AU Optronics Corp

OTC:AUOTY

Earnings Call Transcript

[Operator]

Welcome to AU Optronics 2018 Third Quarter Results Conference Call. [Operator Instructions] Now I would like to hand over to Ms. Julia Chao, Head of IR Department of AUO.

[Julia Chao, executive]

Thank you. Good afternoon, ladies and gentlemen. Good afternoon. This is Julia Chao, AUO's IR Officer.

On behalf of the company, I would like to welcome you to participate in our third quarter results conference call. Joining me here are 5 executives: our Chairman and CEO, Mr. Paul Peng; President and COO, Mr. Michael Tsai; Senior Vice President, Mr. Wei-Lung Liau; Vice President, Mr. TY Lin; and CFO, Mr. Benjamin Tseng.

The agenda of today is as follows: first of all, Ben will go over the financial results of our Q3 and provide you with our guidance for Q4, and then our Chairman will provide you with an opening remark. Afterwards, we'll proceed with the Q&A. We have collected questions before the meeting. We will first address the questions. Afterwards, if you still have more questions, we will open the floor for you to call in. So that was the agenda.

Now before I turn over to Ben, I would like to remind you that all forward-looking statements contain risks and uncertainties. Please also spend a minute to read the safe harbor notice on Slide #2.

Now Ben, please.

[Benjiamin Tseng, executive]

Good afternoon. I would like to go over our financial results.

Boosted by seasonally strong area shipment, reversal in TV panel price declined, and USD's appreciation against the new Taiwan dollar. Net sales came in at NTD 81 billion, up by NTD 6 billion Q-o-Q. Profits also improved Q-o-Q. Q3's gross profit was NTD 8.6 billion, margin 10.7%. OP profit, NTD 3.1 billion, OP margin, 3.8%.

EBITDA margin was 14.6%. The EBITDA margin of the Display segment was 15.3%. For our non-OP items, we recognized an income of NTD 2.1 billion in Q3, thanks to stock dividends that we received from companies that we invested in and subsidies going to our subsidiaries. Our net profit attributable to owners of the company was NTD 4.3 billion. Basic EPS was NTD 0.45.

Balance sheet. Cash and cash equivalent was NTD 63 billion, down by NTD 19.3 billion. The cash was used to pay out cash dividends of NTD 14.4 billion, CapEx of NTD 76 billion (sic) [ NTD 7.6 billion ], debt repayment of NTD 5.6 billion. Because of the cash dividend distribution, our gearing ratio was up a little bit to 11.9%. Inventory turnover days was 34 days. Both of these levels are very healthy.

Moving on to cash flow. We generated for operating activities NTD 9.4 billion in Q3. CapEx was NTD 7.6 billion. We had an outflow of NTD 19.5 billion for financing activities mainly for cash dividend distribution and debt repayment.

Moving on to revenue breakdown by application. On a Q-o-Q basis, the revenues of applications increased to various extent. What's worth noting is the monitor segment, which gained 2 percentage point share to 18%. Thanks to brands' pooling moves for large-size and gaming panels, area shipment increased.

Next slide, revenue breakdown by size. The more significant change came from the 20-inch to 39-inch segment, whose share grew from 18% to 21%, boosted by monitor size upgrades, gaming applications and increased adoption of public information displays.

Next slide, shipments in ASP per area. Area shipment grew by about 7% Q-o-Q, partially thanks to shipments from the new Gen 8.5 line, starting from the third quarter. ASP per square meter was flat Q-o-Q.

Next slide, small and medium-sized panels. Area shipment was down by 3% Q-o-Q. However, with product mix optimization, revenue grew by 4%.

For our Q4 guidance, first of all, about large-size panels as pooling activities for the high season came to an end, shipments are expected to be down by low single-digit percentage points Q-o-Q. Blended ASP denominated in USD is expected to be slightly down Q-o-Q. For small and medium-sized panels, shipments are expected to be down by mid-teens percentage points Q-o-Q with an expectation of higher-blended ASP resulting from product mix changes. The overall loading rates of Q4 are expected to be maintained also at high levels.

That was my financial overview and guidance for Q4.

Before we proceed with Q&A, I would like to first invite Paul to provide you with a business update.

[Shuang Peng, executive]

Good afternoon, ladies and gentlemen. This is Paul. Thank you all for participating in our results conference call.

