Yahoo Finance

Question and Answer Session

Operator

Yes. Thank you, Yo-Ming. And ladies and gentlemen, we will now begin our English question-and-answer session. (Operator Instructions) Al Wang, HSBC

Al Wang

Can you hear me?

Ji Zhao

Yeah.

Al Wang

So my first question is, can you share the product mix for the fourth quarter? And then I have a follow-up question. Thank you.

Ji Zhao

I think you meant the previous quarter, Q4 2024, right? So in the 2024, our DP product line is slightly higher than 35%. Our high-speed or PS product line is slightly lower than 50%. Our TC or soft driver product line, is about 15%, and our TT is lower than 5%.

Al Wang

Okay. Thank you. My follow-up question is that what is the outlook for each of the product going into the next quarter?

Ji Zhao

I think in the Q1, we don't see the significant, the allocation difference, it will be similar. Among then the high-speed or PS product may continue goes higher, but we still remain to see in the coming Q1, the end of result.

Al Wang

Okay. Thank you. I'll get back to the queue.

Operator

[Jamie Ye], KGI.

Can you hear me?

Ji Zhao

Yes, please go ahead.

Yes. My first question is about the -- for this year, what's your view on the growth for this year, that you start with -- like above seasonality first quarter? And are you still confident that we can have like a double-digit growth for this year and why? That's all my question, thank you.

Ji Zhao

Yeah. I think the -- our major notebook segment has been reported or forecasted by a few institution research institution, to have a single-digit increase in terms of unit in 2025. And we think that our lines, and we just had guided our -- the Q1 result is similar to the last year Q4. And traditionally, Q1, because there's the Chinese New Year, and this year, we just passed, is a short quarter, so we consider as a pretty happy Q1, could reach the similar level as the Q4 last year.
In terms of 2025, we are pretty positive, and they are driven by the two things: one, as we said, the unit-wise notebook will continue growing in the single digit. And another thing is the high-end notebook segment, which driven by AI for inference, the calculation of computation, and we have our solution larger associated with those high-end segments for our high-speed product. And we hope we can continue to grow better than the industry unit growth. So that's our expectation at this moment.

And for -- do you mean that your high speed can grow higher than the DP product? And in that case, do you think that gross margin can improve further? Because (inaudible) just recover slightly from the quarter? And how do you think about the gross margin in the future? Thank you.

Ji Zhao

I think we operate in a way that our gross margin remains similar within our guidance. It has been a long time. The driving force really is because we have a high-speed product on -- those are -- the business increased quite well. And those certainly have better gross margin. However, on the other side, the panel industry and those are going through more the competition on the price, especially on the mature product line. So we added this together to take into consideration.

Okay. And my second question is about the ASIC product line up. I think last call, you mentioned that you prepare 6-nanometer process. I think maybe for some further potential ethics service. And can you share some comments about that?

Ji Zhao

Yeah. We are very strong on the high-speed segment. Our IP, high-speed IPs, and regardless, we have PCIe, USB, and other high-speed, and we are moving to deep submicron, and we have our test chip on the 6-nanometer and so on and so forth. And we are working with the Tier 1 customer to discuss for the integration of ASIC-like solutions to facilitate for their big chip and type of thing.
And our high-speed IP has its own unique value because it's proven and often take a lead. So that's one of the things. We are working with the Tier 1 customer. But those products may take a longer time to define, to develop, to move into the production. So that's one of the rush we push towards.

Okay. So we probably will see this growth driver next year or from next year.

Ji Zhao

Yeah, that's what I would hope. And I think we are moving along for the first opportunity already. And -- but I wouldn't think those -- the product will create revenue this year, more likely next year or year after.

Operator

[Ethan], Morgan Stanley.

Thank you management for taking my question. So my question is on your USB4 timer. I'm just wondering if you could provide some updates on that and provide some also price and color on competition, revenue range, and growth rate. Thank you.

