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Novatek Microelectronics Corp
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[Foreign Language] Dear investors, analysts and media, welcome to Novatek 2020 First Quarter Online Investor Conference. This is David Chen, Vice President and Company's Spokesperson. I'll be the host for today's conference. In order to prevent the spread of the coronavirus, we have switched our investor conference to live audio webcast. Please be reminded that your questions can be sent to us by text.
The agenda for today's event will be as follows. First, I'll be reporting Novatek's first quarter results. After that, our Vice Chairman, Mr. Steve Wang, will provide more details on our Q1 results and Q2 guidance. Following that will be our Q&A session. As mentioned earlier, if you have any questions, you can send them to us by text. Our IR Director, Mr. Tony Tseng will be processing and reading out the investor questions one at a time, both in Chinese and English. And our Vice Chairman, Steve Wang; CFO, Mr. S C Chou, and I will answer all your questions in Chinese and will be translated into English.
As usual, please take a look at our safe harbor notice.
So let's start with our 2020 Q1 financial highlights. Our net sales for Q1 2020 was TWD 16.89 billion; Q-o-Q, up by 2.21% from TWD 16.5 billion; y-o-Y, up 13.01% from TWD 14.946 billion. Our net gross profit in Q1 was TWD 5.6 billion; Q-o-Q, up by 5.24% from TWD 5.39 billion; Y-o-Y, up by 14.38% from TWD 4.9 billion. Our gross margin for Q1 was 33.2%; Q-o-Q, up by 0.95 percentage points from 32.25%; Y-o-Y, up by 0.39 percentage points from 32.81%. Our operating income in Q1 was TWD 2.6 billion; Q-o-Q, up by 6.5% from TWD 2.44 billion; Y-o-Y, up by 8.15% from TWD 2.4 billion. Our net income for Q1 was TWD 2.21 billion, up Q-o-Q 22.7% from TWD 1.8 billion and Y-o-Y up by 12.38% from TWD 1.96 billion. The EPS for Q1 was TWD 3.63. And last quarter was TWD 2.96, and last year Q1 was TWD 3.23.
Next, our cash and cash equivalents. Q1 was TWD 19.93 billion; Q-o-Q, up by 11.31% from TWD 17.9 billion; and Y-o-Y down 1.59% from TWD 20.26 billion. Account receivable; Q1 was TWD 13.84 billion; Q-o-Q up by 3.77% from TWD 13.34 billion and Y-o-Y up by 1.43% from TWD 13.64 billion. Our inventory in Q1 was TWD 8.8 billion, up Q-o-Q 40.8% from TWD 6.26 billion, Y-o-Y up by 18.57% from TWD 7.43 billion. Short-term loans in Q1 is TWD 1.08 billion. Last quarter reserve and last year same period was TWD 1.35 billion. Our large panel driver, 384-channel equivalent unit shipment in Q1 was 727 million. Q-o-Q down by 1.08% from 735 million and Y-o-Y down by 18.95% from 897 million.
Let's look at the sales breakdown by products. The 2 main top lines are the SoC and the display driver ICs. Our SoC Q1 was TWD 4.98 billion; Q-o-Q, up by 3.04% from TWD 4.83 billion; and Y-o-Y, up by 12.29% from TWD 4.43 billion. Our display driver in Q1 was TWD 11.7 billion; Q-o-Q up by 1.42% from TWD 11.55 billion and Y-o-Y up by 12.45% from TWD 10.41 billion.
We have also released our April monthly sales. Our April monthly sales -- net sales comes to TWD 6.54 billion. This is our record high. And this Y-o-Y accounts for 18.56% growth and M-o-M 12.6% growth. And the SoC line contributed TWD 2.023 billion and the driver line contributed TWD 4.398 billion.
If you look at the monthly sales in detail, we can see that for the first 4 months, we have experienced the Y-o-Y double-digit growth for all 4 months, and the accumulated January to April comes down to TWD 23.43 billion, up 15% Y-o-Y from TWD 20.46 billion last year.
