eMemory Technology Inc. (3529) Earnings Call Transcript & Summary

Welcome to eMemory's First Quarter 2021 Webcast Investor Conference. Presently, we have Chairman, Dr. Charles Hsu; President, Dr. Rick Shen; Vice President of Business Development and Spokesman, Mr. Michael Ho; Director, Ms. Lin Ching-Yuan; and Director of Finance Department, Ms. Teresa Kuo. The format for today's event will be as follows. First, eMemory's Chairman, Dr. Charles Hsu, will give an opening remark. Afterwards, eMemory's President, Dr. Rick Shen, will summarize our operations in the first quarter of 2021, followed by an outlook of our business. Next, Chairman, Dr. Charles Hsu, will introduced the topic entitled PUF is the Key for Zero Trust Security. Then we will go into the Q&A session, where our management team will be ready to answer your questions. [Operator Instructions] As a reminder, this conference is being recorded, and a webcast replay will be available within 2 hours after the conference is finished. Please visit the company's website at www.ememory.com.tw under the Investor Relations section. As usual, before we begin, we would like to remind everyone that today's presentation may contain forward-looking statements that are subject to risk factors associated with the semiconductor and IT business. Please refer to the cautionary statement as shown on Page 3 of today's presentation. Now I would like to give the floor over to eMemory's Chairman, Dr. Charles Hsu.

Okay. Thank you. Good afternoon, everyone. Thank you for attending our conference call today. As mentioned previously, we have entered a multiyear growth cycle. According to the royalty report received in the first quarter, the contribution of the 12-inch is accelerating, and its contribution will exceed 8-inch by the end of this year. Following the application of 28-nanometer process nodes, the applications of 16-nanometer and beyond are entering into production, which will contribute to our royalty in the future. As for our new technology, we are very confident with the development and adoption across various markets. I will explain more about the importance of the PUF for the security application in a short while. Next, I will invite Rick to report our first quarter operating results and the outlook of our business. Rick, please.

