AAC Technologies Holdings Inc. (2018) Earnings Call Transcript & Summary

Good afternoon. Welcome to the AAC Technologies' 2024 Annual Results Announcement Conference. I'm Joyce Huang, IR Director and a host of the meeting. On behalf of the company, I would like to thank you for your attendance in AAC. Please allow me to introduce the management. Mr. Benjamin Pan, Executive Director and the Chief Executive Officer of AAC Technologies; Mr. Kelvin Pan, Executive Vice President of AAC Tech; Mr. Dan Guo, Chief Financial Officer of AAC Tech; Mr. Jack Duan, CEO of AAC Optics; Mr. Shi Tingjia, Vice President of Strategy of AAC Tech. Thanks management for attendance. Today's meeting includes 2 parts, starting with my presentation on AAC 2024 financial performance and business development. This will be followed by a Q&A session. [Operator Instructions] Thank you. Now let's take a look at the results. In 2024, the group's revenue hit record high sales leasing increased 33.8% year-on-year to RMB 27.3 billion, driven by the strong performance in optics and precision mechanics, and acoustic sectors. Additionally, the automotive acoustics also contributed RMB 3.52 billion, further expanding the business scope and the revenue streams. Gross margin was 22.1%, 5.2 percentage points increase. The notable GP margin growth is mainly attributed to the group's internal and external development, strengthening of the lean management, efficiency and technology innovation. Net profit increased up by 142.7% year-on-year to RMB 1.8 billion, highlighting the remarkable improvement in profitability. Through the dedication to smartphone market and trend in specification, our revenue and profitability saw remarkable growth. According to IDC, global smartphone shipments in 2024 increased by 6.4% year-on-year, reaching 1.24 billion units. Consumer electronics revenue growth outpaced low-value product shipment growth by threefold to [ 24 billion ]. Auto's revenue reached RMB 3.52 billion increased by more than 600% and improved significantly by the 3 percentage points, and this is for the gross margin. rising by 5.2 percentage points. In 2024, the group continued to improve operational efficiency. The operating cash inflow amounted to RMB 5.2 billion, up by 12.3% year-on-year. Free cash flow was RMB 2.95 billion, boosting the liquidity by post PSS acquisition. CapEx was totaled RMB 2.33 billion. Net gearing ratio stood at 3.8% with cash on book of RMB 7.54 billion. The inventory turnover days improved to 59 days, representing a reduction of 21 days from 80 days as of 31 December 2023. Next up is about the business segment performance. Acoustics. For the second half of 2024, the group acoustic revenue was RMB 4.75 billion and up 13.8% and the gross profit margin was at 30.4%. And for the full year, the revenue is RMB 8.21 billion, rising by 9.5%. And this is also because of the rebound market with downstream and also the gross profit margin is 13.2%, 1.8 ppts year-on-year increase. Acoustics product mix optimization achieved a great success in 2024. The master level SLS because have shipped nearly 30 million units, representing a year-on-year increase of over 120%. And the group's automotive Acoustics business. Its revenue is RMB 3.52 billion and the GP margin was 24.8%, reflecting a substantial synergies between the group and the PSS. And the group and PSS products have been supplied to flagship models of leading NEV brands, including Xiaomi, Geely, Li Auto, and XPeng. Optics. The Optics business revenue in the second half of 2024 was RMB 2.79 billion and up 50.2% and year-on-year and 26% H-on-H. And so the gross profit margin was 7.9%. And for the 2024 period and the revenue is RMB 5 billion and the GP margin is 6.5%. The shipment volume up 6P and above lenses continued to rise, with the 6P lenses accounting for 18% of shipments and the shipment volume of 7-element lenses, including plastic lenses and G+P hybrid lenses, exceeded 3.5 million units, and it is expected to grow by multiple times in 2025, further strengthening the group presence in the high-end optics market. In terms of camera modules, significant increase in both shipment volume and ASP led to a notable year-on-year revenue growth of 55.2%. And modules with over 32 megapixels accounted for 32% of the total shipment volume, up nearly 4 ppts year-on-year. Next up is the electromagnetic drive and the precision mechanic business. In