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

Good afternoon, investors, and welcome to the AAC Technologies 2025 Interim Results Announcement Conference. I'm the host of this event, Joyce Huang, Director of Investor Relations at AAC Technology. First, on behalf of the company, I would like to thank you for all your interest in AAC. Please allow me to introduce the company management team present today. Mr. Benjamin Pan, Executive Director and CEO of AAC Technologies; Mr. Kelvin Pan, Executive Vice President of AAC Tech; Mr. Dan Guo, Chief Financial Officer of AAC Tech; Mr. Jack Duan, Chairman of AAC Optics; and Mr. Shi Tingjia, Senior Vice President of Strategy of AAC Tech. Thanks management for attendance. This meeting includes 2 parts, starting with my presentation on AAC 2025 interim results financial performance and business development. This will be followed by a Q&A session. [Operator Instructions] Next, I would like to present the group's results for the first half of 2025. The group's revenue achieved RMB 13.32 billion, a record growth of 18.4% year-on-year, which was attributed to the continuous improvement in the market share of major products. Gross profit amounted to RMB 2.75 billion, an increase of 13.9% year-on-year. And the gross profit margin was [ 20.7% ], down slightly by 0.8 percentage point mainly due to changes in product mix revenue from the precision mechanics, optics and sensors and semiconductors grew at a faster pace. Revenue growth rate significantly outpaced growth of SG&A expenses. Net profit increased by 63.1% to RMB 876 million, primarily due to the continued profitability improvement in Optics and rapid growth in high-margin precision mechanics. The group's revenue continued to grow, achieving both improved quality and efficiency. According to IDC data, the global smartphone shipment volume increased by 1.5% and 1% in Q1 and Q2, respectively. As shown in the last figure, the group's consumer electronic-related business achieved revenue of RMB 11.58 billion, a growth rate several times global smartphone shipment volume. Revenue from the EMD & PM and Optics business increased 27.4% and 19.7%. Automotive Acoustics Business achieved a total revenue of RMB 1.74 billion, accounting for about 13% to 15% of the group's total revenue. In terms of gross profit margin, the Optics saw a significant improvement, increasing by 5.5 percentage points year-on-year. Let's continue, the GP margin for plastic lens surged by over 10 percentage points. In the automotive sector, the GP margin of the newly acquired company, First Light, also exceeded the industry average. And the group's operating cash inflow amounted to RMB 2.89 billion, up 9.1%, and while free cash flow was RMB 1.86 billion, CapEx was RMB 1.44 billion, an increase of 57.5%. Net gearing ratio stood at 4.7% with cash on book of RMB 7.75 billion. The group will continue to improve its operational efficiency and operating cash flow will support the group's long-term healthy development and innovation. Next up, we'd like to share with you the performance by business segment, Acoustics. In the first half of the year, Acoustics business revenue reached RMB 3.52 billion year-on-year increase of 1.8%. GP margin was 27.2%. SLS master and Coaxial speakers continue to lead the mid- to high-end market with shipments exceeding 17 million units in the first half of the year and the increase of nearly 40%. Group also launched industry symmetrical speakers with a unit thickness of only 1.4 millimeters. Accompanied by the second half of the more high-end products ramping up Acoustic business gross margin will steadily increase. And we also in the Automotive Acoustic Business revenue of a RMB 1.74 billion, up 14.2% year-on-year. GP margin was 23.9% as awarded SUV [ projected ] for domestic NEV encompassing 32 speakers. And we also have the full-stack in-vehicle acoustic systems was unveiled in the Shanghai Auto Show showcasing the high-performance speakers and also the AI music splitting algorithm creating a comprehensive acoustic experience for customers. The group also announced the acquisition of Hebei First Light Auto Parts with key product portfolio of smart microphone, E-call microphones and RNC sensors. Its smart microphones are now covering all major vehicle models, further strengthening the group presence in autonomous acoustic system solutions. In terms of Optics, and the revenue was RMB 2.65 billion, up 19.7% year-on-year. Shipment volume of both optic sensors and optic modules increased year-on-year, accompanied by the continued growth in ASP. And the GP margin was 10.2% a year-on-year improvement of 5.5 percentage points. and there are 3 main business lines. Firstly, for plastic lenses, shipment volume of 6P and above plastic lenses exceeded 18% with stable shipment of high specification, 7P products and increased orders for mid- to high-end plastic lenses. And secondly, regarding the camera modules ASP further increased, thanks to the rapid shipment of mid- to high specification products with module revenue increasing by over 20% year-on-year shipment volume of modules with over 32 megapixel and above accounted for over 34%, an increase of over 3 percentage points year-on-year. 108 main camera modules for several key Android models have entered mass production, OIS modules sales exceeded RMB 800 million, up close to 150% year-on-year. Thirdly, regarding plastic hybrid lenses, the WLG product line achieved a milestone in product development and has been widely recognized by customers. We will provide details later. Next, we will focus on the EMD & PM. In the first half of the year, revenue from this consolidated segment increased by 27.4% to RMB 4.63 billion, mainly due to the continued ramping up of the products such as X-axis motor, innovative side buttons and metal casing in customers' mid- to high-end models and the GP margin was 22.9%. The group rapidly expanded new business and for example, the innovative customized groundbreaking SuperSlim Engine at just 2.33 millimeters thick and weighing only 2.25 grams and it continues to take lead in this mobile phone industry. And in the field of PM, the group's 3 major business segments have achieved a breakthrough. In terms of the metal casting, the group continues to maintain a high and stable supply customers mid- to high-end and folding model and benefit from the market penetration. Regarding Laptop Enclosure, revenue was RMB 713 million in the first half and 18.4% year-on-year increase. Finally, let's look at the Sensors and Semiconductor business. In the first half, the revenue was RMB 608 million, 56.2% year-on-year increase primarily driven by the large-scale shipments of the group's high-SNR microphones to major overseas customers. So these are the financial performance of each business segment. And we will start the Q&A session.