Ji Zhao

Yeah. Our USB4, we are doing quite well, and we had a successful year for the 2024 with significant growth rate. We continue to see a large design wins for many, many models. And not only the notebook as well as other segment for gaming, for gaming console and so on and so forth. Reasonable to say and on the non-Intel platform, we probably dominated on the USB4 cover. And we expect that 2025, we continue to have a good growth based on the design win or NP status in our pocket.
For us, it's more important is we continued that success to develop the USB4 end-to-end solution, which is not only have USB4 retimer, now we will have USB4 hub, which will monitor and dock to use. We have a USB4 redriver for the same solution, which they don't need expensive USB4 retimer.
So as we move on to the USB4.2, which we view much more important and really truly can replace other potential connector for something like HDMI and so on and so forth. So that's the way we look at it and we play along on this segment, and we hope we will continue to dominate in entire end to end. So that's the -- it's a huge opportunity there. We are pretty happy on the current status that we have. Yeah.

Thank you. My second question is if you could share any color on AI PC demand that you see or if there's any industry trends that you can share with us? Thank you.

Ji Zhao

We had -- first one last year with Qualcomm platform on many, many -- the models. And I think that's doing reasonably well as the first, the attempt for the AI-focused notebook. And we foresee. There are second one or more to come out a much powerful, the AI notebook or may target more -- the inference with very high computation power on the top in terms of trillion operations per second, the TOPS. And we are happy in the customer select our USB4 retirement for their defect solutions.
On those platforms, there are multiple USB4 ports there. We are working with them smoothly for development. And hopefully, those will bring the revenue in the second half of this year.

Operator

(inaudible), UBS.

Yes. Thanks management for holding the call and taking my questions. My first question would be regarding your first half outlook. How much of the above seasonal trend in first quarter is driven by your customers as orders due to their concerns on the tariffs?
And looking to the second quarter, what is your current initial expectation? Would you expect some orders get pulled in from (inaudible) to third quarter and (inaudible) to a subsequent quarter, next quarter? Thanks.

Ji Zhao

Yeah. I think it's a pretty dynamically change because of tariff, right? And on the CES, we had a meeting with OEM executive teams because many of us were in the CES. I had the opportunity to talk to the procurement, the senior management for the -- for notebook OEMs. And they had -- they acknowledge they had the sort of action to pull the -- pull in some notebook to the system build to the Q4 or maybe on Q1 as well to try to bid on the sale of tariffs coming.
And so that's the -- having said that, and we are taking to consider those efforts. But Q1 book is premature already is on our book. So we'll provide the guidance, and we should be able to hit the guidance pretty well.
On the Q2, we see our bookings for Q2 is at reasonably -- they're well, I would say. And so it's kind of wait to see because sooner or later, we should see the effect and the pulling effect. But at this moment, has not been clear, those pulling effect become clear, because after pooling, you might have a slow season, but so far, we do not see it.

Okay. So it sounds like you are going to see some of the rush orders still over into second quarter, and that gives you the comments on the order visibility for same quarter (inaudible) state, right?

Ji Zhao

Yeah, are pretty clear for the Q1, and the Q2 booking coming also reasonable, I would think, at the booking rate, that's what we count every day.

Okay. Yeah. And my second question, and I will have a follow-up from the second question as well. I think just regarding the potential landscape, what is your view on the market share dynamics for your VP and also high-speed business for (inaudible)?
And yeah, I want to have a quick thought on your expectation for full year growth this year. Because just based on what you are talking about in the first half that you are seeing above-seasonal third quarter and also reasonable well for same quarter order backlog. Would you be expecting that you can grow your sales by double digits year on year this year?

