Novatek Microelectronics Corp
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Novatek Microelectronics Corp
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[Foreign Language] Dear investors, analysts and media, welcome to Novatek 2020 Second Quarter Online Investor Conference. This is David Chen, Vice President and Company 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 follow: First, I'll be reporting Novatek's second quarter results. After that, our Vice Chairman, Mr. Steve Wang, will provide more details on our Q2 results and the guidance for third quarter. Following that will be our Q&A session. As mentioned earlier, if you have questions, you can send to us by text. Our IR Director, Mr. Tony Tseng, will be processing and reading out the investors' questions one at a time, both in Chinese and English. And our Vice Chairman, Mr. Steve Wang; our CFO, Mr. SC Chou; and myself will answer all the questions in Chinese, and it will be translated into English later on.
As usual, let us take a look at the safe harbor notice.
So let's start with our 2020 Q2 financial highlights. Our net sales in Q2 was $18.6 billion, Q-o-Q up by 10.18% from $16.89 billion, Y-o-Y up 14.14% from $16.3 billion. Our net gross profit in Q2 was $6.23 billion, Q-o-Q up by 11.1% from $5.6 billion, Y-o-Y up 19.23% from $5.22 billion.
Margins in Q2 was 33.48%, up 0.28 percentage point from last quarter 33.2%; and Q2 was 32.05%, up Y-o-Y 1.43 percentage point. Operating income Q2 was $3.16 billion, Q-o-Q up 21.72% from $2.6 billion, Y-o-Y up 23.55% from $2.56 billion.
Our net income Q2 was $2.56 billion, Q-o-Q up 15.63% from $2.21 billion, Y-o-Y up 20.2% from $2.13 billion. The EPS for Q2 was $4.2 versus last quarter $3.63 versus last year same period $3.5.
Looking at the other key index. Our cash and cash equivalents in Q2 was $22.15 billion, Q-o-Q up 11.11% from $19.94 billion; Y-o-Y up 8.34% from [ 20.45% ] -- up $20.45 billion.
Accounts receivable. Q2 was $13.05 billion, Q-o-Q down 5.72% from $13.84 billion, Y-o-Y down 9.77% from $14.46 billion. The Q2 inventory was $9.46 billion, Q-o-Q up 7.25% from $8.82 billion, Y-o-Y up 2.44 -- 24.44% from $7.6 billion.
Short-term loans. Q2 was $1.13 billion, up Q-o-Q 3.5% from $1.08 billion.
The unit shipment for Q2 was 851 million, Q-o-Q up 19.8% from 727 million, Y-o-Y down 6.24% from 929 million units.
Looking at the sales breakdown by products. Q2 SoC $6.18 billion, Q-o-Q up 24.05% from $4.98 billion, Y-o-Y up 36.64% from $4.5 billion.
Display driver. Q2 was $12.34 billion, Q-o-Q up 5.34% from $11.7 billion and Y-o-Y up by 4.45% from $11.81 billion.
We're also releasing our July monthly sales which comes down $6.74 billion, Y-o-Y up by 24.57%, month-to-month up by 15.2%. You can see that SoC comes down to $2.48 billion, driver IC $4.24 billion.
If you look at the monthly sales for the first 7 months, it comes down to $42.25 billion, Y-o-Y up 15% from $36.67 billion.
Let's look at the more detailed numbers. As mentioned earlier, if you look at the first half of this year, the top line is $35.5 billion, up 13.6% from $31.25 billion. Gross profit for the first half is 33.35% versus last year 32.41%. The overall gross profit for first half, $11.84 billion, up 16.88% from $10.13 billion.
The operating expense for the first half is $6.07 billion, up 17.64% from $5.16 billion. The operating income for first half is $5.77 billion, up 16.09% from $4.97 billion. The net income for the first half is $4.77 billion, up 16.44% from $4.09 billion. The EPS for the first half of 2020 is $7.84 versus last year $6.73.
