AAC Technologies Holdings Inc
HKEX:2018
Earnings Call Analysis
Q2-2023 Analysis
AAC Technologies Holdings Inc
In a year marked by global economic uncertainties, the company has reported a marginal decrease in revenue of 2% YoY, reaching RMB 9.22 billion. Although a slight decline, this demonstrates the company's resilience in the face of macroeconomic challenges, bolstered by its commitment to operational efficiency and cash flow improvement. Notably, there was a promising Q-Q GP margin recovery observed in Q2.
The cumulative effects of weak global smartphone demand, particularly in Q1, resulted in a year-on-year reduction of the GP margin by 4.8 percentage points to 14.1% and a more pronounced dip in net profit, which fell by 57.1%. Despite this, the company exhibited strength in its operating cash flow, witnessing a substantial increase of 43.1%.
The company's cash reserves have remained stable at RMB 7.13 billion, maintaining liquidity. A noteworthy aspect was the lowering of the net gearing ratio to 4.9%, improving the company's financial health by reducing leverage by 1.3 percentage points from the previous year.
In a prudent approach to resource allocation, capital expenditures were slashed by 42%, and inventory days dropped to 91, showcasing efficient inventory management and a strategic focus on cost control.
The acoustics business saw a 19.9% YoY decrease, facing significant headwinds, while the optics business, revenues fell by 4.4% with a noted improvement in GP margin. On the brighter side, the growing EMD and metal casing business contributed to an impressive 23.4% revenue boost.
Sensor and semiconductor business experienced a modest 3.2% YoY growth in revenue. However, this segment also endured a dip in GP margin, which emphasizes the competitive pressures and cost challenges faced by the company within this niche.
The introduction of high-performance haptic motors and advanced speaker technologies exemplifies the company's commitment to innovation, and the company's collaborative efforts with top-tier smartphone manufacturers are testament to its robust position in high-end product segments.
The company has strategically acquired PSS, a leader in automotive acoustics solutions, predicting that this move will secure its lead in the growing market for automotive acoustics, and expects to see revenue growth from the current EUR 450 million. This acquisition will bolster the company's product portfolio, offering advanced speaker systems and safety solutions essential for EVs growth.
With an anticipated decrease in smartphone shipment volumes from 1.2 billion to 1.1 billion units for the year, the company is shifting its focus towards high-value products to adapt to market demands. Consequently, this strategy is projected to result in a top-line revenue increase between 10-15% in the second half of the year, exploiting its upgraded production capacity and capabilities.
Effectively managing a 3-month inventory level and speeding up operations for new parts, the company is destocking historical inventory while aiming to maintain stable levels compared with the previous year. The high-end product strategy, particularly in optics, with an expected increase in shipments of premium 6P lenses, positions the company well for future growth and strong cash flow.
The foldable smartphone market presents new opportunities for the company, with mass production underway and a target of capturing high-end markets where prices can range around 7,000 to 10,000 units. The company is well-positioned to benefit from this segment's expansion and plans to build on its trajectory of value-based development.
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[Audio Gap] And we also provide a simultaneous interpreting and you can click on the interpreting button.
Next, let's take a look at the results in the first half of this year. In the first half of the year, the group's revenue was RMB 9.22 billion, down 2% year-on-year. Against the background of uncertainties in the global macro economy, the group made a steady progress, continuously improved operational efficiency and cash flow, and its business diversification strategy achieved initial results. The GP margin was 14.1%, down 4.8 percentage points year-on-year, mainly due to the weak demand in the global smart market in the first quarter. But the Q-on-Q GP margin improved significantly in the second quarter. The net profit was RMB 150 million, a year-on-year decrease of 57.1%. And in the first half, the group's operating cash flow was RMB 2.05 billion, a year-on-year increase of 43.1%. The group's cash was RMB 7.13 billion, which was the same as last year, and the net gearing ratio was 4.9%, which was 1.3 percentage points lower than 2022. The CapEx was RMB 616 million, which was 42% lower than 2022, and inventory days decreased to 91 days compared with 109 days at the end of 2022. The company will continue to allocate CapEx and control expenses based on the long-term growth targets to ensure a sufficient cash to support the long-term development of the group's business. Next, I'd like to share with you the performance of different business segments. Acoustics. In the first half, the revenue of the Acoustics business was RMB 3.32 billion, year-on-year decrease of 19.9%, mainly due to the global smartphone market demand recovered less than expected in the first half, resulting in a year-on-year decline in shipment volume.