Thank you, Charles. Good afternoon, everyone. I will first begin with our first quarter results. First quarter revenue was TWD 597 million, a sequential increase of 20.1% and 43.6% year-over-year or up 22.2% sequentially and 51.5% year-over-year in U.S. dollars. The operating expenses were TWD 259 million, down 0.9% sequentially but up 17% year-over-year, mainly attributable to expenditure increases such as human resources expenses, rewards, bonuses and the compensation of employees and directors. This brings us to the operating income of TWD 338 million with an increase of 43.5% sequentially and 74.1% year-over-year. Therefore, the operating margin increased by 9.2 percentage points sequentially and 9.9 percentage points year-over-year to 56.6%. Overall, our first quarter EPS was TWD 3.93, and ROE was 54.6%. Now let's move on to the revenue contribution by licensing and royalty. Licensing in the first quarter accounted for 29.7% of the revenue, up 14.6% sequentially and 66.3% year-over-year or up 16.7% sequentially and 76.2% year-over-year in U.S. dollars. Royalties in the first quarter contributed 70.3% of the total revenue, increased 22.7% sequentially and 35.8% year-over-year or up 24.7% sequentially and 43.1% year-over-year in U.S. dollars. In terms of the revenue contribution by technologies, the results are as follows. NeoBit accounted for 15.4% of the total licensing revenue in the first quarter, increased 3.3% sequentially and 13.4% year-over-year. Its royalties accounted for 50.8% of the total royalty, up 8.9% sequentially and 7.1% year-over-year, mainly due to the demand and the content increases of the applications such as PMIC, MCU and sensor related. NeoFuse accounted for 51.3% of the total licensing revenue in the first quarter, down 17.6% sequentially but up 21.6% year-over-year. Its royalties increased 44.5% sequentially and 99.4% year-over-year due to the continuous production of existing and new applications such as TDDI, OLED, ISP, multimedia, networking related. This brings the royalty of NeoFuse to 46.7% of total royalties. Our PUF-based security IP contributed to 3.1% of licensing revenue in the first quarter. Although this technology has not contributed to any royalty, engagement with industrial leaders is still actively ongoing. Thus, we expect more significant contribution from PUF this year. As for MTP technology, licensing revenue increased twofold sequentially and sixfold year-over-year to account for 30.2% of licensing revenue in the first quarter. Royalty from MTP decreased 3.2% sequentially and 8.2% year-over-year to contribute 2.5% of total royalty. Currently, our MTP team is working with partners on developing MRAM, ReRAM and AI memory. Both ReRAM and AI memory have been verified with proven results. Now looking at the royalty from 8-inch and 12-inch wafers. 8-inch wafers, which accounted for 54.8% of the royalties, increased 10.2% sequentially and 16.2% year-over-year, due to the demand and the content increases of the applications such as PMIC, MCU and sensor-related. 12-inch wafers contributes to 45.2% of royalties, increased 42.1% sequentially and 70.9% year-over-year, due to the continuous production of TDDI, OLED, ISP, DRAM, multimedia networking-related such as DTV, set-top box, WiFi 6, Bluetooth, Ethernet, switch and TWS. There were 155 product tape-outs completed in the first quarter, a record-high quarterly number, reflecting increasing demand of our IPs. We will provide more information in the management report later today. In the next section, I will address our future outlook. We expect the growth of the revenue to continue in the second quarter of 2021 and beyond. For licensing revenue, there is continuing strong demand from NeoFuse, PUF-based solutions and MTP. We expect licensing revenue to continue its growth this year. For the royalty revenues, 8-inch and the 12-inch royalties will continue their growth momentum. 8-inch royalties will grow due to demand and the content increases for PMIC, MCU and sensor-related in 5G, automotive and IoT-related applications. 12-inches royalties will have strong growth as customer production are increasing for TDDI, OLED, ISP, DTV, set-top box, WiFi 6, Bluetooth, Ethernet, switch, TWS, DRAM and others. In addition, royalty from 16-nanometer and below will have started to kick in. We expect to see 7-nanometer customers move into production and start contributing to royalty. [Technical Difficulty] Okay. I'm so sorry that we had some technical issues. So we are back. So sorry for you -- to keep you waiting. So I will restart from the update in terms of our new business developments. So our new applications are centered on the business development of the hardware security. So the NeoFuse in the advanced process nodes is being adopted by secure key storage and is seeking the replacement of conventional eFuse. We expect that this will be a trend for the hardware security as applications are moving into more advanced processes. Our efforts in the past will -- is gradually being seen with the higher adoption and penetration rate. The business activities of PUF-based security solutions are in progress in the applications of the IoT; industrial IoT; AI; blockchain; FPGA; data processor unit, that is so-called DPU; and mobile storage, UFS; and automotive. In addition, our PUFrt and PUFiot have been adopted by several customers across various applications. As for the collaboration with ARM, since customer adoption cases have been very successful, we intend to expand the cooperation to more product applications in the future. For the new IP technology development, our 6-nanometer OTP has demonstrated successfully silicon results, and that is going into qualification smoothly. As for the 5-nanometer plus, the so-called N5P, is on the way to characterization, and we expect to have a good result in this quarter. In Q1, we have announced the adoption of our IP by Achronix for the FPGA hardware root of trust to enhance security at the semiconductor chip level. And we also develop -- continue to develop our PUF-based solution to implement HSM, that is hardware security module, which can be embedded into -- in the chip to provide a security function for network applications. Now I will pass the time to Charles.

