Hello, ladies and gentlemen. Welcome to the Himax Technologies, Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. Now I would like to turn the conference over to Ms. Karen Tiao, Head of IR and PR at Himax. Ms. Tiao, go ahead, please.

Welcome, everyone, to the Himax first quarter 2025 earnings call. My name is Karen Tiao, Head of IR/PR 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 section. If you have not yet received a copy of today's results release, please e-mail 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. Before we begin the formal remarks, I would 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. A list of risk factors can be found in the company's SEC filings, Form 20F for the year ended December, 31, 2024, in the section entitled Risk Factors, as may be amended. Except for the company's full year 2024 financials, which were provided in the company's 20F and filed with SEC on April 2, 2025, the financial information included in the 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 independent auditors, to which we subject our annual consolidated financial statements and may vary materially on 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 Karen. To start off, I would like to quickly comment on the recent abrupt and significant NT dollar appreciation against the US dollar, its impact on Himax’s Q2 financial results is limited and has been accounted for in the financial guidance for the quarter. All of Himax’s revenues and nearly all of our cost of sales are US dollar denominated, providing a natural hedge for its buying and selling activities. In addition, the bulk of our R&D expenses, save for employee salaries, are also US dollar based. For employee compensation, a major item of our operating expenses, while its employees are paid in the local currency of their location for their salaries, their bonuses are all US dollar based. Other major non-US dollar expenses, mostly NT dollar-denominated, include utilities and income tax expenses. While we don’t hedge for currency risk of our non-US dollar based operational expenses as the cost of such hedging would usually outweigh the benefit, we do purchase NT dollar in advance to cover the income tax payable, thereby minimizing the currency risk of a major expense item. Now I would like to comment on the recently announced US tariff measures which have intensified global trade tensions, triggered volatility in capital markets, and heightened macroeconomic and market demand uncertainty. Currently, tariffs have not had a significant direct impact on Himax’s business, as our IC products are not directly exported to the US. Instead, they are assembled into panels or modules by customers outside the United States and then sold into global markets, including the United States. Just a negligible portion, about 2% of Himax’s products are shipped directly to the United States. Only customers for these products are subject to US tariffs. Almost all of these products are manufactured in Taiwan. While some customers have…

Thank you, President Wu. And ladies and gentlemen, we are now in question and answer session. [Operator Instructions] Thank you. We do have a couple of questions from the online.

The first question is, could you explain the validation process for CPO?

The validation process is now being conducted by FOCI and ourselves, our leading customer and our foundry partner. And it is a work in progress at the moment. And the process involve primarily the validation of our current generation of products as well as the newly developed equipment, including manufacturing, assembly and testing equipments involved for the production of the product. And the equipment also includes the manufacturing equipment for the FAU as well as the equipment for the funding of FAU together with the cohorts. So it's going to be a challenge because not just the products, but also the manufacturing process are brand new. And it's primarily in house development on the side of Himax as well as FOCI. However, we believe the process is going well, and we have good confidence on the successful validation of our technology. I don't want to comment exactly when, although certainly there is a timetable- all I can say is not very distant in the future. And once the validation process is concluded, then both the in particular immediate expansion of their capacity, which will not take a long time. And that's how we will get ourselves ready for the mass production schedule for next year. And in our prepared remarks, we mentioned that the support shipments from Himax to FOCI is slated to increase quarter by quarter this year and by Q4, it will reach in the amount of millions of dollars for Himax. And these sample shipments are actually exactly for the purpose of such validation. So once the validation is done and we will certainly start the next phase, which is trial production, try to make sure nothing is going to go wrong and also for yearly improvement and optimization. So that's my answer to the first question.

Do you have a guidance for 2025? How do we see the demand into second half?

As you know, we since our IPO, we never provided full year guidance. And we do comment on the trend we are seeing, but we never we never provide the immediate quarter guidance. So we are certainly not doing that at this moment, especially when the macro uncertainty is so high. And I would, however, again, make a certain qualitative comment on the visibility of the second half. And in short, this year is of particularly low visibility as we all know, especially with tariff uncertainties. And another thing is we are seeing our customers are indeed, especially for the auto demand in China, and you'll appreciate auto accounts for now about half of our total sales. In China, after quite a few rounds of government stimulus programs, our customers are worried that further new government program targeted to stimulate double digit consumption may not be as effective as before, because consumers have been through quite a few of such things. And now, I mean, everybody is aware of the global uncertainty in macro economy. So that is a major concern area for customers and that is reflected in our Q2 rather conservative guidance because our customers are saying, see, for the tariff, how the tariff negotiation is going to unfold, nobody knows. And then another thing is sure, Chinese government is in no likelihood is going to launch new programs to boost the whole economy. However, whether that program will be as effective like the one program that was launched exactly about a year ago, That was quite effective. Whether this year's program will be as effective is a major or not. We start so we were actually able to grow our automotive business by 20% last year, which was quite good considering the global auto sales was only…

Would you comment on the Obsidian investment, that's another question.

Obsidian is a Sydney, Australia based company, specular as in a very unique proprietary thermal imaging sensing technology. And we love the company because our technology is a perfect fit because in a very unique and proprietary design, they are thermal sensor needs our CMOS image sensor inside. And our optical solution can also be very effective to improve their optical design. And in addition, our ultra-low power AI is a perfect fit for their thermal image sensing solution, because the benefit of thermal image thermal compared to visual imaging, such as our CMOS image sensor is quite clear. Thermal imaging has a major benefit of keeping privacy concern away and also it works well in total darkness in the evening, right? And that is certainly those are the weaknesses of CMOS image sensor or RGB sensor. So we love the investment because one, Obsidian thermal imaging is a very good supplement to our RGB sensor image. And also, there are key components actually, it's something we can supply, provide very good support for that. And also, our WiseEye special technology, ultra-low power is a perfect fit. Thermal imaging, together with ultra-low power AI can create very good very convincing applications for our joint customers. So we are together working on new generation of design, and we are proactively promoting the technology together, whether for trade shows or customer bases. And we believe Obsidian's thermal image when it's successful and hopefully, we are seeing next year, hopefully, we'll start to see meaningful volume. It's a very unique proprietary technology to offer thermal imaging together with AI with reasonable low cost, while offering reasonable resolution and point of their strength is very, very uniquely low signal, low noise. So their application can be universal. We are seeing many, many application areas,…

I think that's about it for all the questions we received so far. Okay. So as a final note, Karen Tiao, our Head of IR/PR, will maintain investor marketing activities and continue to attend investor conferences. We'll announce the details as they come about. Thank you, and have a nice day.

Thank you, President Wu. And ladies and gentlemen, this concludes first quarter 2025 earnings conference. You may now disconnect. Thank you, and goodbye.