Ji Zhao

In terms of your -- the first question, and -- we are doing quite well on the high speed in the PC segment. And I think our -- the market rate and the share rate in the PC on the high speed, it's quite high, I would think. To us, willing is to maintain the high speed in the share rate. Another is expanded out to the devices, for example, the monitor dock, dongle, so as the automotive to use our PS product as well as the server side. So those are the things as we achieved very high market shares on the PS product, on the notebook or PC.
So we have to expand out. That's one of the efforts we are doing, included we are, as previous, the guests ask for ASIC like, the product.
And on the DP side, we all know the notebook panel manufacture a lot moved to the China, the BOE, CSOT, and so on and so forth. The competition, as we said, is pretty high. And it's a lot of competition is on the price side. For us, on those panel side, we are very concentrated on the so-called in cell panel, which is integrated touch. And together -- and the good thing is -- as we were in the CES, and confirmed by many industry leaders, the notebook panel with touch rate with touch is increased very noticeable.
And the reason being is the young generation, as they are coming to use the notebook, as they grew up, or use the smartphone has to touch on the panel. So they are welcome to ask notebook with the touch there.
So that's a good news for us. We are pretty dominant on those -- the in-cell solutions, whether PTD or TTD there. Recently, we have quite a few design wins. And hopefully, those ones will help us to defend us our market share and also the price side as well because the in-cell or integrated touch is a relatively complicated. It's not easy to adopt.
And we do provide a solution which is cheaper than the -- towards the panel manufacturer is cheaper than the current on-cell solutions. And it's also much convenient for panel integration.
So that's our strategy. Besides that, we also work on the high-end gaming segment, which require more -- the gaming sector, the panel needs the NVIDIA certification. So those are the segments we are working on, and we got all the gaming -- the NVIDIA gaming certification on the panel side. So those are the good news and we'll continue to compete, but we also recognize on the low media side, the competition on the low price is pretty severe on the market.

Yes. And then just a follow-up on your full year sales outlook. Could you just --

Ji Zhao

As we said, I think we're hopefully what we see today is we will be better than the -- whatever the unit shipment grows for notebook and hopefully, we'll achieve the double-digit and those kind of goal. But I cannot say the -- yeah, I think that's our hope.

Operator

Vivian Yang, Nomura.

Vivian Yang

Can you hear me?

Ji Zhao

Yes. Thank you.

Vivian Yang

My first question is a follow-up on a previous question. Just wondering, do you have a rough assumption about your high-end account, for example? What percentage of your shipment now is to be TEP or TTD versus transitional solutions?

Ji Zhao

Now we are shipping over much more over 10 million there, and we think we'll continue. Those are the in-sale solutions, means TTE and TTD. And we expect those will grow pretty fast. And because the price, those devices are unit price is much higher than the traditional Tcon or soft driver, will become quite noticeable the percentage there. And let's see how good we can do this year, and we hope we can do reasonably well and moving forward. We heard the customer, those DHL customer likes the in-cell solution quite well.

Vivian Yang

Okay. Thank you. And my second question is, maybe can you update about your redriver business for cable customers?

Ji Zhao

Yeah, that's interesting. Our CK redriver are actively engaged with the cable customer, whether the USB4.2, whether go to the data center and the PCIe Gen 4, PCIe Gen 5, Gen 6, we're engaged with them pretty actively. And yeah, we think that's one of the things, as we said, we would like to expand our high-speed device segment. outside the notebook, that's the one-off direction we are pushing.

Vivian Yang

Okay. I'll go back to the queue.

Operator

Anthony Lau, (inaudible).

This is Anthony Lau from Divestment and Consulting. And just first of all, Happy New Year, and wish you to have a successful year in '25.

Ji Zhao

Yeah. Thank you very much. Happy Chinese New Year. Okay. Good.

Yeah. So I asked some following questions. So first of all, sales previous question is talking about Tcon. Price war is still sustained. But do you think is there any kind of maybe this Tcon product competition to be decelerating this year or next year?
Because by our check, we just see like Taiwanese fabless such as Nova or other vendors, they are like the key vendors in this market? And do you think this kind of price war to be decelerate and to have our cost margin to enable to be stable?

Ji Zhao

I think if we compete with those on public war, but the really competitor on the lower end is the fabric company in China. And those are going to the price and the fab, the -- which has much lower price, the wafer price. So it becomes a -- the churn to maybe get worse before we get it better.

I see. So you think --

Ji Zhao

You're not competing novel or traditional one. You look at those people you don't even know where they come out.

I see. Okay.

Ji Zhao

Yeah, on the low end, you see those kind of things. On the medium or high end, you don't, but the low end is the about it, right?

Is the clearing. So I'm only talking about like the standard part customers. Since they are still planning some new RD products in this year and (inaudible) also expecting the HAI to bear fruit in this year or next year. And do we -- have we seen like the standard part customers, they're pulling have any changes in this following -- in this quarter or maybe launches?

