Hello, ladies and gentlemen, welcome to the Himax Technologies Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. And later we will conduct a Q&A session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Eric Li Chief IR/PR Officer at Himax. Eric, please proceed.

Welcome everyone to the Himax [Audio Distortion]. My name is Eric Li, Chief IR/PR Officer at Himax. Joining me today are Jordan Wu, President and Chief Executive Officer, Jessica Pan, Chief Financial Officer. After the Company’s prepared comments, we have allocated time for questions in the Q&A session. If you have not yet received a copy of today’s results release, please email HIMX@mzgroup.us, or hx_ir@himax.com.tw access the press release on financial portals or download a copy from Himax’s website at www.himax.com.tw. Before we begin the formal remarks, I’d like to remind everyone that some of the statements in the conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this conference call. A list of risk factors can be found in the Company's SEC filings, Form 20-F for the year ended December 31, 2023 in the section entitled "Risk Factors", as may be amended. Except for the Company’s full year of 2023 financials, which were provided in the Company’s 20-F and filed with the SEC on April 2, 2024, 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. On today’s call, I will first review the Himax consolidated…

Thank you, Eric. Given the prevailing macroeconomic uncertainty, end customers remain conservative causing panel makers to take a cautious stance and strictly control production to maintain low inventory levels. This is adversely impacting IC demand, leading to our conservative third quarter forecast. During the second quarter in the automotive market, car makers initially anticipated a sales boost due to promotional activities and government subsidies especially in China. Consequently, we saw a major uptick in the second quarter IC sales along with the aggressive discount campaigns of car makers. However, these intense campaigns did not generate the anticipated sales growth and may have even triggered consumers to hesitate in purchasing new cars, leading to disappointing car sales in China for the second quarter and resulting in excessive inventories throughout the supply chain. As a result, our panel customers have begun to scale back their IC procurement in Q3 to manage inventory levels. In comparison, the automotive makers in Europe and the U.S. have remained relatively stable since last year, without experiencing the dramatic fluctuations seen in China. As the leader of the automotive display ICs, we serve a diverse range of brands worldwide, with sales evenly distributed across all major markets. However, since China is the world’s largest automotive market, commanding over 30% of the global sales, fluctuations in China do have a substantial impact on our business. Moving forward, we will navigate the current challenging business environment through close collaborations with panel makers and Tier 1 suppliers, meticulously managing our wafer starts and closely monitoring customer demands. The automotive IC business is Himax’s largest revenue contributor, accounting for over 47% of our total revenues in Q2, significantly higher than our peers. Despite the recent challenges, we remain optimistic about our automotive IC business and are committed to the long-term innovation…

Thanks very much, Jordan. [Operator Instructions] The first one to ask questions Donnie Teng, Nomura. Go ahead please.

Thank you, Jordan for taking my question. My first question is regarding to the automotive business, so, I think we have started to see some positive signs back in April and I remember we were pretty positive back in June and even entering into July, the guidance looks like to be a little bit disappointed and you just mentioned about customers adjusting the inventories quickly. Just wondering when exactly you are seeing the kind of weakness from the customers and also because in the mid of July there has been the news in China that Chinese government asking EV companies to check their localization rate in terms of the component and IC procurement. So wondering if there's any issue there whether we will be, likely hired by the Chinese EV makers or it's not the case? Thank you.

Thank you, Donnie. You are right in that we are more focused on the last quarter where we had spoke that then the price in OLED and I think the reason behind is I already explained the in detail in my prepared remarks, i.e., the fluctuation in Chinese market is the metrics are causing the difference in our view. And as it turns out our customers won’t be optimistic for the second half look enter into Q2 and they were apparently forced to too many too much IC inventory. And now they are going through the destocking process and also we also mentioned in our prepared remarks that the US and European markets are relatively stable compared with China. Now if you look at the Q3 prospect and also if we look further into Q4, so the OLED consumer in Q2 and the destocking in Q3 kind of explains our strategy position in our outlook. Now, the root question is how it is going to go going forward and I think certainly, for longer term, like next year, we remain still pretty positive about the outlook, which I will probably cover in a few minutes. Now more importantly, what is remains early Q4 and I'll tell you the truth our internal forecasts which were the results of collective forecasts coming from various customers globally including our parameters in Q1 and Tier 1s. Q4 as of today, the position remains pretty positive with actually a decent double-digit growth compared to Q3. However, we actually toning down our Q4 - prospects right now given the very recent I'm talking about last week also the global turmoil in financial markets, which might impact the consumer confidence in their major big ticket spending such as new costs. So, we are uncertain and we are…

Great. Thank you, Jordan. And my second question is regarding to CPO. So could you maybe elaborate more on what sort of timeline for the CPO products? And when should we really start to see some more volume contributions. And how confident you are it’s like to ramp up this business in the mid to long term? Thank you.

Preset timeline, I am probably NBA my partner and customers. So I am sorry I cannot give you very specific date or timetable, but I can tell you what we are working on right now the design is targeted for mass production. It is not it is certainly not a RP concept, or an R&D project it’s not actually well processed stage, I mean certainly we see that before – years before. But we are in process stage and we are now pushed towards mass production and then that what I can tell you is in fact, we expect to see some small but very early result hopefully by the end of this year but that’s minimal. But next year, if everything goes as planned, there will be steady ramping. And the confidence level mid to long term, I would say is very confident. I think we all know about this hunger for more positive power because of generative AI right? And we are we all very aware of the issues there. The changes to further increase your bandwidth, your processing power, the presence and speed and but there are all kind of issues including our power consumption, heat dissipation and all that right? And I would say, CTO is a relatively low cost and relatively easy, I am not saying it’s easy by triggered and easy to fix to all this issues and also cost wise, as well. Because, right now, if you analyze the multi-sensor HPC ICs or GPU ICs they are very big positive power. But they are automatic right now is actually the transmission we see outside. The transmission of the ICs, the IC can process without power, or data, high bandwidth, super high bandwidth, very broad than you feel it, the bandwidth is expanding or…

No, thank you, Jordan. Very helpful.

Thank you.

[Operator Instructions]

As a final note, Eric Li, our Chief IR/PR Officer will maintain this monthly activities and continue to attend investor conferences. We will announce the details as they come about. Thank you and have a nice day.