Let's look at the -- our Y-o-Y consolidated income statement. Our net sales for Q1 2020 was TWD 16.89 billion, up 13.01% from TWD 14.94 billion. Our operating expense for Q1 2020 was TWD 3 billion, up 20.37% from TWD 2.498 billion. Our operating income for Q1, TWD 2.6 billion, up 8.15% from TWD 2.4 billion. Net nonoperating, Q1 was TWD 130.59 million, up 317.76% from TWD 31.26 million. The net income for Q1, TWD 2.2 billion, up 12.38% from TWD 1.96 billion. The EPS for Q1 is TWD 3.63 versus TWD 3.23.
Let's look at the Q-o-Q consolidated income statement. Our net sales for Q1, as mentioned earlier, was TWD 16.89 billion, up 2.21% from TWD 16.52 billion. Operating expense at Q1 was TWD 3 billion, up 4.18% from TWD 2.88 billion. Operating income, TWD 2.6 billion, up 6.5% from TWD 2.44 billion. Net nonoperating, Q1 was TWD 130 million versus last quarter, negative TWD 210 million. The net income of TWD 2.211 billion up 22.7% from TWD 1.8 billion. So the EPS for Q1, TWD 3.63 versus TWD 2.96.
So if we look at the sales breakdown by products, we can see that the SoC accounts for 29% of our sales and driver accounts were roughly 69%.
Looking at our cash and cash equivalent TWD 19.93 billion and our short-term loans TWD 1.08 billion, then we have left with net cash TWD 18.85 billion, a change of TWD 937 million. And account receivable TWD 13.84 billion, Q-o-Q change of TWD 502.06 million. Our inventory level in Q1, TWD 8.8 billion, up by TWD 2.55 billion.
Our Board has also approved a cash dividend of TWD 10.5 and within that, TWD 1.5 from capital surplus. So the payout ratio will come down to 80.6%, maintaining our high payout ratio.
So now I'll turn the call to Steve Wang, our Vice Chairman, to give us more details on the Q1 results and the Q2 guidance.
[Foreign Language]
[Interpreted] Regarding the Q1 revenue, amidst the global COVID-19 outbreak impact, we were able to deliver an exciting result. Our top line not only exceeded our guidance on February 11. Our Q1 revenue is also a record high. The growth was driven by both SoC and mobile driver IC.
And as to the Q1 margins, our margins also exceeded our guidance. It's mainly due to the product mix and the NRE. And as on the Q2 outlook, the global pandemic situation is still not well under control. And we can see that the U.S., Europe, India, they so all are under lockdown and the full of low from the demand -- our consumer demand side, there's a lot of uncertainties. But the good news is that we're seeing China reopening its factories and it's resuming production. So hopefully, the pandemic will get -- will not get worse and will be contained very soon. So if everything goes well, hopefully, the second half things will get better.
Due to the pandemic lockdown, the more people are working from home and students are switching to remote learning. And this has boost the demand for notebook, monitors, tablets. And we are seeing rush orders coming in from these applications. So based on the above, our guidance for Q2 is as follows: our revenue top line will be within TWD 17.7 billion to TWD 18.5 billion, and it's based on the exchange rate of $1 to TWD 30. Our gross margins for Q2 will be within 31.5% to 33.5% range. Operating margins will be from 15% to 17% range.
The Q2 growth is mainly driven by SoC and then also a little bit from the driver IC. Within the SoC, as mentioned earlier, we are seeing strong demand for IT-related products. And for TV SoC-wise, our customer inventory remains healthy and we're seeing healthy demand coming in. There's also some market share gain within the TV SoC side. As for our DDIC, the growth will be driven by mainly the large panel driver for IT-related applications. And as to the small- and medium-panel drivers, it's likely to be flattish, but our OLED driver unit shipments are expected to grow, but our pure driver, TDDI or automotive driver IC will be down slightly. The slightly decline in the TDDI is mainly due to the weakness in the HD demand because of the lockdown in India. So that's basically the Q1 -- more details on the Q1 and the guidance on the Q2.