Ji Zhao

I think they're doing quite well. And especially on the low-end product, I mean relative to older product, it's doing relatively well. The newer device or associated with the expensive system are not doing the -- what we had expected. And -- but overall, they are doing well. And yes, we expect to continue doing well.
And yeah, they had that unique customer site to enjoy their device. And yeah, that's the -- that's another different -- the area.

I see. I have another question about the automotive side because since we have many projects in some western plants, and can you provide the automotive sales share in last year? And do we think in this year or next year, we can cut into more products such as our high-speed product to this automotive customers? And what do you think the automotive sales growth in this year and next year?

Ji Zhao

At automotive, we -- our high-speed product, which is our high-speed converter, high-speed retimer USB device into the automotive multiple customers, the converter retirement, we are shipping few 100,000 a month, above a month, and we -- the USB box, which is our USB devices there and shipping to many different carmakers, so we expect the 2025 probably is quite a good year for our automotive solution and our high-speed device. So as designed into first time to the ADA system as our PCIe, PCIe redriver device to the ADA system. And we expect some shipment the second half and more volume shipment with a major -- the carmaker in the 2026 as well.

I see. It seems very promising comparing to your conventional Tcon products. So talking about --

Ji Zhao

One of our strategy, really in pushing our high-speed device, which had a pretty good successful rate or large market share in the notebook to the segment, for example, the automotive server, notebook, so on and so forth, to those areas, then overall, we're actually our growth. And that's on our strategy and we push very hard on it. It included -- another include cable as we had been asked before, yeah.

I see. My last question related to our high-speed products despite that I already asked a lot of questions. But talking about like the high-speed products is our main catalyst like in last year and also in this year. And do you have any self-share like targets in -- for the high-speed product line this year, maybe over 50% averagely a quarters? Or maybe what is the (inaudible) the growth rate for high-speed product line in this year will higher than ['24]?

Ji Zhao

That's what we hope. And that's what we hope will grow significantly to push significant on our high-speed product line. But I cannot say exactly the number or thing, but we have been push this for the NS community, or now, we are very forcefully to push to that segment.

Operator

Evelyn Yu, Goldman Sachs.

Evelyn Yu

So first question, I wanted to touch base on your exposure to the server market. So firstly, I want to know what's our current revenue contribution from server or data center-related business?

Ji Zhao

We are less than USD10 million at this moment. Yeah.

Evelyn Yu

Okay. So I think we do agree that this area is a fast-growing segment going forward, driven mostly by AI and server. So how are we going to engage more or benefit from this mega trend? Do we still see that the -- do we still see a high opportunity in the redriver market that we plan, I should say, we engaged in this business?

Ji Zhao

So the -- on the data center strategy, we are -- whereas we learn the market, you define the standard product, you have a risk of the competition and that market typical we know, we know, okay? And you have to be in the right time with the right product. And we actually start to thinking that using our high-speed IP to work with Tier 1 customer to develop ASIC like the solution for the Tier 1 customer, okay? That's the one way we are pushing that direction because our high-speed doing quite well. By doing this, you minimize your definition, the product definition issue.
So that's the one area as previous analysts had asked, okay? That's the one thing. That slightly changed from our -- the previous for as we define the standard product, we go out to do our product rather than now we'll work with the Tier 1 customer to do this, okay.
On the -- for server, we do design our PCIe redraw device to the server on the car, which is the ADAS system, okay? As I reported, we're already into it. So the first customer will start to ship in the later of 2025. And the second customer will be on the 2026. So that's our current solution. Of course, what was said, on the cable side, we developed those cable work with cable side for the data center, and that's another way to look at it.

Evelyn Yu

I want to follow up on the ASIC-like products. Can you elaborate more on like kind of product that we are talking about or what we are referring to?

Ji Zhao

It's not, at this moment, to talk about too much, but I'll just share with you our thinking, what the rationale is at including those segments. We are telling the customer we're more than happy to do this, and we start to work with the customer on those segments. And the customer is happy because we are doing the high speed relatively well and they trust us and they see the need for that.

Evelyn Yu

Got it. So can we expect to see any initial progress in this year or maybe next year?

Ji Zhao

I don't think those product is a pretty big published. Anything with the revenue will be next year or year after.