Q3 was the high season for the panel industry. The demand for various product lines was very strong. Consumer brands procure panels aggressively for the year-end holiday season, boosting panel shipments. As a result, panel prices in the third quarter were relatively stable.

In the first half, we added additional capacity for our Gen 8.5 fab. With higher demand for high-end product, this new line reached full capacity in Q3, and this contributed to our revenue. In the third quarter, NTD weakened against USD, which also benefited our performance. As a result, in terms of revenue and profit, we had a revenue of NTD 81 billion, up by 8% Q-o-Q. OP profit, NTD 3.1 billion. Net profit attributable to owner of the company was NTD 4.3 billion. This make the third quarter the best quarter yet for this year. The combined net profit of the first 3 quarters was NTD 9.88 billion, very close to NTD 10 billion. As for our balance sheet, we maintain a very healthy inventory level. We have been able to control our inventory levels very prudently. Inventory turnover days was 34 days, on par with the previous quarter. Gearing ratio was up a little bit, mainly due to the fact that we gave out employee bonus and stock dividend. So our cash position was a bit lower than the previous quarter. Despite so, our over financial structure was very healthy. That was our Q3 overview.

Recently, there have been some fluctuations in the market that are worth our attention. First of all, the short supply of components was being felt. In the first half, there was a short supply of MLCC. And recently, components of semiconductor, components also went into short supply. We will observe the shipment momentum of our brand customers closely going forward.

Secondly, emerging market currencies depreciation may cause purchasing power to lower. But of course, the biggest uncertainty still comes from the trade tensions between China and U.S. This issue may not resolve in anytime soon, and we are not sure about how big the impact will be. In the end of September, the U.S. announced to impose another 10% tariff on USD 200 billion worth of Chinese goods. In Q3, end sales wasn't impacted significantly, but the bearings could really play out later on.

Currently, the USD 200 billion worth of Chinese goods do not include ICT products, but we will still have to observe what will develop later on.

Starting from January 1 of next year, tariff will increase from 10% to 25%. We will still have to see how big the impact will be and whether there will be any changes in the timing. These all constitute uncertainties for our operations, but our strategies remain the same, and we will continue to adapt and observe the changes of the market.

Looking ahead at the fourth quarter. These uncertainties would likely extend into the fourth quarter besides macro changes. In terms of television because the Chinese market is preparing for the Chinese New Year, so restocking happens, but in the west, restocking demand was close to an end. Currently, we maintain high loading rate. But with any changes and adjustments, we will schedule our annual maintenance and also pilot new products for next year. These are the things that we do at this time of every year. We do so because we want to make best preparations for the coming year. Also, with new capacities coming from Chinese panel makers, they will account for a larger portion of the market. So there have been some big changes in the market. Of course, some people are worried that the newly added capacities could skew the supply demand next year. This is especially so for commodity products where competition may be fiercer.

Starting from a few years ago, AUO has been committed to value transformation. Going forward, we will stick to this strategy, and we will execute the strategy more prudently and aggressively. For customers, high-end value-added products also are the main sources for their profitability. Although there are some seasonal changes for AUO, we still think that demand is strong.

From our perspective, what we will do at the moment is to maximize the effect of our capacities to meet the changes. That is why we think we will need to consolidate our resources to maximize the values that we can create.

Starting from tomorrow, we will have some changes to our organizational structure. We will focus more on leveraging our hardware capabilities to develop software and solutions. We aim for consolidating our resources, developing new technologies and differentiation with the new organization. We will also focus more on smart manufacturing and smart management. The hope is to maximize our return on asset. Although we cannot change the external environment, we should be like chameleons to constantly change ourselves, reinvent ourselves so as to adapt to the changes of the environment. Although the competition in the industry will still be very fierce, we are convinced that with our tech innovation and our HR management, we can create win-win with our customers in hopes of maintaining stable profitability. Thank you.

[Julia Chao, executive]

Thank you, Paul. We will start our question-and-answer session.

[Julia Chao, executive]

For the first question, we will be talking about market update and outlook. Now about AUO's views on the worldwide TV monitor and notebooks, smartphone supply and demand, as well as the third quarter's TV sell-through updates, in addition to -- of 4Q's demand outlook. Michael, would you please?