The GP margin was 25.5%, down 1.7 percentage points year-on-year, mainly due to the decline in shipment volume caused by weak demand in the Android market in the first quarter and increase in unit costs caused by the drop in the shipments. In the first half of the year, the demand recovery of the Android market still faced some pressure, which had a certain negative impact on the group's Android-related business. But, however, thanks to years of close cooperation with overseas customers, the group has maintained a relatively steady market share and continuing to support customers' expansion in the technological innovation. And in the first half of the year, Acoustics solution integrating a full set of audio system design services was launched to create an immersive sound experience for users. In the first half, the group's optics business achieved a revenue of RMB 1.77 billion, year-on-year decrease of 4.4%, mainly due to weak market demand and the pressure on unit prices in the first quarter. Revenue in the GP margin improved significantly in the second quarter, mainly due to the increase in market demand shipments and the slowdown in unit price competition. We will continue to implement the high-end strategy, optimize product structure and gain market share through technology upgrading. And the plastic lens, the proportion of the 6P products shipments has increased to more than 10% of the total plastic lens improving the ASP. And we also have the OIS modules, WLG hybrid lens is progressing smoothly. And the related array lenses, cylindrical and prisms making their debut at the 2023 Shanghai Mobile World Congress. In terms of VR, the group's 3P Pancake optomechanical module successfully achieved mass production during the period. The group has also achieved deployed industrial lenses and achieved sales breakthroughs from 0 to 1 in industrial inspection. Now we will pay attention to the emerging division of Electromagnetic Drives, EMD, and Precision Mechanics segments. In the first half, the revenue was RMB 3.62 billion, up 23.4% year-on-year. And the EMD business increased steadily. The metal casing business increased significantly, and the market share of the laptops business increased. The GP margin of the combined segment was 19.3%, down by 1.2 percentage points. In the first half of 2023, the group's market share among overseas market remained stable, and the market share further increased. The shipment volume of entry motor products increased by 63.2% year-on-year, with higher performance in stop-start speed. And the group's motor products also continue to extend to the nonmobile phone fields. In the first half, the group's metal casing business continued to expand and maintained a leading market share. And Toyo Precision field achieved a good performance on the laptop side. And the Yangzhou Phase 2 factory started smoothly and will further enhance the contribution of laptop revenue. Finally, let's pay your attention to the sensor and semiconductor business together. And the revenue of sensor and the semiconductor business was RMB 494 million, up 3.2% year-on-year, mainly due to the increase in shipments. The GP margin was 11.3%, down 2.4 percentage points year-on-year, mainly due to the decline of ASP brought about by intensified competition. In the first half, the production capacity of the Malaysian factory gradually ramped up. And in terms of the automotive fields the group has successfully completed set of new automate MEMS microphone modules. After sharing the financial performance of each business segment, let's take a look at the strategic development of the group. The group continue to lead the smartphone market experience upgrades. Its products include the high-performance x-axis haptics linear motor, which has been used by Samsung Galaxy AS 23, Oppo Reno 10, Vivo X90 and super linear speaker has been used by Xiaomi 13 ultra and other model.
One Plus 11 adapter speaker box with proprietary NLC low-frequency algorithm, Xiaomi Civi 3 and Mix Fold 3 are equipped with 1G 6P outer charging current WLG lenses. And also the flag -- the flagship and high-end models of some major customers, the business of the metal casing market share is increasing. And the group will adhere to the high-end metal casing. And the group also made the customized hinge realized stimulating study and a reliable folding experience. Group also provides customers with ultra-thin and the super large average temperature plates and participants in the research and the development of annular cold-pumping heat technologies, which greatly improves the key deficient capacity of smartphones in the fields of automotive acoustic. And the president should -- will make the introduction.