Okay. Sorry for the interruption just now. There will be a recording you can listen if you missed some of the information, and let us know if you have any questions later on. Okay. Next, I would like to share with everybody about how PUF is to be used in the so-called zero trust security. You can turn to Page 15. I would like to introduce the subject of zero trust, which has received significant attention recently as the security risk of the IoT becomes increasingly consequential and more widely reported. And basically, zero trust security has following features, as shown in Page 15. The first is the -- for the zero trust, it is never trust everybody -- anybody, okay, and always verify. The second feature is only authenticated and authorized devices are permitted. And the third feature is de-perimeterization security protection. I will explain what is de-perimeterization security protection. And fourth feature, it is identity-centric policy. Okay. Let me explain what they are, okay? The traditional security strategy and the principles based on castle and the moat or the so-called security parameter strategy. And in a traditional network, employees who work inside the enterprise network are protected by Internet firewalls within the security perimeters, and they are trusted by default. However, for those employees working remotely are left outside the security perimeter, and they remain untrusted, so requiring them to provide the -- if they want to access back to the enterprise, they have to have -- provide a very strong -- we have to provide very strong verification for them to access the internal network. However, as many edge devices are being connected directly to the Internet, it is very difficult to provide a secure perimeter or boundary to protect everything inside the security network. However, each device should utilize a mixture of encryption, secure computer protocol, secure computer system and device-level authentications rather than the reliance of an organization on its network boundary to the Internet. And this is the so-called zero trust security strategy, in which the device trusts only itself and will always verify the accessing party. So a zero trust security model creates de-perimeterization of the traditional security boundary within a network as the existing defenses are no longer effective. The defense wall transforms from a single large perimeter to a small perimeter for each device individually. The device relies on its unique ID for verification each time for access, during authorization, or to be accessed, doing authentications. So please turn to Page 16. So in a short summary, zero trust security is needed as the following situation increases. First is work from home during COVID-19 has become normal practice. And the second is remote working is set to continue for many enterprises. And the third is increased deployment of cloud-based services. So there is no way to maintain the old security perimeter anymore in this zero trust era. Instead, a new borderless or de-perimeterization approach is urgently needed. You can please turn to Page 17. So zero trust networking is based on the principle of never trust and always verify and, therefore, requires authenticated verification. And a PUF is best suited to perform this function and is set to become essential for creating a zero trust network because our PUF-based technology can provide a self-generated ID for unique identification and a self-generated key, both of which are inherently created in the PUF. And this sets us apart from the conventional method, which is shown in the left-hand side of Page 17. Both ID and key is injected from the outside, while in the right-hand side of the Page 17, in the PUF -- for PUF, internally, it is a self-generated PUF ID and PUF key. So for the -- so by using PUF, this sets us apart from the conventional method, which require an injected ID and a key from outside of the device, as I presented in Page 17, and which will -- exposing the attack surface before the key is injected into the device. And in addition, the injected key and ID which -- are stored at the key storage memory, which is not as safe as the -- those ID and the key stored in the PUF. So in Page 18, so the key in the PUF can be used with crypto engines to provide comprehensive security services, as shown in Page 18, such as unique identity generation, authenticity, confidential and integrity and nonrepudiation, which are essential for a zero trust network. So in conclusion, as the security becomes more of a concern for electronic devices, zero trust networking will push the secure boundary from a single large perimeter into a device itself. And PUF -- because PUF is the basis of the root of trust, so it will play a very important role and become essential to the success of the zero trust security model. Okay. thank you.

Thank you, Charles. This concludes our prepared statements. We now begin the Q&A session. [Operator Instructions] We are now going to collect questions, and we'll get back to you in a minute. Please stay with us.

We already have many questions. So we're starting from the first question. The first question is, what is your strategy to increase your IP adoption rate in 16-nano FinFet and below? So please, Rick? Yes.

Okay. I think this is a very big question. So currently, the technology widely being used, adopted in the 16-nanometer and below is eFuse, which is offered by the foundry as a standard cell. In comparison to the eFuse, our technology performs -- technology's performance is superior in terms of the small feature size and lower power consumption for the operation and the higher security protection for the data storage. Since our OTP, that's the so-called NeoFuse, issued its patent in 2013, we have developed more than 200 process platform and have designed a solution for more than, say, 500 products. So as customers move into production, they will be contributing significantly to our royalty. However, most importantly is the accumulation of our production record. We can also see the increased adoption rate for 16-nanometer and below. This implies that the 28-nanometer customers are migrating into leading-edge process node. As this happens, we predict that new customers and the new applications will shift from the generic eFuse to our solutions due to the performance and the security concerns. In addition, as we mentioned previously, conventional eFuse is no longer secure and cannot offer higher density for customer use. Together with eMemory's NeoPUF technology and our security IPs, we are happy to see our IP deployment becomes faster. As you all learned from recent news, hacker attack is getting severe. I believe the chip makers, especially for those who provide the complex SoC chips in the advanced process nodes, will surely consider the necessity to enhance its product security level and to deploy hardware security function to -- against the increasing security risk. So I think this is our strategy, to enhance and increase our IP adoption in the leading-edge process nodes.