Let's look at the Q2 Y-o-Y numbers. The top line net sales Q2 $18.6 billion, up 14.14% from $16.3 billion. The gross profit, Q2 was $6.23 billion, up 19.23% from $5.23 billion. The operating expense, Q2 was $3.06 billion, up 15.07% from $2.66 billion. The operating income, Q2 was $3.17 billion, up 23.55% from $2.56 billion. The net income for the Q2 is $2.56 billion, up 20.2% from $2.13 billion. The Q2 2020 EPS is $4.2 versus the same period last year is $3.5.
Looking at the Q2 Q-o-Q number. The top line net sales, Q2 $18.6 billion, up 10.18% from $16.89 billion. The gross profit, Q2 was $6.23 billion, up 11.1% from $5.6 billion. The operating expense for Q2 is $3.06 billion, up 1.91% from $3.0 billion. The operating income, Q2 was $3.165 billion, up 21.72% from $2.6 billion. The net income for Q2 is $2.56 billion, up 15.63% from $2.21 billion. The EPS for Q2 is $4.2 versus Q1 $3.63.
Looking at the sales breakdown by products. SoC accounts for 33%, and the driver accounts for 66% of our total sales. So you can see that the SoC proportion has increased.
Looking at our cash and cash equivalents. In end of June, the second quarter, the cash and cash equivalents is $22.15 billion. Excluding the short-term loans, the net cash came down to $21.03 billion. Note that accounts receivable end of second quarter, $13.05 billion. That's down $793 million. The inventory level end of Q2 is $9.46 billion, up by $638 million.
And now I'll turn over to our Vice Chairman, Mr. Steve Wang, to provide us more details on Q2 results and the guidance for Q3.
[Foreign Language]
[Foreign Language]
Thank you, Steve. I'll translate for what just Steve just mentioned into English. Regarding the Q2 revenue, the growth was mainly driven by the increased shipment of SoC of what we call the nondriver products. And the second point is the strong demand for large driver for IT-related product, like notebook, monitor, tablet, which -- mainly due to the pandemic. And the overall small-sized driver in Q2 are relatively weak, so it was down slightly in Q2.
As for the Q2 margins, Q2 margin was 33.48%, up 0.28 percentage points Q-o-Q. This is mainly due to the better product mix.
And looking at the Q3 outlook, what Steve just mentioned is that globally, governments are all trying their best to contain the COVID-19 virus and also trying to speed up the development of vaccine. And we're also seeing that governments are aggressively working on stimulus packages and recovery plans, hoping to resolve the economic crisis. And at the same time, we're also seeing that the U.S.-China relations seems to be getting worse, and this has brought in more uncertainties to the economic recovery.
And we also see that the global pandemic is still spreading and has yet to be contained. And due to the lockdown -- continuous lockdown, people still need to work from home and students need to work online or remote learning. This has -- therefore, the need for the notebook, tablet or gaming or monitor-related product will continue to maintain its strength through Q3. And we're also seeing that the TV demand is also picking up momentum and getting stronger as we enter into Q3, the seasonality, okay?
And as for mobile phone, starting from end of July, beginning of August, we are seeing the demand is slowly recovering. And especially, you can see that the TDDI demand is picking on momentum pretty fast. So -- and we also think that our TDDI tablet will start to ramp up in Q3. And our automotive-related driver, in Q3, it's kind of slow, but we are seeing sign of recovery in Q4. And as for SoC, we see that it's pretty strong in Q3.
So based on the above, our guidance for Q3 is as follow: Revenue for Q3 will be from TWD 20 billion to TWD 20.6 billion. The exchange rate will be around 1 to 2.9 -- $29.5. The gross margins will be around 31.5% to 33.5% range. The operating margins will be 15.5% to 17.5% range.
Thank you, Steve, for the Q3 guidance.
Next, we'll move on to Q&A section. Please be reminded to send us your questions, and Tony will process and we'll read it aloud. So please, Tony?
[Foreign Language]
[Foreign Language]
Given strong quarter-over-quarter growth of 24% for SoC product in second quarter, could you give more color on individual product lines such as which product outperforming others?