[Kuo-Hsin Tsai, executive]

Good afternoon. This is Michael. I would like to first talk about 2018 worldwide television monitor, notebook and smartphone supply and demand. In terms of demand, sell-through were better than expected in the first 3 quarters of the year. Demand steadily grew across various applications, and the trend for larger sizes remained quite strong. Ranging from television monitor, smartphone, car display and commercial displays, we are seeing that size migration continued. We expect that full year area demand will be up slightly. Area demand will be up by 7% to 9% this year. In terms of supply, there will be new capacities coming up this year, but it may take some time for the new fabs to ramp up their yield and production efficiency. Also, when it comes to demand of the market, the technological specifications and product development cycles would have to be in line with the market demand. Additional capacities will not necessarily translate into a demand. In addition, existing capacity would also go through product specification upgrades and the transition of manufacturing processes. Therefore, we will still need to observe the amount of effective capacity that can be added. Overall, we expect that 2018 supply and demand will be relatively stable and balanced as well as healthy.

Now about the third quarter, TV sell-through update and fourth quarter's demand outlook. I will also talk about, first of all, sales results in Q4. In the third quarter, sell-through and area size growth was better than expected, extending the momentum of the FIFA World Cup. The main growth regions were North America, Eastern Europe and emerging Asia. This was especially true for the developed markets. Sell-through of the third quarter in North America and Western Europe posted positive growth. The strong economic growth in the North America boosted sell-through. As for the Western Europe -- Western European countries such as Germany, U.K. and France, demand also posted positive growth. Large size 4k continued to be the key sales point. Average size grew by 1.5-inch Y-o-Y. As for China, sell-through in the third quarter was flat Y-o-Y. However, size upgrade momentum continued. The key highlight of Q4 will be the November 11 Single Day Festival. It is expected that daily online sales amount will likely grow by more than 30% Y-o-Y. As for emerging markets, with signal switchover in Russia, Eastern Europe sell-through in Q4 grew by double-digit percentage points. The demand is coming back in emerging Asia so the sell-through and size both posted growth in Q3. Overall, sell-through and area sales -- area growth were both better than expected in Q3. Every size also grew by more than 1 inch Y-o-Y. Looking ahead at the fourth quarter, which will be extending the high season momentum from Q3, large-size and high-end products will still be the highlights of sales. We expect that sales momentum -- shipping momentum will likely continue in Q4. Thank you.

[Julia Chao, executive]

Thank you, Michael. The next question is about the inventory levels for TV sets, monitor, notebook and smartphone. Could Michael please answer these questions?

[Kuo-Hsin Tsai, executive]

Now about the TV sets and IT products, including monitor, notebook and smartphone inventory levels, so far the overall inventory levels are relatively healthy. In Q3, there was the high season effect. Inventories were effectively digested. At the moment, with stocking demand ahead of Q4's shopping spree, the inventory levels of TV sets were a week to 2 weeks higher than normal. As for monitor and notebook, brands are selling very well. Channels are restocking for the year-end holiday season, so the inventory levels are slightly higher by about 1 week to 2 weeks. As for smartphones, brands launched their new models in Q2 and Q3. This has spurred the sales of new smartphones. So before we come into the holiday season, pooling activities were still quite strong. Also, the demand for LTPS technology continue to increase. Inventory levels are relatively healthy. Thank you.

[Julia Chao, executive]

Thank you, Michael. Now the second group of questions were financial ones. First, about loading rates. The loading rates of Q3 were on par with the previous quarters at mid-90s. The loading rates of Q4 will likely also maintain at high levels. For depreciation and amortization, the amount in Q3 was NTD 8.7 billion. The amount of the first 3 quarters was NTD 25.3 billion. For the full year of 2018, we expect the amount to be within NTD 35 billion. For CapEx, the amount was NTD 7.6 billion in Q3. The amount was NTD 26.5 billion for the first 3 quarters of the year. As for the full year numbers, some of the payments will be delayed into 2019. At the moment, we expect the amount to be within NTD 40 billion. Next, about the currencies fluctuations' impact on our margins. In the third quarter, based on official data, NTD weakened about 3.4% against USD and also weakened against Japanese yen by about 0.9%. These 2 factors combined had a positive 1.9% impact on our gross margin. The third group of questions are about AUO's key products and technologies. The first question is about TV panels. Could Wei-Lung, please, about AUO's key products for television including ultra large-size and 8K models? Secondly, analysts are also very interested in knowing our strategy for the proper information display segment, which is PID.