Next, we'll move on our Q&A sessions. Please be reminded that if you questions send us to the text, and Tony will process and read out the questions in Chinese and English, and we'll answer them both in Chinese and English. Yes. Tony, please.
[Foreign Language] Given the record high gross margin in the first quarter. You also mentioned an upside number from March due to the NRE. Would you provide amount as well as the product for this NRE income?
[Foreign Language]
[Interpreted] The question was on the gross margin for Q1, exceeding our guidance. So basically, the Q-o-Q increase, main of the margin, mainly comes from the sequential growth of the OLED and the SoC, basically the product mix, which enjoy a higher than corporate average gross margin and also the NRE from our SoC and driver ICs.
[Foreign Language] The target of 31.5% to 33.5% for gross margin second quarter only include revenue from product or also for the NRE? And also the rough estimate for your NRE income in the second quarter.
[Foreign Language]
[Interpreted] The question is whether the Q2 gross margin guidance, 31.5% to 33.5%, includes revenue from NRE, also. Yes. Basically, the gross margin guidance that we gave earlier already includes the revenue from NRE. And the NRE for Q2 basically will be a little bit less than Q1, and it will be around more than TWD 100 million in Q2.
[Foreign Language] And they would also like to know the ASP and the gross margin trend for TDDI and OLED driver products in second quarter compared with those in first quarter.
[Foreign Language]
How about the [ quite sharp in the ] margin [indiscernible]?
[Foreign Language]
[Interpreted] Okay. The question was on the gross margin whether the second half will be better than the first half and about the gross margins of the products for different categories. Well, the -- as Steve mentioned, the company target is to continue to improve our margin. That's our main target. And we have introduced a lot of new products. And all of these products, we do expect them to have better margins, but it's very difficult to project the second half margins because there's still a lot of uncertainty. But basically, we'll try our best to improve our margins and by introducing more new products and -- or better products for customers.
[Foreign Language] Just want to get more color on the competition on TDDI and OLED driver on your gross margin as well as the impact from the tight supply of 8-inch wafer?
[Foreign Language]
[Interpreted] Okay. The question was on the -- whether there's any impact on the gross margin because of competitions and also the tightness 8-inch foundry. So Steve just answered that we are basically, most of our TDDI OLED drivers actually we're using 12-inch foundry wafers. So basically, the 8-inch doesn't have impact on our mobile driver. And as to the costs of our TDDI, OLED drivers, basically, there aren't much change to our cost or ASP. So basically, there should be too much change to our gross margin for these products.
[Foreign Language] Management mentioned about the growth for second quarter were mainly from the SoC as well as some drivers for IT related. They would like to know a little bit more color about the individual product momentum within SoC.
[Foreign Language]
[Interpreted] Okay. The question is on the Q-on-Q revenue growth by group on the driver side and on the SoC side. What just -- Steve just said was the -- both the large panel driver IC and SoC would up Q-o-Q, while the small-, medium-size driver IC will be kind of flattish. The mainly large panel driver was driven by the IT-related applications like timing controller, power management, all these stuff. And on the SoC side, we have the TV SoC. So far, we are seeing our SoC -- TV SoC is still pretty -- the demand is still pretty good. And basically, we do see our customer size. I mean there's still -- orders are still coming in. And I think there are -- this has do with some market share gain. And on the other hand, I think the inventory on our customer side should be pretty healthy. So basically, our SoC and driver, we are expecting it to -- Q-on-Q-wise, there should be growth.
[Foreign Language] The first question about the product on OLED. I would like to know the impact from the coronavirus as well as the progress on your diversification at both panel and the end customer side?