[Interpreted] Basically, the strong -- the growth in Q2 mainly driven by the TV SoC-related product. And also, we are seeing the scaler for the gaming monitor, the high-end gaming monitor. And also, we are seeing the timing controller and also the power management-related product, so these actually contributed to the growth in Q2.
[Foreign Language]
[Foreign Language]
Could you provide quarter-over-quarter revenue growth figure for large-sized driver versus small-, medium-sized driver in second quarter? Also provide a direction or some figures for the shipments for both TDDI and OLED DDIC in second quarter compared with first quarter.
[Interpreted] Well, in the second quarter, the -- as we can see -- during the presentation, you can see the unit shipment for the large display driver IC actually Q-o-Q went by double digit. And the -- as for the small-sized driver, Q-o-Q-wise, it's kind of slightly -- kind of slightly down. It's mainly due to the -- we can see that the TDDI was slightly down Q-o-Q unit shipment. And the OLED unit shipments kind of flat Q-o-Q.
[Foreign Language]
[Foreign Language]
We continue to post record high gross margin in the second quarter since the listing and hit the high end of your guidance. Could you provide more color on your high-end product as well as your NRE income and from which product?
[Interpreted] Well, we have $180 million NRE in Q2, and this is mainly from SoC product, for the ASIC product. And as you know, our ASIC product is a trend for us, and we'll continue to try to get more ASIC product. And of course, if there's more ASIC product, there'll be more NRE contribution. So it's hard to tell how much, but we'll try to secure more ASIC products moving forward.
[Foreign Language]
[Foreign Language]
We noticed you not just improved your gross margin, but operating expense as a percentage of revenue also reduced quarter-over-quarter. What's the major reason behind this improvement?
[Interpreted] The operating expense Q-o-Q down slightly mainly because the revenue actually went up, okay? But if you look at the absolute amount, Q-o-Q-wise, actually, the operating expense went up by 2%.
[Foreign Language]
[Foreign Language]
We noticed you had a big drop at the inventory at the end of the first quarter. And now second quarter, this amount continued to increase by 7% quarter-over-quarter. Could you give us some more color on this and from which products?
[Interpreted] The -- yes. The inventory level in Q2 actually went up slightly Q-o-Q. The main reason behind that is 3 reasons. First of all, as you can see that our SoC product line is actually pretty strong. And a lot of the SoC product actually the back end and altogether, the lead time is actually longer. Due to the cycle time, that will have some impact on our inventory levels. And on the other hand, as you can see that our revenue is also growing, so we need to be prepared for the revenue growth. So the overall inventory level, normally, it will go up. And of course, I mean, all of you know that the current foundry situation is very tight. So we need to make some -- add some inventory to prepare for that.
[Foreign Language]
[Foreign Language]
[Interpreted] Well, the net nonoperating activity is mainly due to ForEx loss.
[Foreign Language]
[Foreign Language]
Given the more positive outlook from SoC product into the quarter 3, some question will be answered from the SoC side and also by product group. And the first question is, could you give more color about the TV SoC for quarter 3? And also, your view for your growth outlook for TV SoC product in 2020 and for the reasons for the strong growth.
[Interpreted] Okay. The Q3 SoC, the strength actually is coming from -- mainly from TV controller of the TV SoC-related product. And the growth in this TV SoC is mainly due to the market share gain. And actually, this is pretty in line with our expectation. So this is moving forward as expected.
[Foreign Language]
[Foreign Language]
Is the foundry supply -- I think the 12-inch is tight at this moment.
[Interpreted] Yes. As you know, the SoC product mainly uses advanced nodes like 22 nano, 28 nano. And these nodes, actually, the supply and demand is relatively tight, and the cycle time has increased.
[Foreign Language]
[Foreign Language]
Can you provide some initial outlook for 2021 for the TV SoC product?
[Interpreted] Well, we still maintain our positive view on our TV SoC product as we are developing a lot of new product for the TV-related controller. And we're also developing high picture quality products. So based on that, we are positive for next year TV business.
[Foreign Language]
[Foreign Language]
You may also interest about the camera SoC business. Would you also provide some outlook for the quarter-over-quarter growth or the whole year growth for 2020? And what are the major reasons behind this trend?