First let's welcome -- first question and this is from the Everbright Tianzi Fu.

Good afternoon management, I'm Fu Tianzi from Everbright and overseas. And first off, I'd like to congratulate to the achievement for the first half and this is a very encouraging in terms of the revenue and the profit. And many investors also the system nonrecurring income, and it did also make contribution to the profit. So please explain this process be nonrecurring income and what's the influence in the second half?

Okay. Thank you very much for the question. In terms of the nonrecurring income and as it relates to the acquisition and the completion of the acquisition of a PSS. Actually, this is a fair value gain and the actual price paid lowered is lower than the previous -- at a very reasonable price. And after we complete this transaction, and this will help us to create better synergy and this is just a onetime adjustment. It will not affect the second half of the year. And next, I will also talk about the opportunity. As you mentioned, both in the revenue and the profitability a very good growth trend has already been shown in the first year -- first half of the year. And the revenue for this first half of the year -- the growth rate was about 18.4%, and we can we have the confidence that the growth rate in the second half of the year will remain at this level and will not be lower than 18.4%. In addition, the GP margin is about 22.1%. And you see there are a lot of new products ramping up and the GP margin is also lower than the average and with the development of this new product in the second half, we have the confidence to increase the GP margin. And yes, last year, the GP margin -- overall GP margin was 13.2% and last year, it's very clear.

Thank you very much. And the second question is about the Optics business and Optics business improvement is one of the highlights in our performance. And the last year, had already achieved the profit -- positive profit. And this year and this kind of situation has been consolidated. Many investors are interested in the continuous development and WLG can be regarded -- this year can be regarded in the first year for the large-scale mass production of WLG. So what's the outlook of the scale of profitability?

I'd like to take this question. And this year at a large-scale mass production as we expected and this will be more than 10 million. And next year, the expectation is about 15% growth. We also talked about the WLG's breakeven and the positive profitability. I think this will happen next year and the yields of WLG is very stable and above 80% and realizing the single lens profitability. There's a mass production in the second half, the G+P and hybrid lenses will exceed the plastic lenses and they will reach about 33%.

Okay. And the last question is about the strategy. And our team have followed AAC for more than 10 years. From these Automotive, Acoustics and through the full stack development and including the consumer electronics. So -- and as well the robotics business. So I'd like to see the outlook whether there will be a new company growth engines or the new profit engine in the future?

