AU Optronics Corp

OTC:AUOTY

Earnings Call Transcript

[Julia Chao, executive]

Ladies and gentlemen, good afternoon. This is Julia Chao, AU's IR Officer. On behalf of the company, I would like to welcome you to AU Optronics' Fourth Quarter 2021 Results Conference. Today, we have 4 Executives present; Paul Peng, Chairman and CEO; Frank Ko, President and COO; James Chen, Senior VP of the Display Strategy Business Group; and Ben Tseng, CFO. The agenda is as follows. First of all, Ben will go over our fourth quarter results and provide you with guidance for Q1. Then our Chairman, Paul, will have an opening remark. Afterwards, we will have our question-and-answer session. For the first part of the Q&A, we will address the questions previously collected. Then we will open the floor for you to post more questions. Thank you.

Now before I turn it over to Ben, please allow me to remind you that all forward-looking statements contain risks and uncertainties. Please also spend some time to read the safe harbor notice on Slide #2. Ben, please.

[Benjiamin Tseng, executive]

Ladies and gentlemen, good afternoon. I would like to first go over our Q4 results, and I'll be talking about our full year results. During the fourth quarter, large-sized products, such as TV and PID experience declines in end market prices plus material costs persistently increased our revenue and profit were under greater pressure. However, we did our best to offset the impact, we allocated more capacity to stronger demand products and applications such as commercial notebook, retail, manufacturing and medical applications.

Q4 revenue came in at TWD 93 billion, down by 6.1% Q-o-Q. Gross profit was TWD 17.6 billion; OP profit, TWD 10.3 billion. Net profit attributable to owners of the company was TWD 10.7 billion. EBITDA margin, 19.9%. Net non-op income was TWD 1.7 billion due to disposal of facilities. Next slide, full year results. In 2021, on the back of the stay-at-home trend induced ASP increases across various applications. Our revenue increased Y-o-Y. Net sales came in at TWD 37.7 billion, up by TWD 99.7 billion Y-o-Y. Gross profit, TWD 90.8 billion; OP profit, TWD 63 billion. Net profit attributable to owners of company was TWD 61.3 billion with an EPS of TWD 6.44. EBITDA was TWD 96.7 billion, margin was above 26%. ROE for the full year was 29.6%.

Next slide, balance sheet. At the end of Q4, cash was TWD 79.9 billion, down by TWD 8 billion Q-o-Q, mainly due to earlier debt repayment. Debt long-term and short-term combined lowered to TWD 54.7 billion, down by TWD 14.9 billion Q-o-Q and TWD 62.1 billion Y-o-Y. Gearing ratio was negative 10.6%. Inventory turnover maintained at 42 days. I would like to provide more information on the drop in equity. Despite a profit in Q4, our equity went down by TWD 4.3 billion Q-on-Q to TWD 238 billion. This was because in Q4 we obtained an extra 49% stake in the AUO Kunshan to make it our wholly owned subsidiary.

For that, we paid TWD 17.3 billion. Before the transaction, the net value of AUO Kunshan was fully accounted for in the consolidated equity of AUO Kunshan, thereby causing the lower equity here. Because of this transaction, starting from this year 2022, net profit attributable to owners of the company will fully recognize the P&L of AUO Kunshan. Using 2021 numbers as a point of reference, a 49% stake in AUO Kunshan will represent [TWD 2.44] billion in additional profit. Moreover, with a 100% stake in AUO Kunshan, we are able to better control the pace of investments to meet our customers' demand for high-end products and capacity.

Next slide, cash flow. In Q4, we generated from operating activities TWD 31.4 billion. CapEx and was TWD 5.4 billion rather, including equity investment of TWD 2 billion. Financing activity outflow was TWD 32.4 billion, including TWD 14.9 billion for net change in debt and TWD [7.3] billion for the 49% stake in AUO Kunshan. Next slide, revenue breakdown. On the back of persistent TV ASP drops, TV share further went down to 17%. Meanwhile, with persistent product mix optimization, the share of notebook, which offers steady profitability, climbed sequentially.

As a result, mobile, PC and device share increased to 33%. Next slide, revenue breakdown by size. Again, due to TV and other large size application, ASP decreases. 39-inch and above segments lost 5 percentage points in share in total. 10- to 20-inch segment increased by 6 percentage points to 48%, mainly thanks to the persistent growth in notebook, large-sized car displays, retail, manufacturing and medical display. Next slide, shipments and ASP by area. Shipments increased slightly by 1% Q-o-Q. Average ASP decreased by 8.6% Q-o-Q.