the second half of 2024, the consolidated segment, the revenue was RMB 6.07 billion and the gross profit margin was 23.4%. This revenue for the full year of 2024 was RMB 9.71 billion, and also the GP margin was at 23.3%, up by 3.2 ppts year-on-year. And the shipments of the access linear motor increased by 15.5%. And the revenue from the motor model products grew by 36.6%. The industry's likely senseless motor with highest energy density began mass production and shipping. [ Beginning ] of PM, smartphone metal casing revenue grew by nearly 24% year-on-year, and it was exclusively supplied the new home casing for a major customers portable phone setting in the industrial benchmark. Laptop enclosure revenue was RMB 1.35 billion, increased about 53.3% year-on-year and heat dissipation revenue reached RMB 326 million as we become 40% increase, and this also gained the recognition of the major customers. Let's have a look on sensor and semiconductor business. In the second half of 2024, revenue from SSE amounted to RMB 384 million, down by 27.7%. And the gross profit margin was 14.9%. And the business generated revenue of RMB 773 million in 2024, a decline of 24.6%, mainly due to the product strategy adjustment and the transition cycle between old and new projects with emphasis on promoting high-performance products in the future. And the GP margin was 15.6%. And in the future, and the focus will be on the higher end macro phones. After sharing the financial performance, let's focus on the business highlights and strategic development. The group deepened its presence in the smartphone market and let upgrade mid to high-end products, with the accelerated evolution of AI optical upgrades, experience innovation and the volume increase of other devices by major customers and AAC is capitalizing on the trend and accelerating the upgrade of the smartphone products, including the developing high-performance VC products made up stainless steel and steel, copper -- materials to become the heat dissipation solution provider to top customers and also accelerating the rollout of [ 7-element ] plus high performance and low-power compact packaging microphones. Additionally, it also includes but not limited to secure multiple design wins of the 7-element and the G+P hybrid. And some novelties on customer side that show on the slide. We will continue to make efforts in multiple industries such as smartphones, smart cars and AI glasses. Looking at the accelerated deportment of edge AI directly on local edge devices presents major opportunities for technological transformation. And also we will see this very importance of the sensory technology. The group has developed an automotive acoustic solutions, including branded audio system, a full set of speakers, amplifiers, microphone [ HOP ] modules and [ pantheistic ] acoustic, algorithm. In 2024, we supplied a full set of speaker system for the first vehicle model a Beijing-based Android client. We accelerated the mass production on AAC's own production lines and self-developed amplified product enabled a well-known domestic automate in creating [indiscernible]. The first automated grade AAC microphone modules has been shipped to our high-end domestic NEV brands. And Pro algorithm enhanced acoustic experience and base performance enhanced by 200% and secured design wins for the first time for flagship series of top-tier automotive brands. The next fiscal years, the focus will be on the humanoid robot market. As a leader in sensory experience solution provided for has extensive expertise in speakers, microphones, heat dissipation and camera modules. The group is also actively expanding into the rule-out actuated market, including textures and also build a vertical integrated capability. The group has used the core capability in the XR fields and the relevant projects have been implemented. We also have the development of the AI glasses, steel [ real ] solution. And it's also dual active deep directional audio solutions, and we also made an optical waveguide mass production in AI camera and a large field-of-view on AR module and other our customer projects will be mass produced within the year. At the same time, the group also has system-level design humidity and have successfully delivered major domestic customers through vertical integration solutions. The above is my introduction of the annual results. Now we can start Q&A.