Evelyn Yu

Got it. For 2025, I want to -- also want to follow up on more specific comments on each product outlook. You're saying that -- so notebook will be up -- unit-wise will be up single digits. And you're also positive on high-end notebook segment as well. But in terms of each product segment, can you elaborate more, especially for USB4 retimer, what the growth will be like? And can you also rank by product segment that, how are you expecting these different products, the growth to be like for this year?

Ji Zhao

We have many -- on the high-speed side, we have a USB4 or USB solutions. So we have HMS solutions. We have a display solutions, and we have a PCIe solutions. And I'm actually happy to report our USB4 retimer alone already become a top revenue contributor in terms of device. The single device segment after a year, it's been our highest revenue contributor for our entire portfolio.
So we continue to see the 2025, we will remain dominated on the segment and by the design win, by the older design we are doing and on the non-Intel platform, right? So the (inaudible). And then the first thing seems like a non-Intel platform in terms of unit shipment has grown pretty well. So we are happy to see that. And as we said previously, the very important thing is that we win the design with upcoming AI platform which many people had a good expectation that we'll be very successful in the second half this year.

Operator

Lucas Liu, KGI Securities.

Lucas Liu

Can you hear me?

Ji Zhao

Yes, go ahead.

Lucas Liu

My first question is regarding to the current progress of the company's USB products within the Intel ecosystem, or the Intel can? Thank you.

Ji Zhao

We had said on the USB4 is a non-Intel platform. However, we do have the solution, as we said, end-to-end, which is our USB hub and USB4 redriver, USB4 hub. Those are the -- those two devices are not related to whether the Intel platform, not Intel platform. Only USB4 retimer are associated with asset separation whether Intel or non-Intel. And Intel using their own and don't allow other people -- into their platform.
And many OEMs want to use us to do the Intel platform and Intel just don't allow people to do it. That's unfortunately situation there.
And hopefully, the thing will change as we move to the USB 4.2, which is 80 gigabit per second, and we have already have a device in the lab and working with the AP process guy or CPU guys now. So we continue to see USB4 or beyond will become the driving force for our business. And that's the what we view.

Lucas Liu

Got it. And what's the company's long-term strategy for (inaudible) customers? And -- or what's the long-term growth drivers for the standards customers? And another question is, how should we respond to the potential competition from Taiwanese and Korean competitors?

Ji Zhao

We have been working with the standard plus customer for a long, long time, right? So the -- we work with them in many generation. We'll continue to work with them. That's the one thing. And we continue -- the strategy there is we have to go -- move to the very deep micron process to certify their demand to the low power, so on and so forth. So yeah, that's the one thing. And we continue work gain the business momentum over there.
And we're also marketing our high-speed device to our customer. And as well, and we'll continue -- we'll see those high-speed device, and we have more room to grow in their place as well.

Lucas Liu

Got it. Very clear. And regarding to the OpEx ratio or maybe the OpEx in 2025, what's our outlook about OpEx ratio?

Ji Zhao

That -- probably need to -- Kuowei, could you respond to this question?

Kuowei Wu

Yeah. Thanks for the question. So for 2025, we're still projecting -- trying to maintain the growth rate probably within 5% on 2023 -- on 2024.

Operator

Jason Tsang, CLSA.

Jason Tsang

Can you hear me?

Ji Zhao

Yes.

Jason Tsang

Thank you for my questions. My first question in terms of your Tcon or (inaudible) business. Can you give us some outlook in terms of this because you already mentioned a lot for your high-speed business. So for Tcon or (inaudible), did you find the new catalysts or new drivers for this kind of business, such as probably higher market share or better content growth? Or can you have any opportunity to penetrate into the applications or devices in the future? Thank you.

Ji Zhao

Yeah. I had said on the Tcon, we -- our strategy is to go integration, which integrates the soft driver and the touch together to serve for notebook. The -- basically, you (inaudible) system to go even higher integration to defend your position to make the leap gap with the low end suppliers.
So I think we are doing reasonably well, some of the devices already (inaudible) and continue to see the customer interested for integrated solutions and because of you provide savings provide function. And on the hand, we are gave them penetrating into the Tcon gaming segment. All of our high-end Tcon already got the certification from the NVIDIA for the gaming segment.
And those are the areas we push harder. We acknowledged previously had said that the low end of competition for the -- is pretty high in terms of price competition.

