銷售額的 40% 以上.尤其是我們的汽車銷售，很有可能在第四季度從第三季度的低谷強勁反彈。從長遠來看，我們非常看好我們的汽車業務，並繼續尋求擴大我們的領先市場地位。

With that, I will begin with an update on the large panel driver IC business. Our third quarter large display driver IC revenue is projected to decline by double digit sequentially and below what we typically see on a seasonal basis, as customers impose tight inventory control measures to reduce near-term inventory due to continuous deterioration of forecast visibility from their customers.

有了這個，我將首先介紹大型面板驅動器 IC 業務的最新情況。由於客戶的預測能見度持續惡化，客戶實施嚴格的庫存控制措施以減少近期庫存，我們第三季度的大型顯示驅動器 IC 收入預計將環比下降兩位數，低於我們通常看到的季節性.

The outlook for large size driver IC business remains soft with moderated TV sell-through and muted Chromebook sales, while monitor customers exercise strict inventory control. Q3 monitor, notebook and TV IC sales are expected to decline double digit, reflecting the overall market softness, reduced our business visibility and destocking pressure from our customers.

大尺寸驅動 IC 業務的前景依然疲軟，電視銷售放緩，Chromebook 銷售疲軟，同時監控客戶嚴格控制庫存。預計第三季度顯示器、筆記本電腦和電視 IC 銷售額將下降兩位數，反映出整體市場疲軟，降低了我們的業務知名度和來自客戶的去庫存壓力。

Now turning to the small- and medium-sized display driver IC business. In the third quarter, revenue is expected to decline double digits sequentially. Our Q3 automotive driver IC sales are anticipated to be down double digits sequentially as customers destock inventory accumulated during the second quarter when production was severely disrupted by the widespread city lockdowns in China. However, the extent of the sequential revenue decline for automotive is likely to be less than those suffered by other product areas, while business visibility into Q4 and next year are also much better for our automotive business.

現在轉向中小型顯示驅動IC業務。第三季度，收入預計將環比下降兩位數。我們的第三季度汽車驅動 IC 銷售額預計將環比下降兩位數，因為客戶在第二季度積累了庫存，當時中國廣泛的城市封鎖嚴重干擾了生產。然而，汽車業務收入環比下降的幅度可能小於其他產品領域所遭受的影響，而我們的汽車業務在第四季度和明年的業務可見度也好得多。

As indicated earlier, despite the Q3 decline, we expect our automotive driver IC sales to see strong business momentum in Q4 with TDDI sales outgrowing those of DDIC. We expect our automotive TDDI business to continue to be a key driver of high-margin growth for Himax for many quarters to come. In the meantime, smartphone and tablet driver IC sales are set to decline double digit, a result of the ongoing deterioration of forecast visibility as our customers prolong their efforts to reduce inventory amidst the backdrop of soft demand and the weaker macro environment.

如前所述，儘管第三季度出現下滑，但我們預計第四季度我們的汽車驅動 IC 銷售將出現強勁的業務勢頭，TDDI 的銷售額將超過 DDIC。我們預計我們的汽車 TDDI 業務將繼續成為 Himax 在未來多個季度實現高利潤增長的關鍵驅動力。與此同時，由於我們的客戶在需求疲軟和宏觀環境疲軟的背景下延長減少庫存的努力，預測能見度持續惡化，智能手機和平板電腦驅動 IC 銷售額將下降兩位數。

Now for a quick update on each of the major sectors in small- and medium-sized display driver IC business. First, on the automotive sector, as Eric mentioned earlier, automotive now is our largest revenue contributor, set to represent over 35% of total sales in Q3. We are poised to sustain our leading position and dominant global market share as we offer the most comprehensive automotive product portfolio ranging from traditional DDIC to technologies such as TDDI, local dimming Tcon, LTDI and AMOLED. Additionally, we are the pioneer of mass production for TDDI, a technology that is essential for large-sized interactive, stylish and curved automotive displays. While TDDI is still in early stage of mass deployment for automotive market, it is on track to be a fast-growing segment. We are glad to report that we expect our automotive TDDI to reach a milestone of over 10 million units cumulatively shipped by the end of Q3. TDDI adoption rate for automotive has been advancing at a rapid pace and our design-win coverage continues to quickly expand with panel makers, Tier 1s and auto brands.