Thank you, Rick. There is one question regarding the hacker, okay? Recently, international hackers have been rampant, and the issue of information security has evolved into a national security issue. So can eMemory's hardware security IP protect against such a hacker attack? Will the adoption of the application be accelerated? So Charles, please.

Okay. Okay. Because now there are so many attack is from -- attack on the software, so the software security is no longer enough to protect the system. So the adoption of the high-level security will be accelerated. And eMemory's PUF-based security offers unique identity, secure storage, authentication and the anti-counterfeit features and that can protect against such attacks. The large system companies are focusing on creating a zero trust network solution that requires really every device to perform verification, authorization and authentication. And this could be provided by a hardware PUF key, which can be easily self-generated by the PUF in the device to protect the system security through the hardware.

Okay. And another regarding security question. Can quantum computing be able to create eMemory's PUF? Is NeoPUF still useful for future quantum computing? Charles?

Okay. I think the quantum computing cannot crack down eMemory's PUF because quantum computing offers super computation power and can only use brute force to try every combination from a huge pool of the numbers to find the right numbers. As I explained in previous investors conference call, eMemory's NeoPUF technology is based on existing CMOS process. And it features 100% randomness and robustness. Because of its unique features, product designer can easily have a sufficient security key bit stream, that is so-called a large key stream. With that, this would be very hard -- harder than identifying a single grain of sand across the whole earth in a very short time. So I think it is very unlikely that even with quantum computing, they are able to break down PUF.

And this is a question for Rick. What is the impact on foundries aggressively increasing CapEx to build more capacity?

Okay. I think this is a very hot topic recently. So reconsidering the return of the CapEx increase, frankly, most foundries were very conservative in past years, as you know. But the fact is not only for the advanced process nodes due to the increasing demands from the specialty and the mature process technologies like the CMOS image sensors, power management and the connectivity IC for IoT. As you all learned, the increasing capacity across foundries covers wide process nodes. The current shortage of the foundry capacity creates opportunity for us. It's a fact. As our competing technology is foundry-based internal solution, eFuse, customers require multiple foundry strategy solutions more than ever to diversify their supply chain. Our technologies are widely deployed across most foundries, from the legacy nodes to leading process nodes. By adopting our IPs, I think the customer can guarantee a higher level of flexibility in terms of their production plan and allowing them to move from one fab to another. In addition, the current foundry pricing is favorable to us as our royalties are based on the percentage -- based on a percentage of the wafer price. This increasing CapEx leads to more foundry capacity, also an increase to our total addressable market. I think this is our perspective.

This is for Rick, too. The latest 7-nanometer chips from global FPGA manufacturers have announced their collaboration with eMemory. Does this mean eMemory's high level of data security protection IP will reach the mainstream market?

Okay. Yes, I believe so. So our security solutions, combined with NeoFuse and NeoPUF, are set to be fully introduced in the advanced process nodes, that's FinFET, expanding their application. We are confident that our PUF-based solutions provide the highest level of security when compared to the competition. We are well placed to cross the chasm into the mainstream market as customers shift their production. Many potential customers are -- that are waiting for a clear leader to emerge before adopting solutions. So our growing production record and superior benchmarking lead us to believe that this will be -- likely be our IPs.

Okay. Another question regarding the April revenue. All foundries have a full capacity, and the wafer price have also increased. Why did your April revenue drop compared to January revenues?