And thank you, Joyce. And I'd like to talk about the automotive acoustics. Our targets of the automotive customers is to provide the attractive experience to our end users and customers. So based on this concept, AAC pay attention to the amplifier and algorithm as well as the system market development. So continuous accumulate the experienced and make innovation of technology progress. We entered this background, and we think AAC has achieved a leading acquisition in the integrated solution of the automotive acoustics. So apart from only a few companies have been equipped with such probability. And we also propose the acquisition of PSS. So I would like to introduce PSS. So PSS has over 15 years of sound solution technology leadership and headquarters in Belgium. And there are over 300 engineers globally. Their focus is on the automotive acoustics. And there are 4 highlights. First of all, hence, the leadership in the technology in the automotive acoustic systems and the market leader in EV and PHEV as well as traditional vehicles. And they also provide the advanced products in the market. In addition, apart from the traditional vehicles on auto companies, the OEMs as well as the new NEVs and new EVs. And they are also their customers. Certainly, we think is also very important because they serves the automotive companies globally, and they have a very good layout in distribution in the world. Last but not least its financial performance and the PSS revenue is about EUR 450 million. And we're seeing the revenue will grow in the future. In terms of the revenue, the orders will continue by 3 to 5 years. So in the next 3 to 5 years, the growing momentum will be maintained, and it will also be triggered by this new autos -- automakers. In addition, they have great momentum in the innovation with variety technologies. And those technologies and innovation will boost the profit. So we think PSS has a great potential in the future growth. And the strategic rationale for the acquisition of PSS, PSS is a sizeable and leading white-label automotive speaker manufacturer, and this will make a supplement to AAC. They supply directly to global OEMs, and it is also a leading supplier to global audio brands. And secondly, we have a strategic diversification. By acquiring a business with existing scale and operation, AAC achieves meaningful strategic diversification through one transaction. Certainly, vertical integration. By collaboration with PSS, and we can make a breakthroughs in the speakers and amplifiers as well as some products in optics to grab additional value show. Fourthly is the synergistic opportunities. Well, the transaction enables AAC leverage its operational expertise in supply chain and the China market should tap the growth of the global automotive acoustics and EV markets with reasonable transaction structure. The proposed deal structure enable AAC to retain and effectively motivate the existing key management team. A small part retain in the part of the management, and this will become the incentives for the management and to lead value grab of AAC. And last but not least risk mitigation, the retention of existing management mitigates significant due to risk and boots confidence in the execution of future business plans. So the sixth highlights -- the sixth rationales are the main considerations for us to acquire PSS. PSS product portfolio. The main product is speaker, and it includes a full range, mid-range speakers and woofers, et cetera, and et cetera. And they will also provide the speakers to the consuming customers. They also have other 3 segments. The first one is the latest acoustic system. The first one is about the speaker systems in a box, it's a subwoofer and also the tool boxes. And headrest solutions, 3D solutions. And they can put this speaker size. And so it's more compatible in the automotives. And thirdly, it's about the safety speakers and systems. So with the EVs growth, it's very important for example, the AVAS, Acoustic Vehicle Alerting System. This is the requirement for installation in the EVs. And after the acquisition, we can also innovation products. Fourthly is the Transducer based on haptic systems. Many people are talking about the 3G and 4G and also, for example, more on haptics and experience to our customers. And PSS has achieved a mass production on those regards with the entertainment and the infotainment. So this is a perfect combination of acoustics and optics. So those are the 4 core business parts -- segments of PSS. And PSS global operational footprint. As I mentioned before, this half quarter is in Belgium. It was founded Those are the main factories. And Mexico factory is mainly serving the U.S. market. And we also have factories in Germany and Hungary. And those are serving the European automotive market in Dongguan and Penang in Malaysia. For the Chinese markets and ASEAN, we have global customers. The R&D center which is Belgium and Shenzhen. So those are the R&D centers. You can see from this map, PSS has completed global operational footprint, and they have already established industrial supply chain to serve all the automotives worldwide. So this is the brief introduction of PSS. And we can come to Q&A session. Thank you. Thank you introduction.
[Operator Instructions] Let's welcome the first question from CICC.
I have two questions. And the first question is related to the mobile phone. You can see a pressure or the price pressure of the mobile phone in the first half of the year. So I'm curious about the long-term strategy of the -- or your view on the long-term demand of the mobile phone? And we also see a recovery for the becoming back up Shenzhen a customer. So whether this will boot any demand and also what's the price strategy?
My second question is about the optimistic -- it's about the optics and inventory. What's your outlook on the inventory and optics business? So I have these two questions.
Okay. Regarding the mobile phone market, yes, in the first half of the year, the shipment volumes decline compared with the first half of last year. The whole year, we're seeing 1.2 billion shipment volumes of last year will decrease to 1.1 billion shipment volume this year. In terms of the supply chain, based on our understanding of our customers, the inventory levels are low as far as I know. So the forecast for the second half of the year, we will be accurate. We'll be more accurate and the volatilities will not be as weak as that atmosphere. So this is about the shipment volume of this year.