[Wei-Lung Liau, executive]

Good afternoon. This is Wei-Lung. I would like to update you on our large-size, especially TV and PID panels. Let me first talk about television panels. In the third quarter, which was the traditionally high season for the industry, brand customers booked panel allocations very aggressively, boosting shipment momentum. Market prices were also relatively stable as a result. This year, our key focus was placed on 8K and 75-inch and 85-inch ultra large size panels, and we have made very good progress. In terms of 8K, we have found that after the E fab show, end-demands demand for 8K accelerated. Our first 85-inch 8K panel already went into mass production in Q3 and is currently in short supply. Our 8K panel adopts HDR, low reflection, bezel-less and refresh rate of 120-hertz features to deliver picture quality that excels that of OLED. Later on, we will continue to launch a full series of 8K products ranging from 65-inch to 75-inch. As for the 75-inch and 85-inch panels, this year, we are seeing that the market is very -- has very strong demand for large size televisions in Q3. 75-inch and above television set sales surged Y-o-Y. And AUO 75- and 85-inch TV panel shipments hit another high in Q3, up by nearly 60% Y-o-Y. Besides consumer electronics, we are also working on developing high value-added commercial products. I would like to update you on our progress made in PIDs. PIDs are being extensively applied in the areas of transportation, shopping malls, education and corporate meetings. In the trend for smart retail and smart cities, we expect that globally PID shipment volume will be maintained at double-digit percentage growth. AUO's has been working on the PID market for more than 10 years. Currently, we have 30% of the market share, and we have been consistently among the world's top 2 players. We have a full series of product lines, and we are focusing on high-end large-size products. This year in Q1, we acquired a content management company, ComQi from the U.S. We will further extend our footprint to software and hardware integration services to deliver one-stop shopping services for our customers. This year, our PID shipment volume is expected to grow by nearly 50% than last year. And further on, we will focus on increasing our specifications and the portions of our integrated products.

[Julia Chao, executive]

Thank you, Wei-Lung. Our next question is about AUO's car display and some strategies for our notebook business. We have TY to address these questions.

[TY Lin, executive]

Good afternoon. This is TY. I would like to talk about the progress in the car display and notebook markets. First off, about car display market, recently, the demand for new fuel vehicles is increasing. In light of such demand, power efficiency is the must for all the components. In terms of vehicle human interface and display products, low temp has been well received in the market. With car designs becoming more stylish, the requirements for display to combine other functionalities also increased. That is why they are this requirement for free phone. Also, with limited interior space within a car, the demand for narrow bezels is also increasing. Plus, the demand and requirement for safety and reliability increased. AU has been working on car display market for many years. We have the technological capability. Besides, we have built long-term and deep relationships with customers. We are able to accommodate various requirements of our customers and to offer them with high-quality after-sales services. One case in point is that we recently introduced a side mirror product for a luxury car. When it comes to side mirrors, safety and product reliability and information displayed are very important. In addition, AUO is consistently the #1 market holder of the car display market. We will leverage our advantages to reinforce our market leadership and to further develop the high-end car display market. We expect that the car display shipments of AUO will enjoy double-digit growth this year. As for the notebook segment, we continue to explore the high-end notebook market. This year, with the commercial replacement cycle, demand from customers has been very strong. We leverage low temp poly technology to produce high-end commercial notebook panels, and shipments continue to rise. Sequentially, shipment in Q3 nearly doubled from Q2, and we expect that Q4 shipment to also grow sequentially. What's also worth noting is that low temp has the feature of power efficiency and we led the industry to have launched an ultra low power consumption, low-temp notebook panel with only 1 watt of power consumption. And this product will be launched in alignment with our customer in Q4, and this is the lightest and most power-efficient high-end notebook of the market. For the gaming notebook panel segment, we continue to have the market's #1 position. We have a high-performance gaming notebook panel with a refresh rate of 144 hertz. It is very technical challenging to produce this panel, and only very few panel makers can mass produce such products. We are the premium choice of our customers.

[Julia Chao, executive]

Ladies and gentlemen, we now open the floor for you to call in. [Operator Instructions] We now start the Q&A. [Operator Instructions] Our first caller is Narci Chang from JPMorgan.

[Narci Chang, analyst]

I have 2 questions. Firstly, on the Page 5 of your slide. There was a change in your working capital. I think you had a big net outflow in Q3. Could you tell us why? Secondly, on currencies fluctuations, you mentioned that the net impact from the fluctuation was 1.9% or percentage points.

[Benjiamin Tseng, executive]

Narci, for your second question, that was 1.9 percentage points. For your first question, you asked about cash flow. Are you -- were you talking about financing activities?