[Operator Instructions] First one is from CLSA, Qinrui Zhang.

I'm Qinrui Zhang from CLSA. Congratulations on your brilliant results. The first question, traditionally speaking, our focus was on the modules. And you also talk about the delivery capability in the system level. So it means that our focus will transform from the modules to the system-level solutions?

I'd like to answer the question. We have seen this strong trend of AI and as well as [indiscernible] demand. So based on the modules by delivery in the AI and also the upgrade of our modules and our focus will also on this because you see this kind of upgrade in both the microphone and speakers. And also, we focus on the optimization, and this is a very important change and will become our focus. You will also see in 2024, the shipment volume exceeded and over 1 million, so in what form do we enter with still a module is still the core of this industry. And this is also our strengths, competitive at. But we also heard that some client needs on the system on integration and AAC, so we need to deploy the plan in this regard, but we will still focus on the modules and with the target of a diversified development.

The next one is from Cherry Ma based upon Macquarie.

I have 2 questions. The first question is about the line of the revenue of 2025. As mentioned earlier, you -- that will be about 10% to 15%. So the guidance is not changed, what's the breakdown of this growth guidance? And my second question is about the OpEx ratio and the CapEx guidance. Do you have any breakdown of this CapEx and the R&D?

Sure. If we see the full year, and we still uphold a very steady growth with double-digit progress, and we are very confident in every segment growth and therefore, the acquisition mechanics. This is highest growth segment EM and PM, which [ sampled ] the EM. You can see and there's a high double-digit growth. And also, you will see the PM sector, it's about 18% to 20% growth is even higher and the PM is also maintained a very high GP margin growth is still double digits. And OpEx, in the first half of this year, and we are saying this will be a high double-digit growth in terms of the lens. And in the second half of last year, it's about 25%. And we are also very confident that the module in 2025 compared with the 2024, the MEMS, microphone segment will also have 30% to 35% growth. GP margin is also not about the high double digits in terms of the acoustics, compared with other segments, the rose rates were maintained at a steady growth of medium and low single digits and the GP margin is still about 30%. The top line will be about high double digits. And GP margin will have a growth based on this 22% this year. But with regard to your old tax ratio, and this year-on-year is very steady. The ratio is very steady. In terms of the CapEx, we have a very stringent CapEx policy. Of course, we still have some optimization potential and leveraging existing resources, for example, some production line and to do the optimization. And in 2024 and 2025, CapEx will be remained at about RMB 2.1 billion to RMB 2.3 billion.

And next question is from [indiscernible]

And first off, I'd like to congratulate this remarkable progress on our results. It's really an exciting results. And last year, part of the revenue was from the optics. So what's the expectation of the optics in 2025, any outlook of the optic? Second question, you talk about the robots. I guess some investors are not familiar with robotic segments in AAC, so any visibility of the orders and what's the progress of this robot business and what's the outlook?

I'd like to talk about the optics first and perhaps you will make any supplement afterwards. In the fourth quarter last year, in the Q4 last year and the performance with our expectations, especially in terms of lenses. And last year, I remember the GP margin to reach 25%. And this year, and we can see and this is over 25% is very positive improvement in 2025, we think this kind of profit and also the GP margin can be further improved to about 30%. It's very possible, so that's the heritage of AAC. We entered a segment and business, and we have -- we will leverage our line management and the technology experience and to explore the new growth drives. Yes. Here, we will also become the leading company in both the technology and revenue. And speaking of the modules, the shipping margin is also positive. And from the operating profit, and to other aspects, this performance was very positive. Yes, the modules we have already realized a positive profits. And this year, will be further improved based on this positive progress.

So what about your robotics?

In the overall consumer electronics, we see this mega trend of AI, 2 types. The first one is a humanoid robots. We know that's the key clients from the U.S. is developing this humanoid robots with high confidentiality. This humanoid robust and based on our collaboration with the PSS and the key clients, and we can also penetrate our products in the -- in this robotics and one of the key product is the motor. And the motor is the very critical part, and we are still upholding a very open [ at ] attitude. And as well as there will be the further development and on the humanoid robotics, and we can quickly enter this segment. So we are still in the preparation of the high proactive preparation stage energy with this high confidentiality and another type of the robots, it's a kind of a table -- like the mini mature robot products or some companion robots. And they also need the high performance and outer sync motors, and we have already secured some cooperation with some overseas companies. It depends on different scenarios. For example, the [ study ] scenario and office scenarios to optimize the function of those robots. And from the current observation, and we think the time frame will be in the second half of 2026 or 2027, there will be the new products launching the market. Or it's so-called the AI terminal device, and [ the ] words -- invested on investors.