現在快速了解中小型顯示驅動器 IC 業務的每個主要領域。首先，在汽車領域，正如 Eric 之前提到的，汽車現在是我們最大的收入貢獻者，將佔第三季度總銷售額的 35% 以上。我們準備保持我們的領先地位和主導的全球市場份額，因為我們提供最全面的汽車產品組合，從傳統的 DDIC 到 TDDI、局部調光 Tcon、LTDI 和 AMOLED 等技術。此外，我們是 TDDI 量產的先驅，TDDI 是大型交互式、時尚和曲面汽車顯示器必不可少的技術。雖然 TDDI 仍處於汽車市場大規模部署的早期階段，但它有望成為一個快速增長的細分市場。我們很高興地報告，我們預計我們的汽車 TDDI 將在第三季度末達到累計出貨量超過 1000 萬台的里程碑。汽車的 TDDI 採用率一直在快速提高，我們的設計贏得覆蓋範圍繼續迅速擴大，與面板製造商、一級供應商和汽車品牌一起。

Meanwhile, China's government recently created incentives to stimulate more NEV sales, which may trigger accelerated adoption of high-end automotive displays that incorporate in-cell TDDI. While our automotive sales growth for 2022 might be less than previously predicted. The growing reliance on automotive electrification and smart cabin dictates that semiconductor content values are increasing rapidly per vehicle. We'll be a key beneficiary of these trends and expect to see sustainable growth in the automotive market on top of the already strong 2021 base.

與此同時，中國政府最近制定了刺激更多新能源汽車銷售的激勵措施，這可能會加速採用內置 TDDI 的高端汽車顯示器。雖然我們 2022 年的汽車銷售增長可能低於之前的預測。對汽車電氣化和智能駕駛室的日益依賴表明，每輛車的半導體含量價值正在迅速增加。我們將成為這些趨勢的主要受益者，並期望在 2021 年已經強勁的基礎上看到汽車市場的可持續增長。

Next, regarding smartphone and tablet businesses, we expect both product lines to decline double digits sequentially as earlier stated. With that said, our shipments for high-end AMOLED tablet where it provides both DDIC and Tcon to certain leading brands, are on the rise with momentum expected to last in the foreseeable future. As for smartphone, despite being awarded a growing number of projects by brand customers, much of our shipments to key customers for their next generation new designs that support high-frame rate, ultra slim bezel and high-resolution features have been postponed in the midst of excess inventory for their older models on the backdrop of frozen end market demand.

接下來，關於智能手機和平板電腦業務，我們預計這兩個產品線將如前所述連續下降兩位數。話雖如此，我們為某些領先品牌提供 DDIC 和 Tcon 的高端 AMOLED 平板電腦的出貨量正在上升，預計在可預見的未來將持續增長。在智能手機方面，儘管獲得品牌客戶越來越多的項目，但我們向主要客戶提供支持高幀率、超薄邊框和高分辨率功能的下一代新設計的大部分出貨量已被推遲。在終端市場需求凍結的背景下，他們的舊型號庫存過剩。

Turning to the e-paper driver business, another product in our small- and medium-sized driver lineup. Our e-paper business is expected to decline double digits in quarter-over-quarter due to customers downsizing their annual business plans amidst soft consumer electronics market. As the world continues to transition towards green energy and carbon footprint reduction, we expect long-term demand for e-paper to endure. Therefore, we continue to collaborate with world-class customers for certain ASIC projects with increased R&D efforts spent on their next generation products toward larger size, higher resolution and colored e-paper displays. We are glad to report that one of our e-paper ASICs in collaboration with E Ink for their latest e-book solution was awarded Best Choice Award of Computex 2022. The ASIC enables fast handwriting speed for e-paper display, while also greatly improving the average latency of the display with reduced power consumption, characteristics that are critical or next-generation e-paper devices.

轉向電子紙驅動器業務，這是我們中小型驅動器陣容中的另一個產品。由於客戶在消費電子市場疲軟的情況下縮減年度業務計劃，我們的電子紙業務預計將環比下降兩位數。隨著世界繼續向綠色能源和減少碳足跡過渡，我們預計對電子紙的長期需求將持續下去。因此，我們將繼續與世界級客戶合作開展某些 ASIC 項目，並加大研發力度，在他們的下一代產品上投入更大尺寸、更高分辨率和彩色電子紙顯示器。我們很高興地報告，我們與 E Ink 合作推出的最新電子書解決方案的其中一款電子紙 ASIC 獲得了 Computex 2022 最佳選擇獎。ASIC 為電子紙顯示提供了快速的手寫速度，同時也大大提高了顯示的平均延遲，功耗降低，是下一代電子紙設備的關鍵特性。

Next, for an update on AMOLED. We continue to gear up for AMOLED driver IC development jointly with major Korean and Chinese panel makers in various applications. In the third quarter, AMOLED sales are expected to increase more than 50% sequentially with more AMOLED for tablet models commencing mass production this quarter. Our AMOLED business, including Tcon driver is expected to amount to more than 8% of total sales in Q3 and slated for strong growth in the next few years.