For our Q1 outlook, due to few working days and slow seasonality, we expect area shipments to be down by mid-single-digit percentage points Q-o-Q. Blended ASP denominated in the dollar is expected to be down by low to mid-single-digit percentage points Q-o-Q. Q1 loading rates will be dynamically adjusted based on market conditions. So that was an overview of our Q4 results and guidance for Q1. Before we proceed with questions and answers, Paul will have an opening remark.

[Shuang Peng, executive]

Ladies and gentlemen, friends from the media and analysts, good afternoon. Although we've already passed the Lunar New Year, I would still like to wish you a happy new year and the best of luck and success in the Year of the Tiger. Today, it is our first time to have a physical investor conference in 8 years. Although we tried -- worked on providing as much information as we could in the past, but we always found something lacking because we feel that with face-to-face meetings, they could be -- there could be more interactions. Like when I was introduced earlier, you applauded, that really made me delighted. So our hope is that you have at least one face-to-face meeting once every year. But in 2 years, we've dealt with great challenges due to the pandemic. So it is especially pleasant to be able to have you here to participate in our investor conference.

Now let's look back at 2021, it was a very special year. The first half and second half were extremely different. Consumer electronics enjoyed strong demand in the first half and lower demand in the second half. But then in the second half, the demand for commercial product spiked. So there was big volatility between the first and the second half, posing great challenges to our business. But as Ben just shared with you, we had a really fruitful year in 2021. Full year revenue came in at TWD 370 billion, up by nearly TWD 100 billion Y-o-Y, registering the highest level since 2015. Net profit attributable to owners of the company was TWD 61.3 billion, an all-time high in our history with an EPS of TWD 6.44.

Moreover, our ROE reached 29.6%, which is -- which was also a historic high. Last year, the strong performance did not come easy as we had to juggle many challenges, including the pandemic component, supply crunch and port congestion issues. There were so many things to handle. Thanks to our teams' fast responsiveness, we have been able to tackle the impact and deliver robust results. Moreover, on the back of value transformation, despite price declines of consumer products such as TV in the first -- in the second half, we posted a stronger unit ASP performance than our peers.

We have demonstrated stronger resilience. As the society and the market started to give more attention to ESG, I would like to also share with you the achievements that we've made in the ESG aspect. We've actually won 45 awards last year, 2, in particular, are worth mentioning here. For the 12th year in a row, we were included in DJSI, a rare feat in Taiwan. Moreover, our MSCI rating was upgraded from BBB to A. As you have seen earlier in our video, we have made some progress in Industry 4.0 and sustainability.

We have been certified as a lighthouse factory. These achievements show that our multiyear efforts have paid off. Now what about this year? TV prices saw significant corrections in the second half last year. The corrections have gradually abated recently because of several reasons. First of all, there have been big corrections already; secondly, market inventory levels are quite healthy at the moment as we are in a slower season and panel inventory buildup is less aggressive than the first half of last year. So TV price drops are already easing. PC or IT applications such as monitor or notebook will likely experience some changes, some corrections because the stay-at-home economy induced by COVID, people have gradually grown used to remote learning and remote working for which we require notebooks and monitors to supply our work.

And these products have enjoyed big growth. Last year, registered a PC shipment peak in several years. For 2 years, growth was in the double-digit range with last year being a peak in particular. This year, shipments will likely be flat or up slightly. This year, consumer products will probably see weaker demand, but on the back of the back-to-office demand, commercial segments still are enjoying strong growth. AU has built a strong position in notebook products. We have Low-Temp Poly which is really efficient in power consumption, and we also have gaming, professional use curve monitor and high refresh rate products.

These are niche products, which we have really good shipment momentum. Moreover, we have launched mini LED models, and we have been working with customers on co-marketing, which also helped us to boost shipment momentum. We expect that IT segments will have more stable situation and the growth will be less significant as the past 2 years. While TV market is slowing down, some peers have shifted their capacity toward making more monitors and IT products, especially large-sized monitors -- commodity monitors.

There has been quite some pressure on the market, but AU is less affected because we have been more focused on premium models. But what's worth noting is that the component supply crunch is still persistent. Last year, the shortage for automotive chips were especially in short, causing car sales to drop. This year, the demand may still be outstripping supply, and the shortage will be particularly stringent in some process. Now what about the panel industry? When some panel makers shift from making TVs to ITs, they will be acquiring more drivers, but they don't have sufficient supply relationship to allow them to translate their new capacity into effective output.