Let me answer this question and first off, Fu, we have done a lot of efforts in the technology on R&D in mobile and smartphone industry and consumer electronic industry, and we will continue to optimize our plan in the smartphone industry in this regard. In addition, we will also capitalize the opportunity of AI development and the microphone sensors you see from the last year has already about 700 million and it may double this year, and it is will be scaled up and this is the growth engine. And in addition, our dissipation solutions for the overseas high-end customers. And in the second half of the year, and this will enter the mass production as well. And last year, there still was about 300 million. This year, it will be tripled. So in the overall AI application scenario dissipation will remain better contribution to our profitability. And we see a stable smartphone shipment volume. We also see the smartphone folding trend though it raised the demand of [ ultra sales ] products and that this provide new opportunities for us. For example, we have this high performance, high energy and high density products and this will help us to improve our continuous development on ASP and which the stable development, our Acoustics, and also the motors will record growth, and those are the opportunity growth on smartphone. Moreover, we also have our global plans of the automotive industry. And last year, we acquired PSS and this year, we acquired the First Light and then from the high-end speakers to the complete amplifier system and the core algorithm and we have this sensor modules and by specific [ answers ]. And automotive sectors have already accounted about 10% of our revenue. And we have already obtained the design win for a very high-end brand in the domestic market and this system will redefine the selling of the domestic audio system. And this system has a 13 parts requirement and we have this design win still is also very large and we will have more information for our customers. And we will also continue our expansion into the autonomous -- automotive industry and through the full-stack system under the brand expansion. In the longer run, we will also see some opportunity of AI -- so for example, the robotics and there is a lot of motors inside and we are preparing our plans in this regard. In the next few years, AI and AR/VR devices will provide more opportunities. And apart from the wearables, there will be more like demand and the [indiscernible] and that we are proactively discussing with our customers overseas and domestically. And in the future, maybe there will be some independent AI devices directly connected to some large models of AI overseas automatically. So we think those kind of products will be launched next year, and large-scale mass production will be carried out as well.

Thank you, thank you very much, Mr. Pan, for your detailed answers, and I am looking forward to the company's continued breakthrough in performance in the second half and the future.

Thank you for your question. And next one, we'd like to invite [indiscernible].

I have 3 questions. First of all, it's about the GP margin. I'd like to follow up the GP margin. The GP margin improvement is significant in Optics. So what about the Acoustics and the Automotive Acoustics and the Microphone and the volatility. What are the reasons and what are the long-term trend?

Okay. There are 2 parts in the consumer electronics, we see this cyclical this kind of seasonality. And in the first half, the sales of microphone is included, but the GP margin it's a little lower than last year because we are ramping up the new products in the first half. And in the first half of the year, and the revenue as percentage will be about 40% and next year -- second half of the year is 60%. So the GP margin for the first half is a little lower and after the ramping up of the new products and the GP margin will return to a more healthy level. And we think with the collaboration pace with our customers, the GP margin will be improved in the second half of the year. In terms of the automotive, it's relatively stable. In the short-term, the automotive market is a little fluctuated but after the acquisition of PSS, we are helping them to expand the business on a dramatic market. So in terms of the speakers GP margin, this is a relatively balanced and the new products will be further introduced. And Automotive new products will be introduced in the second half. This will help our GP margin in the second half and the next year, and PSS has a very solid collaboration with this customer especially in the new products on R&D and penetration. So we don't need to have much to worry about it.

Okay. And second question is about Optics business. And we see this hybrid lens demand is very high and strong. And this is also our competitive edge. So I'd like to know the percentage of this hybrid lens and in the overall lens and the penetration in the next 3 years. And what's the percentage and penetration?

And in this question has already been mentioned by Mr. Duan before. And this year, the main customer size can reach about 10 million. And in the future, and we think we can achieve 15 million and this is a remarkable change. And we are also the exclusive suppliers to our customers. And with G+P solution, this can help customers to stop the pain points. And with the development of the system and our customers, and this will trigger a profound changes of our customers. And in the next year, we think the 15% growth is certain and even higher. And the penetration speed is not very fast, and most of the applications are in the flagship models and most of the suppliers -- most of the suppliers from us is also 1.28 versus 1. And the upgrade of lens will bring about changes in user experience and it will be from the mainstream. So we think it's G+P for this year. The shipment volume is about 10 million to 15 million and next year, it's about 20 million, but it will be higher. We still have to look at the whole project in the market. At present, main cameras and the main camera with the G+P the momentum has become more and more certain and we've also seen the combination of pre-scope and also Prisma application, that those kind of applications is lower than the G+P solutions. But many models applying the Prisma and also 2-in-1 and 3-in-1 Prisma's. And this kind of momentum will be more apparent in the first half of next year.