接下來，關於 AMOLED 的更新。我們將繼續與主要的韓國和中國面板製造商在各種應用中共同開發 AMOLED 驅動 IC。在第三季度，隨著更多用於平板電腦的 AMOLED 在本季度開始量產，預計 AMOLED 銷售額將環比增長 50% 以上。我們的 AMOLED 業務，包括 Tcon 驅動器，預計將在第三季度佔總銷售額的 8% 以上，並預計在未來幾年內實現強勁增長。

As a reminder, we provide most AMOLED driver and Tcon and are the sole source supplier for a global leading tablet customer. In addition, the number of awarded projects for our flexible AMOLED driver and Tcon for automotive is also increasing with worldwide conventional carmakers and NEV vendors. Finally, we are making good progress with leading panel houses for the development of AMOLED display drivers for smartphone, TV and notebook applications. In light of serious constraints on the capacity for smartphone AMOLED display driver in the next few years, we have secured and continue to vie for more such supply -- more capacity for the future.

提醒一下，我們提供大多數 AMOLED 驅動器和 Tcon，並且是全球領先平板電腦客戶的唯一來源供應商。此外，我們的柔性 AMOLED 驅動器和汽車 Tcon 的獲獎項目數量也隨著全球傳統汽車製造商和新能源汽車供應商的增加而增加。最後，我們正在與領先的面板廠商合作開髮用於智能手機、電視和筆記本電腦應用的 AMOLED 顯示驅動器。鑑於未來幾年智能手機 AMOLED 顯示驅動器的產能受到嚴重限制，我們已確保並繼續爭取更多此類供應——未來的更多產能。

Now let me share some of the progress we've made on the non-driver IC businesses. Starting with an update on timing controller. We anticipate Q3 Tcon sales to decline double digits sequentially, pressured by lower shipments for TV, monitor notebook markets. Yet Tcon shipment for AMOLED tablet and automotive sectors is set to enjoy decent growth, and we expect these 2 areas to see accelerating design-in momentum in the coming quarters.

現在讓我分享一下我們在非驅動IC業務方面取得的一些進展。從時序控制器的更新開始。我們預計第三季度 Tcon 銷售額將連續下降兩位數，受到電視、顯示器筆記本市場出貨量下降的壓力。然而，AMOLED 平板電腦和汽車領域的 Tcon 出貨量將獲得可觀的增長，我們預計這兩個領域將在未來幾個季度看到加速設計的勢頭。

Our cutting-edge automotive leading local dimming Tcon has won numerous awards and penetrating into OEMs, Tier 1s and carmakers premium new car models with some of which already commencing mass production. We anticipate more than 50% year-over-year sales growth for automotive Tcon, which will represent about 2% of total sales in the third quarter with additional projects slated for bigger volume shipment starting in 2023. For AMOLED tablet Tcon, as reported earlier, in the second quarter, we successfully commenced the mass production of our tablet AMOLED solution, including both Tcon and driver, to support a leading tablet brand as the sole source supplier in their newly launched tablet model. Additionally, we are undertaking new design developments, supporting even larger panel sizes with [small] named customers. We expect to gain traction with more shipments to key customers in upcoming quarters and are optimistic about the long-term potential for our Tcon business with secured capacity from our foundry partners in pursuit of sustainable growth.