Next one is from [indiscernible]

I'd like to ask you 2 questions. The first question is about the WLG, because this is also multi platforms. Did the applications are in different scenarios. I'd like to know the yield rate of WLG and also the shipment volume outlook. My second question, now as you know, there are different scenarios, and we also have our glasses and also the automotive scenarios. And what's the outlook and after volume in the near future?

Perhaps you answered the WLG and automotive and the robots may be Kelvin answer this part.

Okay. I'll answer your question on WLG. Last year and also the year before last year, we made upgrades on our marketplace and the equipment mode, and the yield is an increase by about 6 to 7x. So this is done from the mode improvement, and we are very confident on the yield rates. And this yield rate will outperform the competitors. Another part is the equipments. [ The right ] 2 parts. In the previous part, this yield rate is very high. And in the processing part and the yield rate is also good. Of course, it still has room to improve. And yield rates in WLG is significantly enhanced. Of course, in the new equipment, the new mold equipment and also the tours, we still have the room for improvement. In addition and the main camera and the smartphone, the progress is also smooth, and we obtained the recognition and the progress on the major and enjoying customers and mass production is secured. And also meet this volume, we released in our previous report. In terms of the Christmas, and we used this as a very new Christmas [indiscernible] phase 3 in one Christmas. And this -- we are the first one the industry. And the mass production will be commenced soon, and the product will be launched in the market soon. and customer experience will be upgraded. And this kind of trend is very affirmative and the next year. And in this year, how we think will be ramping up.

I will add a little here. Maybe there will be some questions about the WLG. Many people concerned about WLG, we also make great efforts on WLG for many years. On the first one, the equipments, and we have accumulated to a [indiscernible] million. The numbers is correct, right [indiscernible]? And for this year, this can also reach over 10 million. This is about the 7P and also 6P and also G+P. This Mass volume has sort been reached, so these are applied in the flagship models of Android customers. Over last been in the [ pre scope ] and also the Christmas, and the first project will be put into mass production soon. And depend will be confirmed in the next few months. Several major customers, they will also use the capital in the equipment and also [ physical ] projects, and this will be launched in the second half of the year and the scale have reached about several periods. Apart from G+P, WLG can also be outlined in the Christmas and [ physical ], promote its application in the customers' scenarios. But to gain its momentum and the value in the market. And we have already seen this promising results. Kelvin perhaps you can talk about automotive and robots.

Speaking of a robots, we talked about the table robots and by 2026 and 2027, there will be over several million demand. And this kind of -- at the number is not very clear, but the change is very clear, the microphone and the motors, and it's because the value will be about a few tens of dollars, U.S. dollars. Of course, depends on the utility volume, and in terms of the humanoid robots, most of them are still in the testing and waiting. And of course, we have to see this development, and it's a little difficult for us to make any forecast in the next 5 to 10 years about its specification and pricing and volume. In terms of AI, and we also have our expertise on AI, for example, AI glasses, and this is also a trend in the future. And also AI has the demand -- AI glasses has the demand in the noise cancellation or higher requirements actually on making operation based on the demand of our customers. And the Meta proposed their plan -- and the growth of over 10 million or several 10 million volume, and what kind of model they will use need to analyze and observe, of course, a part of Meta, some traditional glass manufacturers or the gaming industries will also share the market with those company -- AI companies.

What about automotive?