Okay. Mr. Pan. And last question is about participation. And Kelvin talk about the big customers dissipation products mass production. So what about the outlook in the second half and next year or any downgrade or slowdown of this penetration or whether we will see the PC products, and dissipation products on pad and Mac and what are the changes on materials?

For customers, we see the AI opportunities on smartphone and the pad and the PC and AI applications momentum. And actually, it's in line with the -- our dissipation products development. So from the AI functions and it's development speed as far as application speed its similar to the development pace of VCs. So this is a very deterministic trend.

Yes. And added to this and from the mass production, it will start from the high-end model and is the overall application scenario. And this will be rapidly expanded and penetrating from the high end to other models. And the overall demand is higher -- process -- more demanding and entire manufacturing process as well as the investment is quite large and demanding. So we're saying in the future, the performance of our VCs will continue to be more public and this will be iterated in the future and will become more complex in the future. And I think the market potential and echoing the AI development momentum mentioned. I think this year just as the beginning. We just see the market grow from last year is about 300 million to this year 3x and this is just a preliminary potential in the future, and we will see the very large potential for the evolution.

Thank you very much. And we like to show you the highlights of our financial performance in each business segment. And as you see, the group is actively capitalizing this upgrade. And in the smartphone and also the AI glasses and our group continue to make contribution as mentioned by our management and the government is actively capitalizing opportunities to fully empower dissipation solution upgrades. As shown in the last figure, the group's VC shipments are expected to achieve a CAGR of 90% between 2020 and 2025 with shipment volumes continued double-digit growth. It will both ample production resources and the future its products cover a wide range of VC materials, including copper, stainless steel, steel copper composites and aluminum copper as well as FCCL and titanium [indiscernible]. The group's WLT-related products have rapidly expanded and received positive market feedback. The group supported the domestic customers high-end flagship model with 1G 6P main camera upgrade leading a significant breakthroughs for WLG in high-end optics. The group also successfully mass produced and supplied the exclusive WLG based which is super-light Prisma solution. And looking ahead to the second half of the year more flagship models with large plastic and hybrid lens and the microphones produced by the group's exclusive WLG process will be shipped marking a milestone for the group's WLG product line In addition, group has excellent product developments and the design capabilities and is an industry leader in optical, structural and mode design. In the field of autos with intelligence leading sensory interaction and other configuration demand, and this market size in 2030 is expected to exceed 400 million, huge space. This group has a perfect in vehicle ecosystem and high-end multi-brand matrix, building a full stack in vehicle business capabilities. And the group's brand system landed luxury model design win of the flagship SUV of a domestic NEV brand and system features 32 speakers, 14 channels, amplifiers, algorithm and turning services to deliver the ultra-luxury automotive acoustics. At the same time, we have completed the acquisition of First Light, an automotive microphone manufacturer. The group target RMB 100 billion level market size focusing on product and deployment around high-value segments of a humanoid robot prioritizing the development have a vertical integration capability high-value component system. Level large modules and software algorithm, the material hand solutions for robots is about to enter mass production. And group has deep technology foundation and product capability in cordless motors, acoustics and sensors, optical sensing and heating system modules, and we will continue to make efforts and focus on those fields in the future. The group is comprehensively building core capability in XR and AR devices with key products gradually being implemented and continues to achieve breakthroughs in acoustic and display systems. The group continue to supply speakers and microphones to several leading domestic and international AI glasses manufacturers in the first half of the year and there are several products in the development and delivering. The group has -- has a global brand R&D centers and production bases in Asia, Europe and the U.S., nearly 20 countries and regions, including Singapore, United States, Denmark, Japan, Finland and other places. Manufacturing bases in Vietnam, Malaysia, Mexico, et cetera. There are strong support for the company's business diversification to build an operational closed-loop capabilities. AAC will scale new heights for shareholders and customers to bring higher returns. So the above is the introduction of the performance in the first half of 2025. Now we continue the Q&A session.

Next question from the China Merchants. [indiscernible].

Good afternoon management [indiscernible] from China Merchants. I'm very pleased to have the opportunity to ask this question. I have 2 questions. The first question is about the robotic business plan including the current business department ideas and the customers development.