我們尖端的汽車領先本地調光 Tcon 贏得了無數獎項，並滲透到 OEM、Tier 1 和汽車製造商的高端新車模型中，其中一些已經開始量產。我們預計汽車 Tcon 的銷售額將同比增長 50% 以上，這將佔第三季度總銷售額的 2% 左右，其他項目計劃從 2023 年開始進行更大的出貨量。對於 AMOLED 平板電腦 Tcon，如前所述，在第二季度，我們成功開始量產我們的平板電腦AMOLED解決方案，包括Tcon和驅動程序，以支持領先的平板電腦品牌作為其新推出的平板電腦型號的唯一來源供應商。此外，我們正在進行新的設計開發，以支持更大的面板尺寸與 [small] 指定客戶。我們預計未來幾個季度將向主要客戶提供更多的出貨量，並且對我們的 Tcon 業務的長期潛力持樂觀態度，因為我們的代工合作夥伴確保了產能以追求可持續增長。

Switching gears to the ultralow-power AI image sensing total solutions, which incorporates Himax' ultralow-power CMOS image sensor, our proprietary AI processor and CNN-based AI algorithm. On the AI image sensing business for notebook, we continue to support Dell's production ramp-up in the range of their new models. In addition, a number of other leading laptop vendors and CPU platform players have also shown interest in our AI total solution in an effort to further broaden use cases for next generation notebooks. In addition to presence, look-away and onlooker detections, we are developing a variety of new context-aware AI features for next-generation smart notebook market.

轉向超低功耗 AI 圖像傳感整體解決方案，其中包含 Himax 的超低功耗 CMOS 圖像傳感器、我們專有的 AI 處理器和基於 CNN 的 AI 算法。在筆記本電腦的人工智能圖像傳感業務上，我們繼續支持戴爾在其新機型系列中的產量提升。此外，許多其他領先的筆記本電腦供應商和 CPU 平台廠商也對我們的 AI 整體解決方案表現出興趣，以進一步拓寬下一代筆記本電腦的用例。除了存在、遠離和旁觀者檢測之外，我們還在為下一代智能筆記本市場開發各種新的情境感知 AI 功能。

Our AI image sensing solution, featuring ultra-low power tinyML vision AI in a tiny form factor, is a perfect fit for the resource-constrained and battery-powered endpoint applications. The new AI area, which is now ardently explored by AI communities. Automatic meter reading or AMR is one of our successful showcases to the endpoint AI industry where our AI total solution has been adopted by several Chinese vendors and shipments is slated to begin in the second half of this year after some delay is caused by [severe] lockdowns in China. We have also kicked off projects jointly with water authorities, utility companies, meter OEM/ODMs and/or IoT network providers from China, Japan, Europe and India over the past few quarters. Our power-efficient AMR solution can operate with a battery pack for over 5 years, and it's easy to install over the existing conventional water meters for real-time water consumption readout and detection of abnormalities such as water leakage.

我們的 AI 圖像傳感解決方案採用超低功耗 tinyML 視覺 AI，外形小巧，非常適合資源受限和電池供電的端點應用。人工智能社區正在熱切探索的新人工智能領域。自動抄表或 AMR 是我們在端點 AI 行業的成功展示之一，我們的 AI 整體解決方案已被多家中國供應商採用，由於 [嚴重] 造成延遲，預計今年下半年開始出貨中國的封鎖。在過去的幾個季度中，我們還與來自中國、日本、歐洲和印度的水務部門、公用事業公司、儀表 OEM/ODM 和/或物聯網網絡提供商共同啟動了項目。我們的節能型 AMR 解決方案可以使用電池組運行 5 年以上，並且可以輕鬆安裝在現有的傳統水錶之上，以實時讀取耗水量並檢測漏水等異常情況。

We also seeing expanding adoption of our tinyML based, endpoint AI solution in new areas such as shared bike parking, capsule endoscope and more broadly in areas of automotive, smart office, smart home, agriculture and environmental conservation. In smart office, we have several projects ongoing with office automation ODMs where our ultra-low power AI solution is used for meeting room human presence detection and people counting with an aim to save energy for lighting and temperature control. For environmental conservation, we are collaborating with Seeed Studio, Edge impulse and hackster.io, jointly organizing event of IoT into the Contest for Sustainable Planet 2022, aiming to cluster AI experts around the world to tackle different real-world environmental challenges. We are excited by the traction this relatively new AI product line has generated and expect to see increasing sales contribution throughout 2022 and beyond.