Jason Tsang

Got it. So with this kind of integrations, can you provide more value-add product to your clients? Is that -- can you -- can this kind of migration benefit your selling price or gross margins or market shares?

Ji Zhao

To us, the -- first of all, the integration solution has a higher technology, which is not easy to penetrate into, to start with, right? And the second one is the -- our product content increased because up to today, the [notebook touch] is a discrete device, which (inaudible). And so with the integrated or in-cell solution, we increase our content and the silicon content there. And because this one has the firmware, software associated with it, the sort of -- the customer wants you use it probably will use for longer time with you. And it's purely because there's a firmware software associated with it.
So you can defend your solution longer, and that's the -- what our strategy is, and go with integration, go with a deep submicron and to protect your interest in your product line and your IPs.

Jason Tsang

Got it. Thank you. And my second question is in terms of the USB. So can you provide your USB4 penetration rates for notebook for this year? And just any competition because I remember some of your competitors announced they want to move into this kind of new market. Yeah. So I know you're the -- you can keep the leadership. So how do we look at this kind of competition frontier?

Ji Zhao

Well, frankly speak, on the USB4 retimer, we were not the first one. But previously, on the non-Intel platform had -- can do there, right? However, our performance, our -- the professional, the win -- or our support win the customers. And I don't think you ever other can do any more on the competition side. And we really drive out that totally, right? So we'll continue to see other competitor claim, they have a device.
The secret of this USB4 retimer is your firmware, is your ability to pass certification on multiple standard, say, you have to pass USB4, USB 3.2, you have passed the Thunderbolt, all of the standards. So it's pretty tedious, the work or expertise to do this. Frankly speaking, many our platform, which CPU guys heavily relying us to make the system pass compound test, CTS tests, that typically take multiple months. So once that passes, I'm not sure people will go back to we do the thing with others. So that's the barrier for other people to come in.
So we still think some of them may -- will come in. But hopefully, when they come in, we already moved to the generation units before that to the 80 gigabit per second.
I think in addition to this, we opt -- as we said, we provide end-to-end solution, which is as our USB4 hub, USB redriver, and multiple other devices together.

Jason Tsang

So wondering if you can provide your view on USB4 penetration for this year?

Ji Zhao

You mean the notebook itself?

Jason Tsang

Yeah.

Ji Zhao

Notebook itself, I think, is 30%, 40% or will be on the high end of 30%, 40% or will be, and the continued work going up. And by the next year, you will see, USB 4.2 to come for some notebook. And by 2027, you will get a very popular USB 4.2, 80 gigabits per second.

Jason Tsang

Got it --

Ji Zhao

Standard is moving too high. That's a good thing for us. That's why we moved to the 12-nanometer, we'll move to the 6-nanometer just for driving -- drive those thing. And hopefully, by the time, Intel no longer wants to do this, and we can provide the more broad, the solution to our customer.

Operator

Mike Yang, Bank of America.

Mike Yang

Yeah. Happy New Year. I just have a question regarding your high-speed or PS business. Because if I look at the product mix in fourth quarter versus third quarter, the PS segment actually recorded a higher mix when compared with third quarter. But at the same time, the gross margin went slightly down versus third quarter.
So my question would be that do you actually feel some pricing pressure in this segment? And then is there any competition here and there across the PS segment? Thank you.

Ji Zhao

Yeah. I think you're correct. We grew. And there are two segments. One is, as you said, the PS. You see some -- on the lower segment, you see some price pressure. For example, the USB, all the USB-A solutions and the TI to make very cheap price and to compete, right? So I think the industry all know, those are the high -- very high volume, but the price is very low and the TI still wants to compete. That's kind of amazing to me.
But overall the USB, the PI -- the PS product segment, the gross margin are healthy and are good. But that's another segment, if we look at it, as I said previously, the DP segment on the low-end margin, lower side of competition, also very high on the price.

Mike Yang

Got it that's very clear and I'll go back to the queue. Thank you.

Operator

There appears to be no further English questions at the point. We will now begin our Chinese question-and-answer session. (spoken in Chinese)

Statements in the Chinese Q&A segment were spoken purely in Chinese and no translation was provided on the live call by the company sponsoring this event.