Let me talk about it, and we have a lot of foundation and the technology reserves in the field of motors. So when the AI devices together with the robotics emerge, and this will provide the opportunity for us. As mentioned before, we have collaborated with domestic and overseas customers on robotic motors or some dexterous hand. And this is in the primary development stage and then most of the products are in the upgrading and the iteration phase and there will be more opportunities. And for us, our focus for recent years and it still is in collaboration with the larger customers, and for the product development. And secondly, within AI development there will be more empowerment from AI, there is an application, for example, the humanoid robot and there are large language model into action. In the next 1, 2 or 3 years, we will see some new AI devices and some startups focusing on those kinds of products. And apart from the Acoustics and Optics products, we understand nowadays and there will be more interaction products. In the short run, and this is -- this will benefit up to the introduction of our new products. It is an [indiscernible] AI application must have these kind of [indiscernible] or hardware and to interact with people and we can kept on our XR devices and AI glasses in the future.

Thank you. That's all for me and wish AAC a better development in the future.

Next question is from [indiscernible].

I have 2 questions. The first question is about the GP margin of the Acoustics. It's related to the pressure of the new products or any other innovation pressure.

In terms of the GP margin, Kelvin has already mentioned, part of it and I'd like to add a little. Acoustics is actually is our starting point and in the first half of this year, we see a lot of changes in our Acoustic products. In terms of the price, there are obvious changes from our perspective, and we also see our operational efficiency improvement. And with the mass production and the ramping up of the mass production in the second half of the year, we are very confident to maintain the GP margin level with that of last year. And last year was 13.2%. And we don't think this year's GP margin of Acoustics will be below 30%. So you don't need to worry about this. And with the development of our brand and the promotion, and we think there is still potential for improvement in the second half. In addition, our sales scale and this year has increased by more than 50%. And our GP margin is also changing. And we collaborated with Japan, TDK. And we do the product design packaging and the TDK provide this. So the GP margin in this regard is relatively lower. This is also reviewed the profitability of our microphone. And the last year, I mean, this GP margin was very stable and compared with the year before last year, it was stable as well. And with the TDK's collaboration, the GP margin will be a little slowdown, but the growth potential is still promising. In the future, we think -- and last year, the growth is about RMB 800 million to RMB 600 million. And this year, the growth rate will be about 50% to 60%. So you -- we still see the potential for the next microphone.

My second question is about the Optics. The Optics revenue together with the GP margin for the first half of the year have significantly improved. So I like to know, the breakdown of the GP margin for the lens and the modules. What's the outlook and the guideline for the second half? And the GP margin was mentioned?

I mentioned last year was over 30%. And this year and for the first half of this year, it has exceeded 30%. For the full year, and we think the GP margin of plastic lenses will exceed the 30% GP margin growth, there are 2 address. And the first one is the upgrade in the plastic lenses in the market and causing the pricing hike and a stable increase. And in addition, we also improve our operational efficiency. So we are confident. And the full year's GP margin growth rate can reach above 30% and still have the potential for the growth.

Mr. Pan, what about modules?

In terms of modules for the full year, it's 4 to 6. Yes, this is for the GP margin growth, mainly driven by the ASP and the ASP growth is due to the OIS in the 108 megapixel and also the 200 megapixel have began to be shipped. And in the second half, our pre-scope as well as the Prisma products will enter mass production and we are confident and to have the growth on the modules next year.

Next question is from Andy Meng from Morgan Stanley. Please go ahead. Maybe the signal is a little delayed. Let's invite next one first, Ms. Tianqing Huang from the CICC.

Thank you, management. I have 2 questions. In the introduction the management have already provided the details for the business segment. So I would like to know the guidelines for the second half for each business segment, including the revenue and the GP margin. This is the first question.