我們還看到我們基於 tinyML 的端點 AI 解決方案在共享單車停車場、膠囊內窺鏡等新領域以及更廣泛的汽車、智能辦公、智能家居、農業和環境保護等領域得到廣泛採用。在智能辦公室中，我們有幾個辦公自動化 ODM 項目正在進行中，我們的超低功耗 AI 解決方案用於會議室人員存在檢測和人數統計，旨在節省照明和溫度控制的能源。在環境保護方面，我們正與 Seeed Studio、Edge imp 和 hackster.io 合作，聯合舉辦 IoT 活動進入 Contest for Sustainable Planet 2022，旨在聚集全球人工智能專家應對現實世界中不同的環境挑戰。我們對這個相對較新的 AI 產品線產生的吸引力感到興奮，並預計在 2022 年及以後的銷售貢獻將增加。

Lastly, I'd like to give an update on our optical related product lines covering WLO, LCoS and 3D sensing. Himax continues to work on strengthening our optical-related technologies, at the same time, better positioning ourselves to capture the vast opportunity presented by the future of the metaverse. Equipped with exceptional know-how and years of proven track record for mass production, Himax is playing a key role in enabling next-generation metaverse-related applications. Currently, we have multiple intensive collaborations ongoing with world-leading tech giants who are aggressively investing in this emerging field with a lot of potential.

最後，我想介紹一下我們的光學相關產品線，包括 WLO、LCoS 和 3D 傳感。奇景繼續致力於加強我們的光學相關技術，同時更好地定位自己，以抓住未來虛擬世界帶來的巨大機遇。憑藉卓越的專業知識和多年的大規模生產記錄，Himax 在實現下一代元界相關應用方面發揮著關鍵作用。目前，我們正在與世界領先的科技巨頭進行多次密集合作，這些巨頭正在積極投資這個具有巨大潛力的新興領域。

Now to quickly go over a few recent updates. First, on our LCoS microdisplay. We continue to have steady joint collaboration with leading tech names and OEMs for their next-generation products in AR glasses, where we offer a leading edge front-lit LCoS microdisplay that features lightweight, small form factor and full color with unique characteristics of high illumination and low power consumption, which are critical for the success of future AR glasses.

現在快速回顧一些最近的更新。首先，在我們的 LCoS 微型顯示器上。我們繼續與領先的科技公司和 OEM 就其下一代 AR 眼鏡產品進行穩定的合作，我們提供領先的前照式 LCoS 微顯示器，具有輕量、小尺寸和全彩色以及高照度的獨特特性和低功耗，這對於未來 AR 眼鏡的成功至關重要。

We have received promising feedback thus far and will report more progress in due course.

到目前為止，我們收到了有希望的反饋，並將在適當的時候報告更多進展。

Moving on to the update for 3D gesture control for human interface sensing. Our WLO technology is deployed into 3D camera to empower 3D perception sensing for precise gesture control, a technology that can be applied to current AR/VR goggles for controller-free gesture recognition. Last for an update on 3D scanning and reconstruction project. Our 3D sensing technology is deployed for customer's 3D scanning device for the purpose of generating real-time digital twins, avatar and 3D environment surroundings. The collaboration is still underway, and we expect to begin engineering build from the end of 2022.

繼續更新用於人機界面感應的 3D 手勢控制。我們的 WLO 技術被部署到 3D 攝像頭中，以實現 3D 感知傳感以實現精確的手勢控制，該技術可應用於當前的 AR/VR 護目鏡，實現無控制器手勢識別。最後更新 3D 掃描和重建項目。我們的 3D 傳感技術部署在客戶的 3D 掃描設備上，用於生成實時數字孿生、化身和 3D 環境環境。合作仍在進行中，我們預計將從 2022 年底開始進行工程建設。

While the opportunity in optical and metaverse related products is vast, it is still very much in the early innings. We are optimistic about its potential though and continue to work to position our strong optical product portfolio for future growth in the years to come. For non-driver IC business, we expect revenues to decline double digits sequentially in the third quarter.

雖然光學和虛擬世界相關產品的機會很大，但仍處於早期階段。不過，我們對其潛力持樂觀態度，並將繼續努力為未來幾年的未來增長定位我們強大的光學產品組合。對於非驅動IC業務，我們預計第三季度收入將環比下降兩位數。

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

我本季度的報告到此結束。感謝您對 Himax 的關注。感謝您加入今天的電話會議，我們現在準備回答問題。

(Operator Instructions) And our first question comes from Jerry Su from Credit Suisse.

（操作員說明）我們的第一個問題來自瑞士信貸的 Jerry Su。

Jordan, I want to ask you about, I think, regarding the LTA and (inaudible) capacity. I think this has -- wafer has been turning less type for most of the (inaudible). I think except for the OLED related. So what is your current structure of these contracts with new foundries? Are you able to renegotiate for new terms? Or you are pretty much forced to keep the obligation and then perhaps pay some penalties to the foundry suppliers? That's the first question.