Okay. So this -- I think this is the major focus in this investor conference call. So thank you for these questions so that we can have a chance to respond to everyone. So if you look at the -- our revenue pattern every year, the April is always lower than January. There are 2 reasons behind this. The first one is our largest end customers are our U.S. smartphone-related chips, which have very obvious seasonality. Q1 is always a low season for wafer shipment, which contributes to our April royalty. The second reason is the semi-annual royalty recognitions of one of our Chinese foundry partners, making the -- which -- making the quarterly revenue comparison unequal.

This is the security question, okay? The data process unit of most AI chips is responsible for the security function. How does the company introduce NeoPUF into the design architect of the DPU, data process unit? How is the growth momentum of the DPU? Charles?

Okay. Yes. I think because in the IoT era, a lot of data need to be taken care of. And also, many cloud-based applications will be realized in the 5G regimes. So DPU depends on CPU alone. The CPU efficiency will be low because it has to take care of the network services and also application service and also the data storage. So that's why recently, the DPU become a very -- start to become very popular because DPU will share with the CPU. DPU will take care of the data storage and also the -- all the security activities. So we have integrated our NeoFuse and the NeoPUF with the digital design to perform hardware root of trust functions to be embedded into DPU. So with NeoPUF, we have innovated a new security architecture for root of trust, which can achieve a high level of security in DPU.

So another question is, what are the difference in architecture between Apple's security chip, T2, and our NeoPUF? What are the advantage and disadvantage? Charles?

Okay. Apple's T2 is actually used in a separate secure element chip, not -- but it is not PUF-based, okay, to perform the security functions. And the trend to high security is to embed secure elements into SoC. So our PUF root of trust and the secure elements are the key security IPs for embedded solution to facilitate higher security solutions. So in the future, security functions will be all embedded into the SoC, okay? That's the -- I think that would be our advantage as security solutions because we provide -- embed it into the SoC, which is different from the current T2 is used in, which is used in the separate secure element chips.

And this question is for Rick. The UMC wafer price continued to increase from each quarter. What is the impact on company profitability?

Okay. This is a very interesting question. So our royalties are based on the percentage of the wafer price. So it's related -- correlated to the foundry pricing movement. So the price -- wafer price increase, it will make a lot of help to the company's profitability.

Does there remain any room for the 8-inch penetration rate to grow from the current 20%? Or are there any applications still growing their market share in 8-inch? Rick?

Okay. Yes. I think this is a question always asked in every quarter. So our penetration will still have room to grow in 8-inch. Recently, we have developed NeoPUF in an embedded Flash process we call -- that is the secure Flash, which can increase our market share across the embedded Flash platforms. There are some legacy chips like the power-related IC that still use conventional laser trimming or eFuse. We are seeing these customers shift to our IP solutions for their new products. Also, the increasing demand for automotive and IoT applications in 8-inch, which require higher level of security and better reliability, will also increase the adoption rate of our IPs.

Okay. Your IP on DDIC and PMIC is already used as an industry standard. Are there other applications where potentially eMemory's IPs could also achieve this position? Rick, please.

Okay. I think that as we reported in every quarter, there are many applications with the adoption of our IPs, for example, the ISP, image signal processor; DRAM; digital TV/set-top box; Bluetooth; WiFi and et cetera. Typically, once a customer adopts our IP, then they will achieve better performance over their competitors, leading to a market share gain. So we expect their competitors will follow on by adopting our IPs. We have seen this scenario in the past with the applications such as DDI and PMIC and the fingerprint sensors. Therefore, we believe that it is just a matter of time for our IP to be widely used in those applications.

What are your opportunity in automotive applications?

Okay. I think in addition to the PMIC, yes, our IPs can be applied to various applications, including the advanced driver assistance systems, that is ADAS, [ frankly speaking ], which we already have customer tape-out in 7-nanometer and 16-nanometer; and also the sensors; microcontrollers; power management IC; and the display drivers IC for infotainment. In addition, autonomous driving requires the highest standard of security. Therefore, our PUF-related solution will be widely adopted.