Okay. I'd like to take the questions. As mentioned at the beginning and we have the full year guidelines, and we will keep you on guidelines, and 2 questions before related to Acoustics GP margin. As we introduced, there are a lot of new products ramping up in the second half, the GP margin of acoustics will be stabilized and will maintain above 30%. In terms of the EM and the PM and our motors business and the growth was rapid. And in terms of the dissipation mentioned about [indiscernible] and this is one of the highlights in the first half and this GP margin is higher than the average GP margin of our group and our shipments will be concentrated in the second half of the year. So we think this will be increased by about 18% to 20% in terms of the sales. And in terms of the GP margin we think it's about 18% to 22%. In terms of motor, the EM business segment, the sales and revenue will be increased by about 15% to 20% and its GP margin is also about 30%. You talk about the Optics and the GP margin of lens is very encouraging which has achieved 30% and the P lens will also continue -- will continue to increase in the second half of the year. In terms of the overall sales, the year-on-year increase is about 20% and including the lens and modules. In lens and the modules, and we also see the double-digit GPM. So the overall year-round should be between 10% to 15%. And Mr. Pan also talked about the MEMS and the sensors. As mentioned by Mr. Pan, we have our prior [indiscernible] products and the other products. And this kind of percentage will be further increased and this will increase our topline at the same time increase improvement of the GP margin and this will create positive influence on the GP margin. And we think the MEMS revenue this year is about 50% to 60%. And it's GP margin increase is about 15% to 20%. So this is about the segment guideline. In addition, some people concerned about the automotive business and the acquisition of PSS has already been completed and from its revenue and the GP margin and also the contribution were stable and revenue and contribution is relatively comparable. We will keep the growth rate in the second half and the GP margin this year for the full year of this year will not be lower than that of last year. I hope this will give you a clearer guidance.

Yes, very clear. And we look forward to be steadily growth in revenue and the GP margin in the future. My second question is about glasses and AI glasses, AI and AR. So what's the development? And what's the collaboration with our customers and our strategy?

And we have deeply discussed with our top-tier customers on AI glasses on both Acoustics and Optic systems. And in terms of the optical wafer guys, we have had in-depth discussions with some mainstream customers and hoping to realize mass production in the second half of the year or breakthroughs in the next year. In the future, as a component of smartphone and this will have a very rapid growth like watch, like the electronic watch.

Next question is from Kyna Wang from Citi. Kyna?

First, question is about motors and its future opportunities, whether there are dual motors application and on the high-end models in smartphones because we see some foldable smartphones next year. So the upgrade of motors and also the acoustics system upgrade are demanded. So I'd like to know the opportunities. In addition, it's about the camera button and some people say some camera button will be canceled in the future. So whether this will influence your future product plan. In addition I also like to know more about Optics. For example, the vertical integration, what's your plan for your vertical integration and including the lenses and modules? And the relative reserves so what's the future plan on -- of the motors and the solution in the high-end optical modules?

I'd like to answer the question for motors. And some people say next year, there will be some high-end foldable smartphone. It's possible to be equipped with several motors or multiple motors, and there's may be a momentum in the future in the high-end smartphone model. So from this scenario, we think they will increase the opportunity in motors and customers are continuing on upgrading their product. If we see the opportunity set forth we will seize that and support this development. So we have our plans in the ultra-band motor, which is in line with this momentum. And last year we shipped the camera button modules and we didn't hear any or receive any news that this kind of a function of buttons will be canceled and there are some information indicate there will be more potential opportunities in the iteration. And this will give us more opportunities to help our customers and a lot of customers overseas and domestically are using the camera buttons, and we didn't receive any information that this will be canceled.

Next, we would like to invite Cherry Ma from Macquarie.

I think this PSS and Acoustics business and its growth is very good but the GP margin is little slowdown. So whether this is related to price -- price pressure or it's the cost structure and they need more new products to be introduced and to improve it's GP margin.

Let me answer the question. And after, sorry, and you have a little background noise on your side, would you please mute for awhile. Thank you very much. And we have some upgrade business in this product and it does caused influence and change in the GP margin. But no matter what kind of changes it has this year, and we believe the revenue and the profitability will kept flat with that of last year in PSS. And we also see this collaboration -- PSS collaboration with the European customers to obtain the design wins this year. So this will guarantee the revenue and the GP margin stable flows. So that's the development and the market potential of PSS in the Automotive Acoustics.

Okay. Another one is about Acoustics. And the GP margin for the first half slowed down. This is because the R&D cost or other reasons?

As explained before, the Acoustics GP margins slowed down in the first half. It's related to the new products, mass production. There are more new products -- mass products and that's the reason we have the confidence to maintain the full year GP margin of 30%. And this is not related to R&D cost. So the yield of the new products was not high, and this influenced the GP margin. The new product introduction will affect the GP margin at some stage.

Okay last 2 questions from Tony Zhang.