AUO has a long-term relationships with our customers, suppliers and expertise in niche products and technologies. So we have an advantage here. Today, we have already been engaging customers and suppliers on their orders and also on material procurement plans. So we believe we will be more resilient to the market crunch. In addition, we continue to ramp up our capacity in the Kunshan fab. And as the capacity gradually comes online, we will incrementally increase our portion in premium models.

This also goes in alignment with our Go Premium strategy. Last year, because of the chip component shortage, the car segment has been affected negatively, demand was weaker. This year, while the supply situation will improve slightly for automotive chips. The rise of electric vehicles would also translate into a different kind of requirement for panels. There are several different requirements. First of all, the picture quality requirement is different and power consumption is also different. When it comes to car displays, long-term capacity is used. And for the past 3 years, they have been quite some capacity ramps. There will be more volume in the next few years.

Moreover, as selfless driving becomes a new trend, the demand will be higher for picture quality and large-sized specifications. AU has been a strong contender in the car display market for a long time, and we have been working with major car makers for a long time. We will capture this opportunity by leveraging our strong market position to provide more free-form full lamination products in hopes of extending the values of AUO.

Currently, we've been engaging an increasing number of customers on new projects. In the post-pandemic era, the contact-less demand is on the rise. For a lot of business activities, people are asking for noncontact interactions. To do so, displays will be required, giving rise to higher demand for storefront, medical, industrial, commercial and factory used applications. This is why we've been emphasizing on our push for commercial applications to meet the demand. Last year, we spun off AUO Display Plus or ADP in hopes of exploring more business opportunities in verticals by using the advantages of ADP.

With the spin-off, we now have more flexibility and agility to help foster the development of field applications. In recent years, our revenue coming from new business and fuel economy applications grew -- have been growing in several times, although the base is still small, but the growth is quite significant. So this signifies the other pillar of biaxial transformation, the go vertical part of it. As for 2022, our view about supply and demand is that we believe we will be returning to seasonality dictating demand.

The COVID pandemic has disrupted supply and demand for 2 years. 2 years ago, we didn't know how to tackle the sudden outbreak. Last year the stay-at-home economy gave rise to demand of some applications or accelerated the demand for some applications. This year, people's life is going to be returning to normal and so as commercial activities. Therefore, the panel industry will be returning to seasonality. Unless there is any certain major incident, the market will be more seasonally fluctuating.

But there are a few things that we need to pay attention to. One is inflation. The U.S. stock market was very volatile these 2 days due to higher than expected inflation. Raw material prices continue to spike. And for AUO, we would need to watch closely whether the increases in product pricing would cannibalize people's demand for nonlife necessity, grocery and products.

If as per projected that the situation will be less pronounced in the second quarter, then we won't have to worry too much. Also geopolitical risk such as the conflicts between Ukraine and Russia is another potential factor that could rattle the entire global economy. And also from last year -- the end of last year to the early -- the beginning of this year, projections for the global economic outlook have been adjusted downward. There's also another aspect that we need to watch closely, that is carbon emissions reduction or carbon neutrality.

Near zero carbon emission has become action, real action, not just lip service. There have been goals set for 2025, 2030 or 2050. These initiatives or targets will be very important for enterprises. Emissions reduction initiatives will entail higher costs for enterprises because fossil fuels were very inexpensive, but they created huge emissions. Alternative energy resources are higher cost. And they will likely cause costs to increase from materials to products. But of course, we still need to work on finding new opportunities. In the future, there will be new opportunities coming from these initiatives that we can capture.

In terms of action against climate change, AU has been taking steady steps towards countering climate change. In 2021, we were joined by several other ICT companies to launch the Taiwan Climate Partnership. Moreover, we have vouched to have near zero carbon emission by 2050 and to reach our RE100 target. Again, this will entail a higher cost, but we have to do our best to deal with the impact. So I've talked about last year and outlook for this. Let me do a quick summary.

We have been working very hard on biaxial transformation strategy implementation for these years. Our push to strengthen product values by utilizing premium capacity products and technologies is bearing fruits with the premium business today accounting for half of our revenue. Because of this, we have been able to be less susceptible to market volatility, but we still need to do more and do better. While near zero carbon emission initiatives will entail higher operating costs, we need to identify new opportunities in the market. For example, through our smart manufacturing and water management subsidiaries, we hope we can capture value of opportunities.