[Foreign Language]
[Interpreted] Okay. The question is on OLED shipments and the impact of the coronavirus on the new products and diversification of panel customers. Well, the -- as we gave the guidance last quarter that we're expecting our first half OLED unit shipments to exceed the whole of 2019. And this is so maintaining that views and guidance. And basically, what we are seeing is that the Q2 OLED unit shipment should be higher than Q1. And as to the coronavirus impact, basically, the design-in and the product launch on our site, the impact is very minimum. But I think what we have to look at is whether on the sell-through -- whether the sell-through will be impacted by the coronavirus. Otherwise, our design-in and our product launch, these are all on track. And as to the diversification, we are seeing more panel maker suppliers are supplying OLED. And so we are working with a lot of them. And a lot of these progress are also on track. So we are adding in more customers and more end customers.
[Foreign Language] And also further follow-up question on OLED driver, would like to know the shipment target in the second half versus in the first half?
[Foreign Language]
[Interpreted] Regarding the OLED for the second half, Steve just mentioned that due to the 5G trend, we are seeing there's increasing demand on OLED driver. So if everything goes well in the second half, and no surprise, we are expecting the OLED unit shipment for the second half to be better than the first half.
[Foreign Language] Now and about the TDDI product, could you give more color about the shipment number in first quarter as well as the second quarter? And also your market share trend for TDDI? And also I would like to know the percentage of shipment from new product as well as the impact from the coronavirus?
[Foreign Language]
[Interpreted] So the question was on Q1 and Q2 unit on the shipment for TDDI and the market share. And so what Steve just said is that the -- basically, if you look at the Q2 Q-on-Q-wise, we are expecting the TDDI unit shipment to be slightly down. This is mainly due to the HD TDDI weakness due to the lockdown in India. And as to the new product design win, as you can see that the 5G trend is also driving the demand for high frame rate TDDI. And basically, we are the market leader in this area. So we do expect, as the 5Gs ramp up, the demand for design-in for the high frame rate TDDI will increase, and that would be positive for Novatek.
[Foreign Language] Follow-up question about the TDDI. What's your expectation for the market size in 2020 versus 2019 as well as your shipment target for 2020 and also the adoption and the competition of the new TDDI products?
[Foreign Language]
[Interpreted] Okay. The question was on TDDI. The global TDDI market size and the overall penetration rate of TDDI. And what Steve just mentioned is that the overall mobile for 2020 shipment may be around 1.2 billion to 1.3 billion, and we are expecting the TDDI penetration rate to be around 50%. So that will come down to roughly around 600 million to 650 million. And as mentioned last time, we also expect that the migration from feature phone to smartphone will also increase the adoption of the TDDI. And based on all these, we expect Novatek TDDI share to maintain our share and then the unit shipment Y-o-Y should grow this year compared to 2019.
[Foreign Language] According to the recent article, the WillSemi China seems to have closed the acquisition of Synaptics mobile TDDI division without the approval of the Taiwan government. Is it correct? And could you also provide some comments to the industry as well to your company?
[Foreign Language]
[Interpreted] Well, the question was on WillSemi in China acquisition of Synaptics TDDI. Well, we don't have any details on the transactions. So we can't comment too much on that. But I think our main focus will be on our own product competitiveness, and we'll focus on that.
[Foreign Language] And as for your main production time table for under-display fingerprint, will company focus on the LCD or OLED panel product and also for small area or for big area of products?
[Foreign Language]
[Interpreted] The question was on the fingerprint, whether -- when will our fingerprint goes into mass production, whether it's focused on LCD or OLED panel. Well, the -- our focus will be mainly on the OLED panel. Our fingerprint will be on the OLED panel. And because of the coronavirus, actually, it has impacted our design-in, our technical support on our customer side. But so far other than that, I think everything is moving on smoothly. So we'll see how the coronavirus situation. If it's under control, I think that will be very helpful for our product design-in and mass production.