Will the collection of royalties from device companies be the same as foundries in the first month of the following quarter after production? How are royalties paid and what are the payment method?

Okay. I think this is a very interesting question. That -- and I think currently, the eMemory collects royalties from foundries and IDMs. Only when design houses adopt our subsidiary PUF security solutions, there will be extra royalty incurred. The payment will be the same time as their wafer shipments through the foundries. We also charge by percentage of wafer price.

Will customers who use the NeoPUF process platform also use NeoFuse simultaneously?

Yes. Yes. Yes. So the first thing, the NeoPUF is based on the -- our NeoFuse process platform, as we reported previously. So customers -- and then second, when customers use NeoPUF for security key and UID generation, in general, customers need -- also need the OTP IP together with -- for the security usage. So in general, whenever customer use the NeoPUF, yes, they will use the NeoFuse simultaneously.

So what is your progress on 7-, 6- and the 5-nanometer process nodes?

Okay. As I reported just now that the IP development in 6- and 5-nanometer are running smoothly as scheduled. So the 6-nanometer is in qualification stage, and we expect to complete the whole qualification procedure in Q3 this year. Regarding the 5-nanometer node, that is in the 5G, we just received the test wafers from the leading foundry partner, and we expect to complete the verification in Q3 as well.

So when do -- how many 7-nanometer tape-out are there? And when will production be started?

I think this is a topic that everyone want to know. Up to now, we already have 5 product tape-out in 7-nanometer. And that we expect that production with the royalty contribution later this year.

In the revenue disclosed each quarter, can you further subdivide the proportion of 8-inch and 12-inch?

Okay. I think as we -- I just reported, and please refer to the Page 9 in our presentation material, the royalty from 8-inch and 12-inch accounted for 54.8% and 45.2% of all royalties, respectively.

Please explain the competition and the collaboration relationship with Armv9.

Okay. Yes, this is -- yes, good question. Yes. I think that has nothing to do with competition. We work together closely. So ARM offers CPU IP, whereas eMemory offers logic NVM and hardware security IP. So for the increasing demand in higher computing performance as well as security level, the collaboration between ARM and eMemory will become closer. So Armv9 is a CPU solution, and that we can support Armv9 to have a better security level.

Have DRAM customers started production? When will there be royalty contributions?

Okay. Yes, DRAM customers are ramping up the production now and will contribute royalty more significantly starting from July this year.

Can you provide outlook for AMOLED DDI, ISP, DRAM, WiFi and the DTV for this and the next year?

Okay. These applications indeed are the main growth driver for this year. For OLED DDI, we are gaining the new Korea OLED customers, which are dominating played in the OLED DDI. And OLED, ISP and the DRAM and the WiFi will manufacture in 28-nanometers, which have much higher ASP and will contribute significantly to our royalties. We expect their production volume will increase significantly next year and drive our royalty growth further. DTV, digital TV, customers are migrating into 16-nanometer and will be in production in second half, which have higher ASP and higher royalty contribution.

Okay. There are some security questions, okay? Who your competitor in zero trust security? Is there someone else offering this?

We are not -- we actually are the security zero trust provider for the zero trust security. So zero trust security is a huge regime. It's not a product, okay? So the competition in the -- providing the hardware security to the security solution, there are a couple of them in the market now, which is basically competing on the -- like, for example, on the PUF will be Intrinsic ID. And on the security IP, it will be Insight Secure or SecureIT, those type of companies.

Okay. So can you please explain what actually HSM is?

Okay. I'd like to add a comment to the last question. So given there are a few competitors in the security provider, but only eMemory has the complete solution with the PUF and the OTP and also with the solution digital design for the integrated PUF with OTP and with tRNG together, okay? And the question is -- on what is HSM. HSM, the full name is the hardware security module. So it's basically to put the security into the hardware, which can provide the security services like encryption, like authentication, like authorization, like checking the data integrity and also like the signature of the services. So the HSM basically can provide the key generation and the key storage and together with the crypto engines to provide all kinds of security services.