Moreover, we need to also focus on smart applications and smart fields, including the 5 major fields of smart health care, smart education, manufacturing, retail and traffic and transportation. We have to build comprehensive ecosystems to make our values go beyond just panel business. Our hope is that the revenue contribution of our nonpure display business will be more meaningful. And also hope that we can be more resilient against cyclicity. Our expectation is for AUO to become a strong company that is steadily profitable as well as the responsible corporate citizen that is able to reduce carbon emissions to near zero.

These are our long-term goals. I'm so delighted to have this opportunity to share with you our prospects and our developments. We haven't met face-to-face for a long time, so please forgive me for taking such a long time to have this opening remark. I hope that we can help you better understand our business and our performance. Thank you.

[Julia Chao, executive]

Thank you, Paul. Now we will have our question-and-answer session. For the first part, we will address the questions that we collected. The first group of questions are about market updates and outlook. What is our view on the 2022 global panel supply and demand. Frank, would you please take this one?

[Fu-Jen Ko, executive]

On this year, in particular, first half supply and demand. This is our view. Let me talk about the supply side first. The panel industry has been going through structural changes. From the perspective of capacity availability, the pace of ramp ups have been slowing down these 2 years and slowdown will continue this year. At the same time, the supply chain has been going through some challenges, especially shortages of component supply. New capacity expansion will likely be curtailed this year.

As far as the demand side, this year will be different from the previous 2 years, which were stimulated by the COVID-related demand. This year, the supply and demand will be more seasonally determined. But for the short term, consumer and commercial applications will have different demand. There are still the shortages for components and the transportation backlog. Brands are going to use their key components on making premium and higher-priced products. And consumers have also changed their behaviors, shifting more focus to higher-end and premium products as well.

These new trends are now being reflected on the higher demand for commercial, gaming and car applications. These are the areas that AUO has been working on particularly for a very long time. So as the trend for bigger size screens and premium products, AUO will stand at a standard advantage. Looking ahead at the first quarter, even the store demand for consumer products in Q1 and the fact that we will be having a few working days in Q1. Q1 will likely be seasonably soft.

[Julia Chao, executive]

The second question is about TV set sell-through. What is the TV set sell-through in different markets around the world? And also could you provide a demand outlook for the first quarter? Also as cargo traffic congestion takes a toll on shipments, could you also talk about inventory levels and the prospects?

[Fu-Jen Ko, executive]

In Q4, TV enjoys strong demand given the high seasonality. Let's look at major markets. North America in particular, saw a large-sized high-end TV sets priced over USD 1,500 share growing from 3% to 5% as a total of a share, as the share of the total sales in 2021. This represented a growth of 40% Y-o-Y. Also, there has been size migration in Mainland China, 60-inch and above TV set sales accounted for 40% of the sales registered during the 11.11 Singles' Day sales festival. And also during November, the average size sold was as high as 58 inch. So this represents the migration towards higher end and premium products.

However, emerging markets were more severely affected by this pandemic, pushing down the demand. However, as vaccination rate continues to pick up, economic recovery can be expected. Above inventory levels against the backdrop of logistic problems around the world, including port congestion, shortages of cargo ships and containers. In advance of the high season and -- after the high season up until now, which is the low season, inventory levels at channels have been healthy. However, in transit inventory across applications is relatively higher today.

And the excess cargo backlogs, of course, may still take some time to digest. So logistic problems may still linger, and we need to pay close attention to how long the issues will continue.

[Unknown Executive]

Thank you, Frank. About financial-related questions in Q4, our loading rates was -- were more than 95%. In Q1, we will make dynamic adjustments based on market conditions. Depreciation and amortization amount was TWD 8.2 billion in Q4 at TWD 33.7 billion in the entire year. The amount for 2022 is expected to be TWD 33.5 billion. CapEx in Q4 was TWD 5.4 billion and TWD 17 billion for 2021 full year, some of the payments will be delayed into this year. For 2022, the CapEx will be TWD 45 billion, which will be slightly higher from previous years. Besides the delayed payments to be made, we will also be adding some CapEx mainly -- CapEx for capacity ramps in Gen 8.5 and Gen 6 lines in Taiwan and the new Gen 6 LTPS line in Kunshan.

Also yesterday, we passed a resolution to have another TWD 28 billion CapEx at the Board of Directors meeting yesterday, TWD 5 billion of that amount will be made this year. Also yesterday, the TWD 28 billion CapEx will mainly be used in [indiscernible] in Zhongku. TWD 20-plus billion will be used to build a Gen 8.5 fab, including land purchase and electricity and engineering purchases, but the cost for equipment is not included in the CapEx. For the machine purchases, we will budget CapEx in incremental phases based on market conditions.