[Foreign Language] Recently, there are a couple of articles about this landscape. It is just announced the mass production for Huawei as well as BOE's cooperation with Qualcomm on ultrasonic product, any impact to Novatek?
[Foreign Language]
[Interpreted] So the question was on the competitor on the fingerprint side and also on the Qualcomm ultrasonic fingerprint product. Basically, Novatek, we don't have any product on the ultrasonic fingerprint line. So it's not related to Novatek. But as for the other competitors or -- I mean, there's no impact on us because we are just focusing on our product and designing in. So, so far, basically, there's no impact.
[Foreign Language] Company just provided very solid guidance for second quarter. Just wonder if you have any initial visibility for third quarter, even for the overall second half?
[Foreign Language]
[Interpreted] The question was on the Q3 revenue or even on the second half. Basically, the -- what Steve just said is that the Q3 visibility is very limited at this moment. But the thing is that if the COVID-19 virus impact or the outbreak really gets under control, I think that will be very helpful. So based on that, I think, hopefully, things will get better. So the second half should improve. And in that case, we do expect second half, things should get better.
[Foreign Language] Given the recent announcement of the LCD panel fab closure, will you benefit from this closure in addition to the driver? Also, do you have some long -- medium to long-term market share target from existing around 30% level?
[Foreign Language]
[Interpreted] The question was on the closure of Samsung's LCD fab. Will that benefit Novatek to -- any kind of mid- to long-term market share target versus what we see at 30%? Well, the -- of course, the closure of Samsung LCD fab, definitely a positive for Novatek. And Steve just mentioned that because of the Samsung, they have a special interface and it's a very unique interface, which Novatek does provide that kind of interface. So basically, that will be very helpful for our share gain. And as to the Samsung LCD fab, well, that fab will be transferred to OLED or QLED, but that's a different issue. But basically, as long as on the LCD side, it should be positive for Novatek. And of course, the 30% market share, that will be not our ultimate target, but we are striking for higher than that.
[Foreign Language] Yes. We would like to get some update about your new product progress, such as wearable OLED driver, the OLED TDDI as well as mini-LED driver.
[Foreign Language]
[Interpreted] Okay. The question was on the new product lines on the wearable OLED TDDI IC, OLED TDDI, leading LED driver. Currently, Novatek already have developed these products, and it's in the process of designing in. And the wearable OLED driver, we're expecting second half to go into mass production. We also have a tablet TDDI, and it should go into mass production in the second half, especially with the high frame rate and also with some active pen. And as to the OLED TDDI, we are developing those things, but it also has to work very closely with the panel maker. So it's not just the driver TDDI itself, but they also have to work along with the panel maker. So basically, we have a lot of products -- activities going on.
[Foreign Language] Now switching gear, SoC product. You already delivered solid growth for the first 4 months. Would you still grow your SoC business overall for 2020? And also, could you provide some guidance for your TV SoC international revenue or shipments? Also, you did mention about some positive progress for new customer of IP camera. Could you provide some update?
[Foreign Language]
[Interpreted] The question was on the outlook of -- for SoC and especially on the TV SoC for 2020 and the IP camera. Well, the -- for the TV SoC, for 2020, we are positive on the revenue growth in 2020 and -- because we're seeing there is a very healthy order coming in. And then on the -- the second one is on the IP camera. The IP camera, basically, design-in activities, I mean, all these are going on pretty smoothly on track. But due to the COVID impact, things have slowed down, especially in the western countries, where -- due to the lockdown. But hopefully, the overall demand should resume in the second half. And hopefully, that will be helpful to contribute to our revenue for the IP camera.
[Foreign Language] Can you provide more color on your strong performance across various lines such as TV, SoC, smartphone, even panels compared with your peers?