The frictions we are making in the automotive, the technologies. We accumulated in the consumer electronics, and we have the strength in the acoustics and also automotive motor and the heated dissipation. As picking up 2 states, we've made a very good progress. And you can see these results in our financial report, together with the PSS, we speak and has already made a breakthroughs of over RMB 4 billion in the revenue. And also in the speaker and amplifier and in the microphone models, we have more investments in both the software and the hardware. The acoustic or automotive acoustics in the next 2 to 3 years, its revenue will be similar to the revenue of our consumer electronics. And it includes both the hardware and software wells, also the algorithm and the vertical products. The automotive acoustics. We will continue to invest and hoping to outperform and exceed the revenue of our consumer electronics. And the automotive motor and the automotive heat dissipation will be the next stage plan will become the supplement of our service in the automotive system, and this will become the new driver for the automotive business.

I have a follow-up question. You talked about this exterior hands, and also our self-developed technology and what's the development, what's the outlook?

The first step is still on the performance. Therefore, at the beginning of the R&D, we will also leverage the external partners to build our abilities. With higher volume and the higher requirements like [ Tesla ], we still need further plan in the production or the long-term strategy. In terms of the robotics and they're still in the preliminary stage. We are observing this development.

And next question is from Fang from HSBC.

Congratulations on your good results. My first question is about the electromagnetic drives and precision mechanics. And there are new growth including the heat dissipation and also the motors. So what's the outlook of those segments? And what's the profitability? And the second question mentioned by Mr. Guo, it's about MEMS. It's 30% to 50% growth this year. So I'd like to know more about the orders, whether you have already secured a very strong orders or the recovery in the consumer electronics?

I will answer the question. And there are 2 parts. And first part is about motors and also some size components are released by the Apple iPhones from the access motors and the side components and optical transmission mechanics, and we obtained a double-digit growth. So this is the first part. And second part is related to the high-end VC if it is a [indiscernible], and we have a very clear pathway for the development. And also, they contribute a lot in our gross profit margin this year. It was for the high end products. The requirements and the structures and also the strength are also very high. And we forged a deep cooperation with the top customers. And in the next 2 to 3 years, we think the profit contribution will become larger from this segment. Compared with the traditional VC anticipation and a new segment will contribute over double digits revenue. Double-digit growth.

Next question is from the CICC, Mr. Huang Leping.

And if we take a review on the history of the company, we see that AAC has a very strong capability in the precision processing and also doing fundamental research probability. In terms of the assembling, and what's the outlook? And you also talked about the robotics and other automotive new growth. So what's your views on this new development and new business drives?

We have already made breakthroughs in the consumer electronics. And we are, for example, in the past, and we are -- the metal casing, and we are at present, we are doing the hinge and also heat dissipation products. In the future, we will also expand the business to the lab closure -- laptop closure, we have been equipped with this capability in the consumer electronics. No matter is the upgrade from AI or the modality of the products, and we have the capability to catch up and also to have a very quick layout in this industry. And in the future, and we will have some developments in the sensors. And the percentage of the sensors in our -- is still low, with the development of AI. We will quickly enter the sensors business. And also the vibrant sensors, it will become the areas that we will quickly cut into in the future. Secondly, based on our expansion in sensors, I mean this capability will also cover new markets. For example, the automotive market because our channels and distributions have already been established,; as long as we explore the deliver tolerability and the product research and development, and we can extend the business to this area. And the robotic customers have different scenarios and also the automotive customers, they also have different scenarios. And this kind of business expansion is very natural and organic. So no matter it is in the acoustics, electromagnetics or the precision mechanics and our optics, and we will have the business expansion with the sensors. And of course, it may be 1 or 2 years of the lead time.

Next question is from [indiscernible]

I have 2 questions. The first question is about the ADAS, what's your strength on your business to spend on ADAS? Second question is about [indiscernible] business. You talked about the sensors and semiconductors. We also see the double-digit growth. So what's the transition period? And in the second half of last year, there was a very good growth. In the future, there will be very good potential of the growth. And whilst the GP margin change, and you also talked about self-development chips and what's the outlook of the self-development chips?