[Interpreted] As you know, the -- regarding the camera SoC, we have 2 parts. First the front end, which is the IP camera; and also the back end, which is the NVR or DVR. We have both the products. And so far, we are making a lot of progress in the design wins in various clients. But the current COVID virus actually has impacted the demand. So a lot of the demand has delayed a bit. But we're seeing that -- as we move forward to Q3, we are seeing the demand is picking up momentum as we move to Q3.
[Foreign Language]
[Foreign Language]
Given the potential [ exit ] on the [ high silicon ] after the U.S. [ sanctioning ], what's the opportunity and outlook for this business line next year?
[Interpreted] Well, in general, I mean, the overall situation definitely will benefit Novatek. But the current situation is that due to the trade issue between U.S., China, there's some inventory level being built in the channel, and it will take some time for them to digest those inventory levels. But in the mid- to long term, we look at it in a more positive -- we have a more positive view on this business.
[Foreign Language]
[Foreign Language]
[ Some ] are less familiar with - about this [ billion ] SoC, could you share some information or color about the market size, the market share or about the competitive landscape?
[Interpreted] Well, in this camera-related product, SoC product, there are a few competitors. But for Novatek, our market share is still small. So there's a lot of room for growth as we move forward. And you can see that if you look at the surveillance, the demand is still there. So we'll continue to work on that, and we do expect our market share to grow as we move forward.
[Foreign Language]
[Foreign Language]
About TCAM, which Novatek ranked #1 in the world, could you also provide the outlook on quarter-over-quarter, for quarter 3 or for the whole year? What are the major growth driver for your business?
[Interpreted] Well, regarding the timing controller, due to the pandemic, we are seeing that the working from home, from the IT-related product, the demand is so strong. So we're expecting the Q3 TCAM revenue to grow Q-o-Q. And the other thing is that for the timing control, we also supply for the TV. So if you look at the TV product, it also needs timing controller. As mentioned earlier, as we enter Q3, that's a high season for TV product. So we are expecting the TV controller business also to grow. So as a whole, the demand in Q3 will be better than Q2. And upon that, we also heard that there is a player existing the TCAM market, so this will benefit Novatek.
[Foreign Language]
[Foreign Language]
I also would like to know the competitive landscape at the TCAM such as versus array as well as any plan for some new interface IT products.
[Interpreted] Well, as you know, we are in the display market. And for panel, there's a lot of -- there's various types of interface that you need to provide for customers. So for Novatek, we will provide the full series of product. And all the various interface that's needed in the market, we'll have them ready for our customers. So no doubt about that.
[Foreign Language]
[Foreign Language]
Now moving to the last product line in SoC, about the power. So what's the outlook for quarter 3 on the power product? What is the major reason for the growth?
[Interpreted] Well, looking at the power product line, you can see that due to the U.S.-China trade issues, actually, this has benefited Novatek. And we are seeing that the -- we are expecting Q3 to be better than Q2. And in the power-related product, we have also introduced our mini-LED backlight, and we are seeing demand picking up momentum in that area also.
[Foreign Language]
[Foreign Language]
We just discussed the 4 product line within the SoC. I wonder if you can give a little bit more breakdown within the SoC product on these 4 lines.
[Interpreted] Well, the -- we are seeing that, as mentioned -- as Steve mentioned earlier, the SoC growth will be the strongest in Q3. So we are expecting the overall SoC contribution in Q3 proportionally will increase in Q3.
[Foreign Language]
[Foreign Language]
The small-, medium-sized driver, about the OLED driver, could you provide some guidance for the quarter 3 versus quarter 2 in terms of the shipment as well as the second half versus the first half shipment? And any some early indication for next year outlook?
[Interpreted] Well, the overall OLED unit shipment in Q3 will be slightly down. But looking at -- for the full year, I think the first half and the second half will be 50%-50%, roughly. And what we are seeing at this moment is that, as you can see, a lot of the countries are trying to ramp up, especially China, trying to ramp up the 5Gs. But in order to control the cost, actually a lot of them actually adopted LCD display for the 5G model. And so because of this, we are seeing that a lot of the TDDI demand has gone up quite strongly in Q3. What we expect is that as the 5Gs ramp up this year and moving forward to next year, the 5G, there will be a lot of new applications, which will drive the demand for OLED. So we're expecting the OLED for next year should go up as the 5G unit shipment goes up, and the new model definitely will adopt more OLED.