[Foreign Language]
[Interpreted] So the question was on the competitiveness on our product line. What Steve just mentioned is that we are focusing on -- mainly on our product and our technology. And we are hoping that we can bring more value to our customer. If you can see that, on small-sized panel, we have like high frame rate, we have the OLED drivers. In a lot of these, the entry barriers are pretty high, and we are bringing a lot of value to our customers. So hopefully, that will bring in more revenue and contribution moving forward.
[Foreign Language] You just mentioned about some progress for your new product for the rest of this year. Could you provide a little bit more color on your mini-LED driver? This is a very hot topic in the industry right now.
[Foreign Language]
[Interpreted] Okay. The question was on the mini-LED driver. So regarding mini-LED driver, there are 2 kind of applications: one is for the backlight, the other one is for the display, especially for the public display, the big public display. And we are expecting the -- our mini-LED for public display to go into mass production very soon. And as to the backlight applications, we are still under development, and the contribution will be relatively small compared to the public display. So we are actually more positive on the public display of the mini-LED driver.
[Foreign Language] Could you provide an update for the supply chain? Particularly, we heard the tight supply for 8-inch. Also, could you provide some color for other key parts for your business?
[Foreign Language]
[Interpreted] Okay. The question was on the supply chain regarding the recent reports on the tightness on the 8-inch wafer and also about 12-inch and other packaging or the other materials. Well, the -- most of our large panel drivers are using the 8-inch fab, and it is relatively tight. But as to the 12-inch, it really depends on different process. The situation is different. And as to the other back-end testing, packaging, things are okay at this moment.
[Foreign Language] Some questions about your financials in first quarter. Could you provide more explanation on your credit loss of TWD 80 million as well as your FX nonoperating gain of TWD 130 million in first quarter?
[Foreign Language]
[Interpreted] Okay. The question was on the Q1, there is a credit loss of TWD 80 million. And this is basically a provision for the potential bad debt on the back of the coronavirus outbreak. As for the nonoperating income of like TWD 130 million, the major portion came from the FX gain of roughly around TWD 90 million.
[Foreign Language] We also noticed there is a big 40% quarter-over-quarter increase in the inventory of around TWD 2.6 billion. Could you provide more color on this big jump? And also about which product?
[Foreign Language]
[Interpreted] Okay. The question was on the Q1 inventory, Q-o-Q increase of 40%. So this year, increase in the inventory largely because of the increase in the lead time because of the tighter foundry supply. And if you look at -- from a days of inventories, our number actually is relatively healthy because if you look at Q1, the days of inventory is 73 days. If you compare it to the 2019 Q1, it was 79 days. So basically, we view it as pretty healthy. So we are not much worried about that.
[Foreign Language] You just announced the payout cash dividend of TWD 10.5. The payout ratio seems to have come down slightly over the past few years. What's the major reason behind that?
[Foreign Language]
[Interpreted] The question was on the payout ratio. Y-o-Y it's kind of down a little bit. What Steve just said that from a company point of view, there is no change in the high payout ratio policy. So we'll continue to maintain high payout policy. However, the payout ratio slightly decreased. This is largely due to the consideration of the coronavirus outbreak and the uncertainties in the second half. So basically, it's very -- just because of the virus issue.
[Foreign Language] The next question is about operating expense. Given a little bit higher OpEx ratio in the first quarter, can you provide some guidance for your OpEx ratio in the second half? Or will you still maintain your previous target of 16% to 17% for 2020?
[Foreign Language]
[Interpreted] The question was on the OpEx for the second half. Basically, our first quarter OpEx around 17.8%. And Q2, we are expecting it around 17%. So if the -- but for the whole year, I think it will all depend on the second half revenue. If everything goes well, no surprise. I think the -- we'll maintain the full guidance for the OpEx around 17%.
[Foreign Language] You just announced April revenue, which you said another record high. Based upon your April revenue as well your second quarter revenue guidance, your monthly revenue trend, sales declined sequentially. Could you provide some color on that?