I'd like to take your question. The first part is about SST on last year's report and we are actively developing the high-end microphone product. And there are some delays from our partners. So the mass production was delayed from the second half of last year to the first half of this year, and this unit is doubled compared with the traditional microphone. So the value is very high on our production ramping up is continued. And every half year, we will have about 100 million production capacity of this high-end microphone, and this is also based on the demand of the customer. So that's the reason we are confident that the SSE segment will reach the double digits growth. You also talked about the WLG in the auto motor segments and also the autonomous driving. And WLG has strength in the autonomous driving in production stability and the performance stability. In the ADAS, there's front cameras. We see this stability as a strength of WLG, and this precision automation level is also high. That's one of the reasons we can collaborate with our U.S. clients. And of course, we have our strength and the cost effectiveness. Of course, there are different parameters in the different products in ADAS, this is a kind of a non preference this is this kind of as spherical lenses will be used more. So this kind of requirement or accuracy will be very high.

Next question is from Andy from Morgan Stanley.

I only have one question. The question is about automotive acoustics. I want to know the main competitors in this area. And what's the market share in 2024? And the management also talked about the future improvement potential. And the potential is from the existent value or existent value or we can obtain the market share from other competitors?

Together with the PSS, and the market share is about 15%. And including our competitors include Fosters and also SK and it's some domestic competitors. And the capital spend is mainly on our high-end speakers. Speaking of the growth, we think there are 2 parts. The first part is about the innovation in the form of the product performance. And secondly is about the service. And we can extend our business and also the delivery to the Korean and Japanese customers and to reach 30% of the market share, this is about the speakers on the automotive segments. In terms of the [ microphones ], and apart from the automotive speakers, we also have the modules. The microphone modules penetration at present is below 3%. And in China, you can also see many new and NEVs and this kind of module has increased sharply. I think this is a very good incremental markets and lead a microphone provider and also the solution provider in the automotive acoustics and a microphone. And so we will seize this opportunity for the future possible. As far lease, we plan to emphasize -- from the hardware of the automotives and also including [indiscernible] and a system capability, and we will secure some customers and big customers or the design being from new customers, and including our microphones and hardwares and the speakers and amplifiers. So this is our strategy, and we want to make use on the branded acoustic system, and this will become a very good milestone for AAC's development in the acoustics industry.

Next question is from [indiscernible]

I have one question. And you talk about the progress of the automotive acoustics, and also obtained many new clients and it secured the unique clients in some North American market. So I'd like to ask a follow-up question. Of the outlook of the automotive acoustics, there are 2 parts and it is about RMB 3.5 billion in the automotive. Next year, we want to achieve double-digit growth, including both the profits and the revenue. Again, I'd like to emphasize the targets, and we want to achieve the similar revenue -- similar to the revenue of the electoral -- consumer electronics or even higher revenue and we outperformed the consumer electronics revenue. So what about optics?

The automotive optics, and we -- from the domestic customers, we also have customers in the U.S. And we are in the final stage of the mass production. In this year, we will have one project of the mass production. And they are in Q3, we want to add another production. And in Q4, one more production.

Next question is from China Merchants.

I'm from China Merchants Electronics. I'd like to know the XR plan, because the XR plan is relatively companies and many clinical components can be manufactured. So some AI collaboration will be forced. So what's the collaboration with the overseas customers and what's your [ opinion ]?

I will talk about this. Many AI modules can highlight our capabilities and we have the comprehensive collaboration, for example, there are MXR or MR display margins. And in those kind of models, in XR has heightened value of several hundred RMB. And the second part is about the interactive capability that the voice interactive, for example, the speakers in the left hand or on your right hand, and in the future, there will be some noise cancellation functions plus the vibration microphones to create this kind of high interaction scenarios. So the functions we can provide and also the volumes together with its value in the XR areas are very diversified. In terms of AI glass and AR, we have our own plans for our U.S. customers, about over 5 or 6 models and different designs are needed. And it's hard to say which stack or which design will become the mainstream. And secondly, different customers have different opinions on the XR for example the traditional glass manufacturings sunglasses and the traditional glass manufacturers and they are an XR plan on AI glasses different. An important milestone, for example, with the AR products. As far as we know, like Google and some [ enjoin ] customers, working with some overseas hard well manufacturers. And we are helping them to iterate on the optic solutions and depends on the AI glasses manufacturers and the companies to decide this style and also the product, and the specific definition of the product, it is still in the process, and we have to wait for those companies to decide.