喬丹，我想問你關於長期協議和（聽不清）容量的問題。我認為這已經——在大多數情況下（聽不清），晶圓的類型都變少了。我認為除了OLED相關。那麼，您目前與新代工廠簽訂的這些合同的結構是什麼？你能就新條款重新談判嗎？或者您幾乎被迫履行義務，然後可能向代工供應商支付一些罰款？這是第一個問題。

And then the second question is more regarding the -- your comments about our fourth quarter for the revenue to rebound. I know you mentioned about automotive and tablet. But can you give us more color about what you think the tablet business by the fourth quarter could see some recovery.

然後第二個問題更多關於 - 你對我們第四季度收入反彈的評論。我知道你提到了汽車和平板電腦。但是你能否給我們更多關於你認為平板電腦業務到第四季度可能會出現一些復甦的信息。

Thank you, Jerry. Firstly on LTA. That actually -- our LTA's actually cover mostly foundry, but also to some degree again as well. Some are expiring towards the end of the year, but that is a small portion compared to the total. I said in my prepared remarks that we are negotiating indeed I mean everybody -- I mean if people are getting better and better picture about the short-term prospect of the market, right? And I mean, there's no need for me to elaborate. So I think us and our partners together, we are working to, as I said in our prepared remarks, to hopefully increase the flexibility for execution of those contracts. And so we are not saying we are going to cancel the agreement or we are going to walk away from the agreement. Firstly, I mean, certainly, as a company, we need to honor the agreement. And secondly, we feel if you look into a longer-term horizon, time horizon, this contract will still be very important for our long-term growth. So I think on a mutually understanding (inaudible) basis, we are working to hopefully increase the flexibility for our execution on these contracts. That is (inaudible) I want to repeat because this is important. In our Q3 guidance, we have factored in the potential penalties incurred by this agreement where we -- our new wave starts would be less than the minimum required according to the agreement. So those have been factored in. And in fact, those charges represent the predominant portion of our Q3 margin construction. So in short, I guess renegotiating, but we will continue to honor those contracts. And I think hopefully -- and if everything goes as planned without any major surprises, I think hopefully, Q4 such charges incurred to us will be less than most of Q3. For the simple reason that our application is based on wafer starts, right? So if you look back in Q2, towards the end of Q2, there's a sudden freeze in market demand. So everybody was (inaudible) by surprise. That's when we started to push our bricks, right? But that was already too late because all the Q2 new wafer starts will come out in Q3, and that explains why our Q3 inventory will reach the peak.

謝謝你，傑瑞。首先在LTA上。實際上——我們的 LTA 實際上主要涵蓋鑄造廠，但在某種程度上也同樣如此。有些將在年底到期，但與總數相比，這只是一小部分。我在準備好的講話中說，我們確實在進行談判，我的意思是每個人——我的意思是，如果人們對市場的短期前景越來越了解，對嗎？我的意思是，我不需要詳細說明。因此，我認為我們和我們的合作夥伴一起，正如我在準備好的評論中所說，我們正在努力提高執行這些合同的靈活性。因此，我們並不是說我們要取消該協議，或者我們要放棄該協議。首先，我的意思是，作為一家公司，我們當然需要遵守協議。其次，我們認為，如果您考慮更長期的時間範圍，這份合同對於我們的長期增長仍然非常重要。因此，我認為在相互理解（聽不清）的基礎上，我們正在努力提高我們執行這些合同的靈活性。那是（聽不清）我想重複一遍，因為這很重要。在我們的第三季度指南中，我們已經考慮了該協議可能產生的懲罰，我們的新浪潮開始將低於協議規定的最低要求。所以這些都被考慮在內了。事實上，這些費用代表了我們第三季度利潤率建設的主要部分。所以簡而言之，我想重新談判，但我們將繼續履行這些合同。我認為希望 - 如果一切都按計劃進行，沒有任何重大意外，我認為希望第四季度對我們產生的此類費用將少於第三季度的大部分時間。原因很簡單，我們的應用程序是基於晶圓啟動的，對吧？因此，如果您回顧第二季度，在第二季度末，市場需求突然凍結。所以每個人都（聽不清）感到驚訝。那是我們開始推磚的時候，對吧？但這已經太晚了，因為所有第二季度的新晶圓都將在第三季度推出，這就解釋了為什麼我們的第三季度庫存將達到峰值。