Thank you very much for the opportunity. The Plastic lenses GP margin has already reached 30% and with our scale up and last year the GP margin of the plastic lens and what's the GP margin of our hybrid G+P lenses? With the ramping up this year and the next year and what's the specific GP margin in this regard? In addition the Optics business and what's your net profit level -- what's the overall net profit level? And what's the outlook for the net profit level in the second half of the year?

Okay. I'd like to answer the part of the GP margin, and Ms. Guo, perhaps you can take the question of net profit. In the second half of the year, The net -- the plastic lens GP margin will be higher. And this is just related to our technology upgrade and improvement. So 40% will be our target of the plastic lens. In terms of G+P, the main product together with our WLG GP margin, we can see above 35% level. And this is the level we can see. In the long run, we think G+P will be similar or even higher than the plastic lens GP margin. And of course, it depends on the WLG's scale. And the mass applications. So we think G+P can be similar to our key GP margins.

Okay, I'd like to talk about the net profit. The net profit Optics for the first half and has already become positive and this continues the trend of Q4 last year and with the modules shipment volume increase and also with [ G and P ] lens and WLG. And WLG this year, the volume is about 10 million is very impressive. So the overall net profit will be improved on this basis.

I'd like to ask a follow-up question. So the plastic lens and WLG hybrid lens. And apart from its application in smartphone business, any new applications in the drones or like action cameras or the autonomous cars, et cetera.

Yes, we are collaborating with the top-tier enterprises and manufacturers in the action cameras and drones and to provide them with this lens. And this is our non-mobile phone business. And the trend for us is to provide integrated solutions to our customers.

Thank you very much. Thank you, Tony. And last but not least, I'd like to ask a question from the message board, which from Andy Meng. You mentioned the company's business is growing very fast. Looking forward to the second half of the year, with the introduction of the projects from major customers, can we achieve significant increase in revenue scale and with the development of the dissipation projects, can we continue to promote the growth of dissipation in business?

In terms of dissipation business. And this year, the growth is certain. And last year, If I remember correctly, it's about RMB 320 million and this year, we think we can reach about RMB 1.2 billion or even higher and the growth in the future will be double digits. Our investments in R&D and CapEx in this -- and autonomous application in this dissipation business and also the equipment investment. From the passive dissipation to the active dissipation, and this is very margin complying with the development of AI, and this will become a new driving force of our growth for both revenue and our profitability in the future.

Thank you very much. In the interest of time, today's Q&A session concludes here. Next, we would like to invite Mr. Benjamin Pan, Executive Director and CEO of AAC Tech to give a summary. Mr. Pan, please.

Thank your investors, for interest and support to AAC. And I -- regarding to your questions I'd like to make a summary here. And the revenue -- the growth revenue is very stable, as you said. And in the second half of the year, and in this kind of growth will not be slowed down and this is about the 3-digit growth. And this 3-digit growth can growth can be sustained in the next few years. And with this double-digit growth, with this double-digit growth, we don't mean to give up the pursuit of the GP margins growth. And we will achieve this high growth on the basis of a stable or even a higher GP margin. So this is the confidence from our management. And with the transformation led by Kelvin for the past years, we have already seen this achievement and efficiency improvement from this transformation. And secondly our R&D and sales and the management expenses and it's actually under control. With this kind of expense control, and we also pursue the return of net profit margin. And of course, the strong cash position will provide us a more stable development. We are constantly looking for and managing such opportunities. Last but not the least the changing of our business. And first of all, the optical lenses, and we want to achieve the 30% or even 40% in the G+P GP margin. And secondly, dissipation business will scale up from the RMB 300 million last year and to this years RMB 1.2 billion or even larger scale, and this has become our important product line and its GP margin is higher than the average of the group. And thirdly, Acoustics GP margin is a little slowed down in the first half of the year, but we're still very confident because this is -- what -- this was our starting products and we will have the confidence and to improve its GP margin on the basis of the original stable foundation and with the efficiency improvement. So this is the summary for this interim results. Thank you.

Thank you Mr. Pan, for your speech and Mr. Pan just mentioned the continuous growth in revenue and the GP margin and we will also provide the shareholders with a sustainable returns. In interest of time, this concludes AAC Technologies 2025 Interim Results. Our performance roadshow materials have been uploaded to our website. If you have any questions, please feel free to contact our Investor Relations team. Thank you for your interest in AAC Technologies. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]