Let's welcome the last question is from Haitong Securities.

My question is a follow-up on the WLG. Nowadays, we pursue the senior the smartphones and also the senior main on cameras, and also there are molding glass functions. And this is also a trend -- a new trend. And another trend is about the available aperture on the smartphones. So this will also use to WLG. So what's the opportunity in the market?

On the main camera on the smartphone, and from, for example, most high-end smartphones, we're focused on inch. Other parts and it's about dark color, and the progress of the lens has become a very important driver. And another one is transmission. Years ago, we insisted on the investment of WLG, and also, the plastic lenses development in size because in this tough scenario, it's a function and the technology has already reached being up. So to increase these aperture and to improve the aperture and we equipped with other performance is very important. And of course, this year, we will secure over 10 million volume this year and most of them will be introduced in the flagship models. And this year, we have the confidence that this will be penetrated to another model. And the WLG's use rates is significantly improved. This is a very good sign for our progress. And it will be over 70% to 80% is accuracy and optical performance must be greatly improved, and in some hybrid lenses, some competitors, they only use the AAC technologies. But for us, we use our own technology can reach the requirement. And the yield together with the performance will largely surpass the GMO.

Thank you, management for the answers. Due to the constraints of time, let's conclude the Q&A session, and we would like to invite Mr. Benjamin Pan, Executive Director and Chief Executive Officer of AAC Technologies to make a summary.

Thank you. And thank you, investors, for your long-term support and attention. Kelvin together with our team, we make our concerted efforts, and the biggest change is all the segments making improvements in both the revenue and the GP margin. In terms of the business growth, we extend and expand our business in the traditional spend and to gain more customers. And secondly, together with PSS, we also unleash our potential in this product end and the customer end. First of all, I'd like to talk about the optics. As mentioned before, WLG, it's a very important product and their technology for AAC. In the second half of last year, the GP margin has already reached 25%. And this year, and this GP margin can be about 30%, of which the recovery of the market and upgrade of the technology, and we developed our 6P and the 7P, the GP margin will be further improved and with the management technology progress, and our less GP margin will be further improved in the near future. I think by 2030 or in about 2028 and 2029, there will be 2 important turning points for the WLG. The first one is about the yields, and we can also use the micro lenses essentially on this traditional modules. So this is the first one, this is about the technology. And secondly, it's about the [ Christmas ] application of WLG and we will see volume scale up in 2028 and 2029. In addition, the VC and [indiscernible] are forged the new drivers and also an open a new landscape of our business. And with the technology development will become the key partners for our major customers for the top customers. And this will become very promising and potential growth point for us in the future. In addition, our GP margin has reached -- to reach about 30%, and in the future, there are still potential for its growth. In terms of the application, we [indiscernible] in its application. We think this single digits growth will be superior. We have already achieved RMB 8.3 billion, and after several years, we can achieve about RMB 10 billion or even higher. And the fourth is about electromagnetic drives in both optics and VCs, and other areas, for example, the robotics and table robots and humanoid robots will bring us value-added growth. And fourthly is about the automotive, the max microphone modules together with other technology needs, will also further improved our market share. And after the acquisition, we can reach about RMB 3.5 billion sales. With the new transformation, including the 2024 are big improvements and AAC has made the breakthroughs from the single production line to the diversified developments. And growing in capitalizing on the change and generating more returns to our shareholders.

Thank you for the summary of Mr. Pan. Due to the time constraint, AAC Technology 2024 annual results announcement has to be concluded. Our results material will be uploaded to the company's official website. Thank you very much for your attention to AAC Technology. [Statements in English on this transcript were spoken by an interpreter present on the live call.]