The next group of questions are about AUO's major applications and technologies. Last year, end market demand fluctuated drastically. The second half saw the demand shifting from customer to commercial applications. What was the impact on AUO? And also as you continues to push for premium products, could you please provide an overview on AUO's performance in 2021 and outlook in 2022?

[Fu-Jen Ko, executive]

Ladies and gentlemen, good afternoon. I would like to share with you our perspectives on our outlook for key products and technologies. As [indiscernible] just shared with you, last year, in the second half, as reopening took place around the world. People started to go out more often and business activities resumed to normal. Some traveling were taking place as well. Consumer products, especially TV sets, saw weakening demand. At the same time, as companies resume normal operation, commercial and storefront and factory equipment require new investments pushing up demand.

So within a very short period of time, just within a quarter, we had the downturn of consumer products and uptick of industrial and commercial products. But at the same time, they were the challenges of component supply crunch, IC chip shortage and shipping container shortages. All of these challenges occurred just within that quarter. So the second half was particularly challenging. At AUO, we have a very comprehensive product lineup. We are particularly strong in our high-end consumer products and industrial, commercial and automotive displays.

We have a very evenly distributed and comprehensive lineup. Within each segment, we have leading position in the market. Throughout market changes and fluctuations, we are able to dynamically adjust across our product lines to deliver strong results. During the year, there were several bright spots that are worth mentioning here. Despite fierce market competition, we maintained leadership in 85-inch TV panels and enjoyed relatively stable ASPs. Competition in the monitor segment was intensifying, but we maintained market leadership in gaming and ultra large-sized curve panels.

This benefited our customers because we are able to meet in their divergent requirements. We are also the #1 leader in super low power consumption low-temp notebook computers. Low-temp technology fits the need for low-power use and low-emission products. So AUO has decided to expand our capacity for LTPS. For car displays and industrial displays, these were the 2 segments that saw some shifts in demand, but they have achieved high double-digit growth.

In 2022, the demand for car displays is quite strong. But it was kept by component supply crunch last year. Currently, those challenges are being addressed gradually. Last year, the shipment was only less than 80 million units while the market has a capacity of 90 million units. So there is a big room for growth. In particular, EV sales doubled. AUO has been working on the car display segment for more than 10 years. We have been among the top 2 providers and have built long-term relationships with major carmakers. With EV, low power consumption panels are essential.

With our super low power consumption panel display technology, we have been able to secure a leadership in the market. And currently, we are seeing demand growing nicely. We expect that for the next few years, car displays will register double-digit growth. And we will also invest more resources in the car display segment. As for industrial and commercial display segments, as Paul said, upon reopening of economies, people are gradually returning to normal life.

However, people still try to avoid contacts with each other. That is why a noncontact or contactless interactions have taken shape. So the demand for touch or integrated panels in various applications, including medical, retail and other signages have all seen strong demand. On the back of recovering business activities amid reopening of economies governments will be investing in more infrastructure projects, leading to more opportunities for panel makers. AUO is the #1 provider in industrial displays. So we stand at a better chance at capturing these opportunities.

With regard to TV, we will continue to focus on 8K bezel-less super large-sized panels. And also, we will be investing more resources in developing next-generation technologies, such as micro LED. In terms of IT, we have built a very strong position in IT segments. We have a full lineup. And currently, we have the #1 position in the low power consumption, notebook panels. In addition, we continue to invest in the development of low-temp technology. As the world is looking for lower power consumption and lower carbon emissions, we believe there will be nice opportunities in these areas.

So what we will do is that we will look for our niche opportunities and also areas where we stand advantageous to push for building a stronger customer base and to land more opportunities. In businesses where we have stronger bargaining power, we will especially strengthen our push.

[Operator]

[Operator Instructions].

[Jerry Su, analyst]

This is Jerry from Credit Suisse. You mentioned that you passed a new CapEx plan yesterday. Could you let us know what this fab will focus on? What kind of products, when will it be ramped? And what is the still -- you only spent TWD 500 -- TWD 5 billion on land purchases and electromechanics. And does the TWD 25 billion include these expenses for equipment purchases? If not, what will it be used on? That is the first question. Also my second question is that Paul and Frank both mentioned that capacity expansion will be curtailed, and the space is also slowing down.