And certainly, we have much reduced the new wafer starts starting from the end of Q2 and also in Q3. And it's one reason -- and that is the main reason why the charges out of LTA will peak also in Q3 because our new wafer start will be the minimum. But in Q4, hopefully -- well, as I said, hopefully, there will be some negotiation and certain rules will be rewritten or compromised. And also after our customers' decision of inventory hopefully, in Q4, we will be able to selectively start some new wafers. And that certainly in itself will lower the LTA charges. And that's certainly will very much depend on the outlook of Q1 and with visibility so limited, I really can't comment too much on next year or even Q1, but that is the plan. And that looks to be the most likely scenario for now.

當然，從第二季度末和第三季度開始，我們已經大大減少了新晶圓的開工數量。這是一個原因——這也是為什麼 LTA 的費用也將在第三季度達到峰值的主要原因，因為我們的新晶圓啟動將是最低的。但在第四季度，希望 - 好吧，正如我所說，希望會有一些談判，並且某些規則將被重寫或妥協。而且在我們的客戶決定庫存後，希望在第四季度，我們將能夠有選擇地啟動一些新的晶圓。這本身肯定會降低長期協議的費用。這肯定在很大程度上取決於第一季度的前景，而且能見度如此有限，我真的不能對明年甚至第一季度發表太多評論，但這就是計劃。這看起來是目前最有可能的情況。

And your second question is about our Q4 revenue. We are staying the sequence of rebound from Q3, especially supported by automotive and tablet. The visibility now appears to be decent for both sectors, although I must say other than our AMOLED or AI and a few like new emerging areas where revenue (inaudible) sectors, I must say, for TV, large panel, smartphone, et cetera, the visibility remains limited. Automotive, there's the hiccup in Q3, as we said, right. In Q2, there's a certain widespread severe lockdowns in China. And so the inventories that our customers took during Q2 and which was supposed to be used in Q2 was unused. And therefore, they are consuming those inventories during Q3, and that explains our (inaudible) of automotive IC shipments in Q3. But again, visibility is creatively strong for automotive, and we believe our customers' inventory level will be back to normal towards the end of Q3. And in starting Q4, it will be -- I can't say exactly business as normal, but I think it will recover a great deal from Q3 loss. And a very similar story for tablet. Having said that, tablet, we have suffered from 2 quarters of pretty significant sequential decline already, and our customers are really just running off of their inventory as we see it. So Q4 will be a process of restocking. Having said that, I must say in terms of longer-term visibility for tablet for us, the visibility certainly is lower than that of automotive.

你的第二個問題是關於我們第四季度的收入。我們保持從第三季度開始反彈的順序，特別是受到汽車和平板電腦的支持。現在這兩個行業的能見度似乎都不錯，儘管我必須說除了我們的 AMOLED 或 AI 以及一些新興領域，我必須說，電視、大型面板、智能手機等的收入（聽不清）行業，能見度仍然有限。汽車，正如我們所說，第三季度出現了問題，對。在第二季度，中國出現了一定程度的廣泛的嚴重封鎖。因此，我們的客戶在第二季度使用的本應在第二季度使用的庫存沒有使用。因此，他們在第三季度消耗了這些庫存，這解釋了我們（聽不清）第三季度的汽車 IC 出貨量。但同樣，汽車行業的知名度非常高，我們相信我們客戶的庫存水平將在第三季度末恢復正常。從第四季度開始，這將是——我不能說完全正常，但我認為它將從第三季度的損失中恢復很多。平板電腦的故事也非常相似。話雖如此，平板電腦已經連續兩個季度出現了相當大的連續下滑，而我們的客戶實際上只是在用完他們的庫存。所以第四季度將是一個補貨的過程。話雖如此，我必須說，就我們平板電腦的長期知名度而言，知名度肯定低於汽車。

(Operator Instructions) Now I'm showing no further questions. I would now like to turn the call back over to Jordan for closing remarks.

（操作員說明）現在我不再提出任何問題。我現在想把電話轉給喬丹做結束語。

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

最後一點，我們的首席 IRP 官 Eric Li 將維持投資者營銷活動並繼續參加投資者會議。我們將在它們出現時公佈細節。謝謝你，祝你有美好的一天。

This concludes today participation. You may now disconnect.

今天的參與到此結束。您現在可以斷開連接。