[Foreign Language]
[Foreign Language]
Management did mention about the OLED TDDI last time. Could you provide some update for this product?
[Interpreted] Well, the OLED TDDI, we are developing that very smoothly as scheduled. And so far, we have full control of the technology. There's no problem with that. But the only thing is that we need to work very closely with our panel maker. So we have to wait for the panel maker to have the panel developed in order to adopt the solutions. So basically, everything is as scheduled. So things are going on smoothly on our side.
[Foreign Language]
[Foreign Language]
Switching to the TDDI, which investors are very interested, could you provide the guidance for your quarter 3 outlook?
[Interpreted] As mentioned earlier, the -- we are seeing that the mobile demand is recovering in Q3. And we also mentioned that a lot of this demand will be related to TDDI. So we are expecting our TDDI demand in Q3 to be pretty strong.
[Foreign Language]
[Foreign Language]
Could you share your market share trend as well as some initial view for the outlook for next year?
[Interpreted] Well, the -- as mentioned about market share, from what we see is that the -- our market share has increased this year, I mean, based on the unit shipment that we actually shipped. And -- but as the for whole year, it's still difficult to give a clear number. We have to wait until the end of this year to give a more precise number. But in general, our market share should increase this year.
[Foreign Language]
[Foreign Language]
We heard the foundry supply seems pretty tight, and the foundry supplier are targeting to raise supplies. Can you comment on that? And if that's the case, will you raise the price afterwards? And any impact to your margins?
[Interpreted] Well, as mentioned earlier, the demand we're seeing for TDDI is pretty strong in Q3. Due to the strong demand, the supply and demand on the foundry side is also getting tighter. And because of this, we're also keeping a close watch. If the foundry price goes up, we'll discuss with our customer, and we'll try to see how to reflect those costs in order to secure more capacity. So we'll work very closely with our customer.
[Foreign Language]
[Foreign Language]
Yes. We noticed MediaTek announced to dispose its holding in [ Edtech ], which acquired back to 2015 to [ a PE firm ] in China of using -- do you expect to see any impact to the market or Novatek for TDDI business?
[Interpreted] Well, regarding this, we don't see any impact so far.
[Foreign Language]
[Foreign Language]
Could you provide some update on your under-display fingerprint timetable?
[Interpreted] Well, so far, our OLED FoD, we are working very closely with our customers. We're fine-tuning the product. If everything goes well, so far, we are expecting to go into mass production end of this year.
[Foreign Language]
[Foreign Language]
Could you provide some -- your expectation for the revenue or shipment number for next year?
[Interpreted] Well, as you know, fingerprint, we are a latecomer, so we just started to enter into mass production most probably end of this year. So it would be better that we wait till the end of this year to give more solid numbers. But at this moment, it's difficult to give you a number. But so far, we are positive that it should go into mass production after this year.
[Foreign Language]
[Foreign Language]
On the fingerprint product, could you provide an update on your integrated product FTDDI and also your position versus your competitors such as Egis with FocalTech?
[Interpreted] Well, regarding the FTDDI solution, as you know, the -- all of these technologies are all developed internally. So we have a very full control of the technology. And so far, product-wise, it's -- I mean development, everything very smooth. And we're working very closely with our panel maker. And as to the mass production schedule, I think it won't be this year. It will be more of a next year story. Because we need to work very closely with our panel makers, especially the panel maker has to improve the fingerprint sensor on the panel side. So we'll wait for the technology to be more mature. And it will be most probably for next year, not this year.
[Foreign Language]
[Foreign Language]
As for other more medium-sized driver, particularly for new product, could you also provide an update on the wearable OLED driver as well as the mini-LED driver? And any view for your next year target?