[Narci Chang, analyst]

No, I was talking about operating activities. You had an outflow of NTD 4.1 billion. That's net change in working capital.

[Unknown Executive]

Narci, we didn't have much change in payment terms or our account receivables terms, and we didn't have much change in inventory. I think it had to do with the timing of our settlements so it was not caused by changes in our payment terms.

[Operator]

Our next caller is Arthur Lai from Citigroup.

[Arthur Lai, analyst]

Congratulations for having a higher than your peers margin at 4.7%. I have 2 questions. Firstly, it's about PID. I think your PID business is growing at a faster pace. I think the margin should be also quite high. Could you give us some color around per area margin increase? And how much do you expect the value to increase? Also, you mentioned that you have acquired ComQi. So it appears that you are integrating toward downstream. When would you expect bigger impact to increase? Also, investors in the Europe are paying much more attention to ESG. Could you please share with us your efforts in this area? And could you talk about your long-term perspective?

[Shuang Peng, executive]

Arthur, this is Paul. About PID, because the amount of products and the applications are -- there are a lot of different kind of products within the PID segment. We actually combined public information display plus with smart retail and public transformation, so there's a big variety. And also, because these are small-volume orders and very diverse products, they offer more stable margin than commodity products such as TVs. We don't have by area contribution data points, however. But in a slower season or when commodity products are under bigger seasonal pressure, these products offer relatively more stable margins. So they provide some sort of support to our profitability. For us as a company, besides PID, we also have commercial, industrial or other diverse and small-volume products. These products account for more than 20% of our revenue, and we are working on increasing them. Even within consumer products, we also have a big chunk of premium models; for example, ultra large-size TV panels, 4K, 8K and high-end notebook panels as well as gaming monitor. All these things combined contribute to another 20% to 30% of our revenue. So overall, within the value-add segment, they account for about half of our revenue. Although I cannot provide you with information of PID's margin contribution, I can tell you that value-add products consistently contribute to nearly 50% of our revenue. This is why we have been able to maintain more stable profitability year-to-date than our peers. As for ComQi, we have 2 purposes by the acquisition. First is to combine software and hardware to be able to deliver solutions. And secondly, it gives us an opportunity to really get in touch with our downstream end users. The scale of this company is not that big. Their revenue was about more than USD 10 million last year. With the acquisition completed in March, for the past half year, we have been working on consolidation. We probably won't be able to see big contribution in terms of revenue from this acquisition, but we expect to have significant growth starting from next year. But the market outreach is basically in Europe and the U.S. As for ESG, I think, at the moment, people around the world are paying more attention to CSR. And AU has been committed to driving our CSR initiatives over the past few years. And these years, we have been widely recognized by the market. For example, we have been included in the Dow Jones Sustainability Index for 9 years in a row. There are only 23 companies in Taiwan are being included. Recently, the sustainability committee also announced that there are 40 index stocks included, and among the top 13, we were one of them. Of course, there are also other accolades and recognitions that we have garnered. In many countries, many places around the world, whether in Taiwan, Asia, U.S. or sustainability indices, AUO has been included. So in terms of environmental, social and governance, AUO is one of the outperformers of the industry. Going forward, we will be continuing to -- committed to CSR activities. This is not only going to benefit our operations to help us run our business sustainably, but it would also help us to boost our performance. Thank you.

[Operator]

Our next caller is Jerry Su from Credit Suisse.

[Jerry Su, analyst]

My first question goes to Ben. Could you give us some more color around your non-OP gain in Q3? A big chunk of it came from subsidies to your subsidiaries. Is it recurring or it happens once every year? How do we model this number? Also for OLED, I think you have been very focused on LCD technology development. Do you have any new plans for OLED? I read some news reports talking about that you have resources in inkjet printing technology. If you are going to adopt this new technique, when do you expect it to really benefit your revenue?

[Benjiamin Tseng, executive]

Jerry, this is Ben. In terms of non-OP gain, because we are not certain whether we can have government subsidies every year so that is why we put it in the non-OP item. And it will also depend on our investments in various places, our performance levels and the different levels of collaborations that we have with local governments and companies. We cannot provide specific numbers, but what we do is whenever we have subsidies, we will account it -- account for that in our financial results.