[Foreign Language]
[Interpreted] The question was on the guidance, for the second quarter guidance. Since the April monthly sales was record high, does it imply that the May and June revenue will be down sequentially? Steve just explained that the -- because the May 1 day is Labor Day, holiday, so we've seen experience the pull-in before the holiday. So we've seen that the April number went up quite a bit. And the other thing is that we also factor in another -- the issue is the -- in April, we anticipate that there will be some inventory adjustment because of the semi-annual financial report. So there will be some inventory adjustment, so we did factor in that portion. So we'll maintain our Q2 guidance as we gave earlier.
[Foreign Language] Investor would like to know if any guidance for your inventory level at the end of second quarter?
[Foreign Language]
[Interpreted] Okay. The question was on the -- about the Q2 -- end of Q2 inventory. Will it go up or go down? And the answer is that we are expecting the second quarter revenue to ramp up. So we did prepare some inventory for that ramp up. And so because of that, we're expecting our Q2 inventory -- end of Q2 inventory level to go down.
[Foreign Language] Based upon the recent announcement from U.S. Commercial Department, there's a warning about the smartphone device as well as some follow-up risk. Have you done some settlement on the back of this announcement?
[Foreign Language]
[Interpreted] The question was on the U.S. Commerce Department regarding the smartphone. So we are keeping close watch on that. But for us, our main goal is to penetrate all the potential smartphone players. So we'll continue to do that. And the rest, we'll just keep watch in how things changes.
[Foreign Language] A follow-up question about the TDDI. They would like to know what percentage of shipment or revenue HD product account for either in the first quarter or into the second quarter.
[Foreign Language]
[Interpreted] Okay. The question was about the TDDI and what -- how much -- I mean, the HD, high-definition accounts for how much of the total TDDI. We don't have the exact number, but it should be a little bit less than 40%.
Around 40%.
Around 40%, yes. This is very rough, very rough number. We don't have the exact number on hand at this moment.
[Foreign Language] Could you provide some comments on the 5G smartphones as well as the specifications for panels for your drivers?
You mean the downgrade of the API, or driver, or what?
Driver of panels, so like OLED down to...
I mean the panel, okay.
[Foreign Language]
[Interpreted] So for Novatek, I mean, the question mentioned about the 5G and there is a downgrade on the panel or driver for the 5G phone. But for Novatek, I mean, it doesn't matter, whether it's downgrade or whether it's the right spec. As long as they need a driver, we supply them the driver. And it's good for us, so it doesn't matter.
[Foreign Language] Wonder if the company can share some thoughts on the inventory level at your customer cycle, both large-sized driver and the small-, medium-sized driver?
[Foreign Language]
[Interpreted] The question was on the driver inventory on our customer side. So the answer is, no matter, whether it's large or small. So far, what we saw is that the inventory level on our customer side still looks pretty healthy. Of course, we work very closely with our customer as a partnership and to supply them the driver they need and to understand the situation. But so far, everything looks healthy.
[Foreign Language] We noticed there is a delay for all activities -- sports activities. And any impact to your TV SoC or large-sized drivers?
[Foreign Language]
[Interpreted] Okay. The question was on the large panel driver for TV. Because of the postponing of the Olympic Games and some of the soccer game, will that impact our TV demand? The answer is that, of course, because of the COVID-19 caused the Olympic -- that impacted the Olympic Games to postpone, especially the Olympic Games, they're focusing on the 8K broadcasting. So because of the delay, the demand for 8K will be delayed also. But from our view, 8K TV still will be the trend. So at this moment, the penetration rate is still low. But eventually, we still expect the 8K resolution, TV to go up. But it will be delayed a little bit.
[Foreign Language]
[Interpreted] So if anyone of you have further questions, do let us know or send us a text.
Okay. Since there is no further questions, we'll conclude our Q&A session. The replay of the conference will be available on our website, www.novatek.com.tw later today. And thank you, everyone, for joining us today and wishing you all the best of health.
[Foreign Language]
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]