[Interpreted] Well, regarding the small-sized wearable, our product already launched. And the design-in process and things are moving on very smoothly. And we are expecting this to go into mass production next year -- most probably next year. So -- and the other problem I just mentioned about mini-LED. Mini-LED, this is for the display, okay? So we're seeing that in Q3, our mini-LED display will go into small volume production. And in Q4, it will go into larger volume production, okay? So the -- our schedule for the mini-LED display has delayed a bit because of the COVID-19. Because a lot of the public display, the demand has come down because of the COVID-19. But we're seeing that the most significant volume ramp-up will be in Q4. It will start in Q3.
[Foreign Language]
[Foreign Language]
Could you also provide a little bit more color on the overall industry and then also your edge versus your competitors?
[Interpreted] Well, regarding the mini-LED display, besides driver, the other very important product is the controller, which helps to interact with the driver and the controller. And as you know, Novatek is one of the very few that has the driver technology and the controller technology, so it's all developed in-house. So we have better -- in that case, we can provide a better solution -- a total solution for our customer.
[Foreign Language]
[Foreign Language]
Now we're switching to the large-sized driver business. Could you provide a guidance for your quarter 3 versus second quarter? And any outlook for the rest of this year, given it's trending to positive year-over-year from July versus the year-over-year decline in the first half?
[Interpreted] Regarding the large display driver IC, as mentioned earlier, if you look at the IT product or the TV line, because of the COVID-19, the IT-related product demand has gone up and then the TV entering the high seasonality. So overall, Q3 demand is positive. But there's one thing -- because of the tightness in the 8-inch foundry and the cycle time has been extended, and this will actually become a constraint to our growth. But in general, Q-o-Q -- basically, our large panel driver will grow Q-on-Q. But as I mentioned, the foundry tightness is one issue that will limit our growth.
[Foreign Language]
[Foreign Language]
You mentioned about the foundry supply has been a constraint for your shipments. So we also heard they plan to raise supplies. Just wonder how you cope with this. As well as, will you increase supplies afterwards? As well, any impact to your margins?
[Interpreted] Well, the -- you're right. I mean, the 8-inch fab is very tight at this moment. And I think this is no longer news. Everybody knows that. So what we are doing is that we are asking our existing supplier to increase supply to us. And also, we'll try to get more supply from various fabs. So we are working out with our current supplier. And of course, currently, Q2, the tightness -- I mean the foundry price, of course, might go up. So in that case, we'll also negotiate with our customer how to reflect the cost. And the main purpose behind that is to secure more capacity.
[Foreign Language]
[Foreign Language]
I think you mentioned about your benefit from the increasing outsourcing from Korean customers. Could you provide some figures such as [ open ] revenue from indirect -- directly from Korean customers? I also wonder if there's a higher entry barrier to produce their product with higher ASP or EBIT margin.
[Interpreted] Well, due to the Korean LCD display player existing in the market, and they're more outsourcing to like China to Taiwan. And this, of course, benefits Novatek. And we are seeing the increased demand from the Korean player from outsourcing. And as you know, the Korean panel maker, they have their own unique interface, which Novatek provide those kind of interface. So because of that, we do benefit from the structural change, and we're gaining share in the large panel driver. And as to [ gross ] line, I think this is a pretty similar margin compared to the others, pretty much similar.
[Foreign Language]
[Foreign Language]
On the Korean outsourcing business, who are your major competitors? And do you have any [indiscernible] for your share for this outsourcing business?
[Interpreted] Well, as you know, the Korean panel maker, they used to have their own in-house supply. And as they outsource the panel, they'll continue to use their in-house in a certain proportion. But they'll release more to the outsourcing, and that will benefit Novatek in the sense that our pie actually got bigger, and we can share a bigger share of that. So those will definitely benefit Novatek.
[Foreign Language]
[Foreign Language]
I just wonder, given the benefit of Korean outsourcing at driver business which you already rank #1 with 30% market share, just wonder if you have any target for the market share in the mid- to long term?
[Interpreted] Well, the -- because of the structural change, definitely, our market share will increase. But as to what extent, it's hard to predict at this moment, but we are very positive.