[Shuang Peng, executive]

Jerry, this is Paul. I would like to answer your questions relating to OLED. I think it may be because that we have been performing relatively well, people are paying closer attention to us. There have been 2 reports within 1 week. But unfortunately, they were incorrect information. One piece of report is about our organizational change, and that was incorrect. But with our new announce -- official announcement, I think that was already proven a false alarm. The other report was about our progress made in OLED, especially with our investment in Mainland China. It was also incorrect. I think there was something wrong in the translation from a news report from foreign wires. In fact, we're being invested in the R&D for OLED for a while. But at the moment, with large-size panels, especially for television panels, in terms of color performance, high resolution or, more importantly, price-performance ratio, LCD still is the best option. That is why with television panels, we are not considering to adopt OLED at the moment. As for small and medium-sized panels, OLED's use case has already been proven for some applications. Over the past few years, we have been adopting OLED to produce some mobile products, for example, wearables and some small amount of smartphone panels. When it comes to mass production, we didn't allocate much capacity of our Gen 3.5 and Gen 4 fabs to do OLED production. So currently, we still are focusing mainly on technological development. As for the techniques of vacuum evaporation or inkjet printing, we have R&D efforts on both areas. A few years ago, we also have demonstrated some products, and we have R&D capacities for that. But we will still have to observe the development of inkjet printing technique and also focus on R&D, but that technique is not there yet for commercialization. Even so, we have made some preparations for small volume production. As long as it's mature enough and ready for commercialization, we can have small-volume shipment. But to be quite honest, it's not that ready for mass production.

[Operator]

[Operator Instructions] Our last caller is Brad Lin from Merrill Lynch.

[Brad Lin, analyst]

I have 2 -- 3 questions. First is a follow-up on Narci's question. In Q3, you had a positive 1.9 percentage points' impact from currency fluctuations. But in Q3, your gross margin improved 1 percentage points Q-o-Q. As I know, the ASPs of mainstream TV sizes grew by 5% to 20% Q-o-Q in Q3, and ASP of IT products were also relatively stable. So could you tell us whether there are some other reasons that weakened the improvement of your gross margin? And could you also please give us more color around your costs down for components? The second question is about your assembly business. Could you share with us the progress that you have made and the contribution you expect for this business for next year? Thirdly, you mentioned that value-add products account for 50% of your revenue. Could you talk about the revenue contribution of your auto gaming and PIDs products?

[Benjiamin Tseng, executive]

This is Ben. I would like to answer the question on gross margin changes. From the perspective of ASP changes, the ASPs in Q2 and Q3 did not increase. Instead, they were down slightly because the price rebound did not happen until August or September. So from an overall Q-o-Q basis, ASP did not increase. Instead, it went down, especially for commodity prices -- commodity products. For component cost reduction, as Paul mentioned, there were some supply constraints with some components. So the reduction in Q3 was not that visible. With product changes, some products had larger shipment area, so it was difficult to reduce their material cost. In addition, the currency fluctuations also played a role. Some payments were made in the USD, so the depreciation of NTD also had an impact. So these were the reasons why gross margin in Q3 didn't improve as high as we had hoped.

[Kuo-Hsin Tsai, executive]

I would like to talk about our assembly business and also the progress with our value-add products. AU has been working on TV assembly business. We've been working relentlessly on working high-end technologies and differentiation. We do so because we want to further maximize our added value from these technologies. We do not want to work solely on panels or modules. We also want to leverage the advantages that we can create for set products, and this will be part of our business model growth over -- for the next few years. Recently, we have been committed to driving our value transformation and competition. We are working hard to make sure that our R&D capabilities are there to meet the market requirements, and we want to leverage our set product advantages to maximize the values for the supply chain. We have been engaging our customers closely in hopes of creating the maximum value possible for customers and us. For gaming, automotive and PID products, as we mentioned, we have GD, AV, CART and commercial products. These products combined had a more than 20% contribution to our revenue. Also, we have value-add products within the commodity segment and consumer segment. We are able to add various added value strengths and technologies to further increase the values of commodity products. Besides our non-commodity product including commercial, industrial, automotive and health care products accounted for more than 20% of our revenue. And we have also other products including total solutions, including touch-integrated set products and software and hardware integrated services. So with these 3 together -- commodity, non-commodity, total solutions -- these are the value-add segments of ours, and our hope is to maintain their ratio at above 50% going forward. Thank you.

[Julia Chao, executive]

Ladies and gentlemen, thank you all for participating in our results conference call. This concludes our call. If you have any other questions, please feel free to contact us at the IR department. Thank you. We'll see you next quarter.