And the most customers are targeting the high-value products. And the models below 1,000 or 2,000 decreased. And many users focused on the models above 2,000 or even higher. And we also see the new launch of the mobile phone models and the new models will trigger the upgrade of their system and their models. So in the first quarter and the second quarter, our shipments will be at the low level. But in the second half of the year the shipments volume will be ramped up compared with the first half. And this market will be more stable and the value-oriented. Acoustics, the ASP will be lower in the first half. But the second half, the ASP will increase from 4.5 to above 5. It relates to the new models and new component upgrades. From the perspective of shipments volume, the first half is about 40% to 45% of the total year's shipments volume. So the second half, the volume will be about 50% to 55%. 10% to 15% increase compared with the first half. So this profitability in the second half will be increased, especially for the android system. And also the production capacity and utilization is increasing. And as far as the Precision Mechanics and the metal casing, of course, this kind of growth was triggered by the Shenzhen bigger customer, and we are developing the collaboration with this customer. We also have the promotion on the high-end models. And for the Precision Mechanics, we have very positive feedback. Compared with the first half of the year, we believe the top line and the revenue will be increased by 10% to 15% in the second half.
The production capacity and utilization as well as the capacity will be increased. So overall the mobile smartphone market will develop according to this value based. And we will be benefited from this development. In terms of optics, and Jack will answer your questions.
So your question has two parts. First one is about the inventory.
So by -- as of the 30 of June, our inventory level is about 3 months. And the newly operational parts has speeded up. It's about 2 weeks to 3 weeks. And for our historical inventory, we are destocking. Therefore, the inventory level will be maintained at a very astound level compared with last year. The complete products inventory developed by 15% and [indiscernible] is also [indiscernible] point. Your second question is about the future of the [indiscernible] in the second half. Our company is more focused on the high-end lens. In the first half, for example, the 6P shipments volume accounted for 15% of our total shipments volume. And in the second half, this number will increase. It is in line with our high-end products strategy. As mentioned by Kelvin, many customers are returned to the high end and the better experience products. Our shipping margin is increasing. The ASP has declined. The -- and this kind of decline will be posed -- will be stopped. And this is also beneficial to our second half. And in terms of the inventory, we don't have any inventory modules and the modules production is based on the orders and we adjust the inventory and the production according to the production. We will increase the turnover days, and we will also achieve the cash inflow positive. So -- and this will help us to maintain a strong cash position. In a nutshell, we will destock our inventory based on the market demand and to achieve [indiscernible] position and cash inflow. Thank you.
So next question is from Citi, Tao Xu.
In the first half, the uptake is better than acoustics. What's the difference? What's the reason? Is it the year-on-year growth is different. So this is the first question. And the second question is about the folded smartphone. And we also see a lot of mass production. So what's our value chain on this folded smartphone? And apart from the Beijing customers, do you have any potential expansion markets?
From this acoustics perspective markets, you can see there is large decline in the inventory. So in the first half, the shipments of the acoustics and the ASP and this unit price -- the unit price declines by 10% to 15%. And I would think in the second half, this unit price will recover to that last year or above that. So that's why we can see this pressure of the acoustics in the first half and some production utilization is -- not to reach 100%. So we have reduced it 390 million products. And our target is 800 million. And the unit price will be increased by 20%. So you can see in the second half of the year, this will be boosted. And according to the shipments of these 2 months -- and we think this shipments in the second half of the year reach 450,000 and ASP can reach 5. So this will help us return acoustic to a sound development. As also the reason why you see the optics performance is better than acoustics in the first half. And second question is the folded smartphone. So we indeed we have reached this mass production and the delivering on the products from [indiscernible]. I think there is potential rate on high-end smartphones, price is about 10,000 and the smaller phone -- folded smartphone is about 7,000.
And for this high-end products for this [indiscernible] price is about 500. And we think this year, we can produce 300,000 to 500,000. So it's also based on the customers' demand. And we think this kind of development is promising, and we are developing the market with more customers. If we have further information, we will disclose those to all the investors. And we can also see this greater potential in this [indiscernible] access products. And we see this -- the attitude is very -- good attitudes toward those high-end products. Thank you.
And next question is about -- [indiscernible].
I have two questions. The first question is about the 5-year strategy [indiscernible] mobile phone and nonmobile phone? Second question is about the automotive acoustics. You are planning to acquire PSS by launching of the deadline -- specific deadline. In the future, do you have any guidelines for the revenue up acquired the PSS? And what might potentially it will bring down to ACC in the automotive market?
Certainly, the PSS has an operation with the biggest client -- tier clients. After the acquisition, in terms of the optics motor, invested company have more potential in the global customer. So my question is about the overall company strategy.