But if you look at the next 1 or 2 years, does that mean the supply and demand will be inching towards parity or a more balanced stage? The next question is about notebook. Recent delay have been an increase in -- there has been an increasing number of notebooks with an aspect ratio of 16 x 10 rather than 16 x 9. Although the change doesn't seem much, but based on my own calculation, that means an extra 10% of area will be needed. From your perspective, this kind of asset ratio will be the norm in the future. And what is the technical challenge or advantage of AUO?

[Fu-Jen Ko, executive]

Thank you, Jerry, for your questions. I will take the first and second once. And I will have a chance to address the last question. In Taiwan, our fab establishment, if you recall, was done between 2008 and 2010. The last fab that we built in Taiwan was the amorphous fab in 2010. We didn't really feel that fab up until last year. We filled it up in 4 phases. This means that the fab that was built 14 years ago was filled up in different phases. This is because that we wanted to make sure that our technology could really match the demand of our customers.

During these years, we only had another one, a Gen 6 fab in Kunshan that was built. This time around, because we believe that high-end IT products, especially notebook and monitors will require a bigger investment, that is why we will have to expand our market shares and our positioning in the premium models. So the new fab that is going to be built will be mainly focused on producing IT products. The budget that was passed was only for land purchases and electromechanics because the buildup will take a long time. Mass production will not happen until 2025.

And we haven't budgeted for equipment purchases, which will take place in several phases. We will probably start to budget for equipment CapEx in 2023. Today, Gen 8.6 or 8.5 fab requires an investment amount of about TWD 100 billion to TWD 150 billion, depending on capacity needs and machines. This is the range. Going forward, we will have to take incremental steps in fitting the fab with machines. Currently, we don't have a set schedule for how long the moving will take, but based on our previous Gen 8.5 fab, which was started with mass production in 2010. And we didn't really fill it up with equipment until last year.

That is because we have been prudently investing in smart investment and adding the capacity that is really needed. The world's capacity ramp-ups have been most concentrated during 2014 to 2019, especially in China. Since the U.S.-China trade war in 2018, what happens is that the Chinese government has gradually shifted its subsidies and support to the semiconductor industry. These 2 years where the pandemic was really rampaging around the world, the Chinese government has put a lot more fiscal money into pandemic prevention and household support, thereby causing LCD production capacity ramp-up to slow down.

In previous investor conferences, we have shared with you that this industry has been through some structural changes. Structural changes are different from geographical changes. In the panel industry, the major producing countries are Taiwan, South Korea and Japan. But today, Japan has already exited from the market and Korean panel makers are also winding down their LCD production. With the Mainland Chinese panel makers still growing in scale, so China will account for probably 60% and plus for the total capacity.

And Taiwan is only accounting for more than 20%. Besides geopolitical -- geographical changes, there are also structural changes going on in the panel industry. The Chinese panel makers are slowing down their investments with dwindling government subsidies. So the panel industry is going to be more market oriented. Drastic supply and demand mismatch will likely be improved. But of course, there will still be some seasonal or incident changes. But the drastic volatility that had taken place for the past 20 years may be gone. James, would you please answer the last one?

[Chien-Pin Chen, executive]

Thank you, Jerry, for your questions. The 16 x 10 conversion asset ratio is in defined trend because for the past 2 years, people have been working at home and people require an extra notebook or monitor, and people have realized that the aspect ratio of 16 x 9 is not as efficient as 16 x 10 because with 16 x 9, you have to scroll up and stand frequently and the screen itself is not big enough. If you're working on your notebook, you still have extra space on your panel that is not a display area.

But today people are more favorable with full-screen displays, which provide more information with one screen. And this demand has taken shape. Take AU, for example, new projects that we are working on and are engaging with engagements are for panels with aspect ratio of 16 x 10. And we expect that the shipments will increase in volumes. And the growth will be quite strong this year and also the next. In the past, most of the fabs were invested for making TV panels and TVs have a form factor of 16 x 9. When we convert to 16 x 10 aspect ratio and sometimes cutting cannot be as efficient, but it is a requirement. If we want to really meet market demand, we have to be able to switch to 16 x 10. Fortunately, AUO has many fabs and many lines. We are able to find the fabs, the lines that can offer the most appropriate, the most efficient to meet the customer demand.

I would also like to respond to Jerry's question on the CapEx amount. We announced the plan of TWD 28 billion CapEx, most of the money will go into buying the land and electromechanical equipment, because it is a full field project, so the investment amount will be bigger.

[Unknown Executive]

Do we have any other questions from the floor? If there are no other questions, we would like to conclude today's investor conference. Thank you for participation. We'll see you next quarter online.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]