[Foreign Language]
[Interpreted] Okay. Steve just mentioned another issue is that in order to grow market share, we have to resolve our foundry supply issues. So far, the 8-inch foundry supply is still tight, and it's not sufficient, and we are working hard to resolve that problem. Once this is resolved, then, of course, our market share will go higher up.
[Foreign Language]
[Foreign Language]
You mentioned about a lot of constraints on the foundry supply at 8-inch. Just wonder if you are considering to switch some production into the 12-inch set for your large-sized driver?
[Interpreted] We'll use both 8-inch and 12-inch. But basically, at this moment, majority of our large panel driver is still using 8-inch. And in the long run, we need to look at the competitiveness of 12-inch versus the 8-inch. So -- but currently, it's -- majority of this is still in 8-inch.
[Foreign Language]
[Foreign Language]
A follow-up question about the foundries -- tight foundry supply. I just wonder, what is your fulfillment ratio at this moment? Are you worried about any double booking at this moment?
[Interpreted] Well, we're not that much worried about the double-booking issue because we do look at the demand and look at the market. So currently, I think that's not a big issue for the -- for us.
[Foreign Language]
[Foreign Language]
About the overall direct [ change ], firstly, it's about your product strategy. We noticed you have continued to increase the revenue contribution from some new display products, just would like to know if you can share with us some big direction or opportunity of revenue from this product. Any mid- to long-term target? And any kind of idea about the margin profile for this new product versus corporate average at this moment?
[Interpreted] Well, regarding our mid- to long-term product strategy, as you can see, that the -- in the past, we've been always positioning us as a display -- a smart display total solution provider. And in the past, when people talk about display, it's mostly related to LCD TFT. But as you can see now, it's moving to OLED, to mini-LED backlight, mini-LED display and various others. And for Novatek, we'll continue to develop all the various advanced display technology and not just driver but controller, scaler, picture -- enhanced picture quality, and all these will be considered for our mid- to long-term technology road map. So for us, I mean we'll be still focusing on display, but it will be very broad. And it will cover all the technology.
[Foreign Language]
[Foreign Language]
Novatek has done a pretty successful product diversification and its market share increased over the year and helping the company to grow revenue by double digit over the past few years and also beating the cycle of the LCD industry. And management just mentioned about a lot of positive trend or contribution from new product, just wondering if you can share us your view into the next year. Still positive?
[Interpreted] Well, as mentioned earlier, we are working -- putting a lot of investment on R&D into the more advanced display technologies. And we are very confident next year, we'll introduce more new technology and more new product into the market next year. But as to revenue guidance for next year, it's too early. It's very difficult to predict, but we are sure we'll have a lot of new products for next year.
[Foreign Language]
[Foreign Language]
We noticed Novatek has done pretty successfully as a product mix improvement as well as more engagement with big company for NRE and seeing some upward margin trend over the years. Just wonder if we can continue to see this uptrend into next year and afterwards?
[Interpreted] Well, we have invested a lot into the new product and advanced display technologies. And the main purpose of that is to improve our competitiveness, and the goal is to improve our margins. So we'll continue to do that and we'll not stop. So basically, a lot of new products are under development, and there's -- some of the product will be launched next year. So if that will be successful, of course, that will be helpful to our margins.
[Foreign Language]
[Foreign Language]
Just also, could you provide some color on so-called AI SoC chip based upon today's headline news at the Digital Times?
[Interpreted] Well, we have no comments on the Digital Times news. But one thing we can disclose is that they've been working on the surveillance and have been adding Edge computing, which is Edge AI. And what we want to do is with the picture quality with the AI, we're going to enhance the quality and make some differentiations. And we are working on some of these products.
[Foreign Language]
Well, the question is about the -- there's one TCAM company existing in the market. And the question is, which companies that -- well, it's not a Taiwanese company. Okay. Yes, it's -- yes, you can figure it out. I can't give you the name.
I think it's about time. There's only 2 minutes left. Any more questions? Okay. I think that's pretty much done. So thank you, everybody, for your time, and we'll see you next quarter.
[Foreign Language]