Okay. Thank you. So I think in terms of the size of the mobile phone and this will be slowed down. But the value, for example, the high products -- high-end products with rich functions and experience will be further developed. And for AAC, we need to catch this opportunity to cover all of our business, including this motors and optics and acoustics. And we can provide the higher-end products to our customers and seize this upgrading opportunity to increase our revenue and the profit. So this is about the smartphone area. In terms of the automotive, many people are curious about the development of acoustics in AAC. And the PSS, the revenue in 2022 is about 452 -- EUR 500 million, and this will be in our consolidated balance sheet. So in the automotive, the revenue is equivalent scale of our electronic acoustics. So apart from the acoustics, we can also develop our other business. For example, the optics as well as MEMS microphone and automotive motor, and we can make breakthroughs on this regard. The -- this acoustics -- automotive acoustics size, we want to reach the target of the same scale in the consumer electronics. PSS has a lot of customers in the U.S. Apart from the U.S., the traditional automakers as well as the mid clients -- tier clients they are long-term customers. And this good relation -- customer relation are very helpful to AAC. Amplifier and speakers and the other components and AAC can leverage the PSS and to expand the market. So those are the strategic value of the PSS.
Next question is from [indiscernible].
My first question is about ASP of the optic lens in the Q2. So what's the structural optimization? In the future, the GP margin of an optics will become positive. When does it happen?
And lens restructuring started last year, this was triggered by the customers demand in the 5P and 6P and are this kind of verification in the design. So after verification, the high-end product started a mass production and ramped up its production. And this volume is increased by over 10%. In the second half of the year, we will continue to optimize this structure and the more 6P products will enter the market. Sorry, I forgot your second question.
My second question is about the processing lens -- lens processing and also the margin profit.
And it's about 15% to 16%. The processing ratio is 15% to 16%. And the GP margin includes 2 parts. And the first is about lens. And the GP margins in processing lens is negative 10%. We think this will turn positive in the second half. And with our deployments in the high-end products as well as the reduction of actions within the company and the technology upgrades, we estimate in Q4, the lens business will gain positive profits. In terms of the module, this is the second part. Second half -- the competition in the second half will become mild. So we think the module GP margin will also turn positive in the second half.
Okay. My second part is about the Toyo Precision. And what's the production capacity?
And after the acquisition of Toyo, the Yangzhou factory, this year, it starts its mass production. And the first products will be delivered in Q3 and Q4. And the total production capacity of the factory is estimated of 100,000 to 115,000 pieces. And in Q3, this capacity can reach 15% because we have 1 product running on that, and there will be more projects onward. And in the second half, the Yangzhou factory will make some contributions. But it depends on the market demand because the laptop demand is declining this year. So we have to make adjustments on the production according to the customer demand. And for the first products has already reached this mass production and deliveries. So after the acquisition of Toyo, this benefited to the group. After the first product -- in the future -- after the first products, the future products will be ramped up.
And for a single slice, what's the unit price?
The single slice for Toyo is 100 to 120. And in Yangzhou factory, it's about 300 because it's precision -- precise processing and not presenting products.
And the next question is from [indiscernible].
The question is about the market share of the PSS and the group cash.
And the revenue as well -- and then the market share of PSS. It's about 15% to 25%. And in the high-end speakers, if market share will become larger -- higher. So the -- in the total speakers, its market share is about 15% to 20%. In terms of financial performance I would like to invite CFO, Ms. Dan Guo to answer.
Okay. I will answer all your questions on chat box.
[indiscernible] by the management, the top line is about RMB 450 million to RMB 500 million annually, and it will grow -- annually, the growth is about -- growth is stable. And the GP margin is 20% and profit margin is 5% to 8%. In the future, as we mentioned before and some synergies will come from the cross-selling of the products and the whole supply chain, including the overall production line and operational efficiency. So we think there are still potential in the future growth. And in terms of the book cash and net cash is about EUR 10 million to EUR 15 million. It is debt -- the operating debt shorter, it's about EUR 50 million to EUR 60 million.
Next question is from [indiscernible].
I have two questions. The first question is about our biggest customers in Shenzhen. And in Q3, they will launch a new models. So I'd like to know more about the preparation on the ASP and the market share? And the second question is about the U.S. big client. Do you have any upgrades on this?