Okay. So can you give an example how the secure application in the remote working will impact the user, more password?

Okay. Yes. No more password because, for example, the FIDO, F-I-D-O, society, they already come out with the DID standard, device ID standard, and they also promote that for the future IoT device ID. So for the device ID, basically, in the future -- previously, ID is only the identity number. But in the future, the ID becomes device ID, which will become the active ID, which is -- not only provides a unique ID, but which also needs to perform the authentication function. So in the future, for the people working remotely, they need to give their device -- want to work remotely, then it is better to have the active ID -- I mean, the device ID, so which can protect their assets and also their data very well. So I think that is -- the impact is to the user is the device -- all the device connected to Internet need to have more security and more high-level security. Not only they only provide ID, but they also need to provide authentication functions. So this means in the future, as more people are working from home, it doesn't matter whether it's because of the COVID-19 or because of the enterprise has a lot of employees working from home, the future, the security, particularly hardware security, will become increasingly demand by the industry and also by all the people in the world who would like to use the device connected to the Internet.

Okay. What safety measures are being taken into to ensure the safety of your employee in this changing pandemic environment?

Okay. Thank you for your candidness to ask this question. Yes. As you know that in Taiwan, we are facing the increasing pandemic and the more intensive cases in this stage. So frankly speaking, we have a lot of change already done before, and we are always looking to the progress and actually the pandemic situation domestically. So for the -- basically, we asked the employee to do the body temperature measure whenever they come to office. And in the meantime, we also -- recently, we suggest all the employees to have a meeting online instead of to meet the customer on site so that we can help not only for our employees but also help our customers to be free from any risk. So in the meantime, we also look into the latest progress, and we will follow the government suggestion in the -- for the related actions. So we also are considering the possibility to restart the work-from-home project with our employees so that we can help to secure our business and also keep safe for our employees.

Okay. As we mentioned about the ARM cases, they do see a very good result for our cooperation. Can you explain more about -- show us more progress about your project with ARM?

Okay. Yes. I think the -- everybody knows that ARM is a very good company and a very successful company in providing the high-computing CPU. So for the security operations, in addition to CPU, you also need to have a very good crypto engine for the computation, for the high-speed calculation of those securities. So ARM does provide those computation capabilities for the encryption and also all the security solutions. But eMemory has a complementary expertise with ARM because as everybody knows that the security -- for security, the most important is how do you generate key and how do you store the key. So eMemory provides the integrated PUF and OTP and also PUF-based tRNG to generate the key and also to provide a very secure key storage. So together with ARM, then we can provide the total solution for the security processor and also security services. I think that is why the both company work together will give the customers a very high-level and very high-performance security solution. And that also get -- we also get successful results from the customers that we both engage. And so in the future, we will work more closely together to provide the security, IP security processors and also security solutions to customers.

Okay. First, your -- you mentioned about the -- in the 5-nano with very good result of verification. So what's your customer application for the 5-nanometer?

Okay. This is a very good question. As we mentioned in the -- for the -- for our IP in the leading process node, major application is security-related. So when we move into the 5- and 6-nanometer, so the -- our customers are all in the FPGA data processor units and also graphic chip segments. So all these products are all high-performance computing. So that is so-called HPC-related product segment. So in 5- and 6- and even for the 3-nanometer, we will work closely with those customers in the HPC segment.

In the interest of time, we now begin closing comments. Charles, please proceed.

Okay. Okay. Thank you very much for attending the -- this quarter's conference report. And also, thank you for your patience and support to eMemory. And at eMemory, we will continue to work hard on IP innovations and also security solutions and innovations for our customers to bring higher returns for our shareholders. And thank you very much for the meeting. Thank you.

Thank you, ladies and gentlemen. Before we conclude today's conference, please be advised that the recording of the conference will be accessible within the next 2 hours. Thank you, everyone, for joining us today. We hope you will join us again next quarter. You may now disconnect. Goodbye, and have a good day.