In terms of the big client in Shenzhen, their products focus on the high end. And we have close collaboration with -- and we will be in line with the market development. So the ASP is the metal acoustic as well as the acoustics and the motors, they have higher on margins. So their requirements on the ASP as well as the requirements are higher because their requirement is higher. So the ASP is 20% to 30% higher than the market price because it's more customized. This year's demand, the customers -- future demand is also huge. Therefore, we'll forge our collaboration with customers and to help them to upgrade the immersive experience. The specific figures depends on the market situation. In terms of the U.S. customer, in the first half, there are some voices in the markets that the company will [indiscernible] we think there are still opportunities. But this will be delayed. And the function will be promoted in the future and may be paused this year or delayed this year, but it will be promoted in the future. And we are paying a close attention to their investments, and we can continue to support its R&D and the development in this country.
The next question is from chatbox. The question is about CapEx and the guidance in the second half of this year and the next year.
The total CapEx of this year is in line with CapEx that disclosed before. And before, it's about RMB 1.85 million. And the CapEx will reduce by 15%. So this CapEx this year is about RMB 1.5 billion. Of course, it depends on our overseas market plans, other strategies some information here.
And for our traditional and old products, the cost is more optimized. So there won't to be any capacity expansion on the traditional products. For our investors, for example, there are small functions upgrade on the Smartphones. For example, the hinge. So the new access motor and upgrade, the high value-added components will be the investing areas. But for old and the traditional mass producing parts, the investments won't be increased. In addition, we also see separation or this fragmented supply chain of our customers. And we can support our overseas customers and from our overseas factories, and we'll help our customers to mitigate the tax risks. And thirdly, the CapEx will be on the strategic development, for example, the acquisition of PSS. And in the automotives, we will continue our investments. For example, we innovate on automotive speakers and the amplifiers and the microphones as well as the automotive optic lens. So apart from PSS acquisition, AAC will maintain continuous CapEx in their own automotives business. So the CapEx target this year has already covered for this development. And in the future, we will continue to optimize our cash flow. And the mobile phone production line and to achieve a stable business development and we will efficiently control on our CapEx, but retain our investments in innovation. Thank you.
Our time is constrained, and this will be the last question. And the last question is [indiscernible].
I have two questions. The first question is about the Precision Mechanics that we see 40% increase in the laptops, and et cetera. And with return of the engine customer, the Precision Mechanics will become better. And acoustics and motor and other business segments, do you have any revenue targets? My second question is, how do you see the corporate of the markets and any upgrade potential in the second half of the year?
And the Precision Mechanics is very good. And this is related to the Precision customers operation. We also see high-end models development. And even this middle-end products will introduce metal casing. And this will become the industrial trends. And the overall industry are developing into the mid- and high-end performance and products. And also we are holding a haptics experience, a very important. And therefore, seeing the metal casing will be promoted. And therefore, the first half of the year, the production capacity, for example, the [indiscernible] has reached its full capacity when even need to find the party partner and to expand our capacity. This is a good news. And next year, this kind of momentum will be maintained, I believe. The metal casing next year, as another increasing points, which is hinge in Q2. And in Q3, we will have our first mass production and in the second half and the next year, there will be more projects end market will use the hinge products as the edge or the starting point for the new markets. So with the launch of the new unhinged smartphones, and you can see this shipment volumes is great a lot. For example, our Shenzhen big clients and the other clients. So hinge, as its market -- and it's high price -- high unit price. It's a very pivotal structural support. And this will increase the performance of the smartphones and also reduces waste. And so about the projects in Yangzhou after the M&A of Toyo and the metal casing for laptops are the progress of Yangzhou factory. And then we think in the next year and the year after next year, there will be more projects into the mass production. And the Precision Mechanics profitability and revenue will increase significantly. Very clear in the Precision Mechanics segment. So that's your second part of your question.
My second question is about the revenue guidance for any upgrade potential market?
Acoustics, motor and the Precision Mechanics will keep the high-end momentum, and the products will be optimized in accordance with this high-end momentum. So we see motor can -- they pay 20% to 30% growth. The mobile phone has steady demand -- the haptics demand -- haptics requirements. And our new motors showed the better performance. And this is also price -- high price to performance ratio, high choice anchors to our customer. And the customer will have a very immediate experience upgrade. For example, [indiscernible] and the acoustics, volume products will help the mid- and high-end customers to upgrade. We will increase the quality of sounds as well as the volume. In the metal casing, as I mentioned before, this middle end mobile phone will use more metal casing. And as well as the folded mobile phone -- and they will help us to increase our top line and bottom line with a stable production utilization and savable market and all the production line will return and revert to some level.
Due to the constrained time, this is the end of the 2023 interim results. And our materials has already been uploaded to the official website. If you have further questions, please feel free to contact IR team. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]