Parade Technologies, Ltd. (4966) Earnings Call Transcript & Summary

Welcome, everyone, to Parade Technologies, Limited 2023 Fourth Quarter Webcast Investor Conference. Investor Relations of Parade Technologies, Mr. Yo-Ming Chang, will present 2023 Fourth Quarter and Fiscal Year 2023 Financial Results first. [Operator Instructions] [Foreign Language] And now I would like to introduce Mr. Yo-Ming Chang, Investor Relations of Parade Technologies. Mr. Chang, please begin. [Foreign Language]

Thanks, Jason. Welcome, everyone, to Parade Technologies 2023 Q4 Webcast Investor Conference. Parade Technologies fourth quarter 2023 consolidated revenue was USD 120.13 million and the net income was USD 20.06 million. Both basic and fully diluted after-tax earnings per share were USD 0.25 and USD 0.25, respectively. These results compared to consolidated revenue USD 101.45 million and a net income of USD 14.48 million or USD 0.18 and USD 0.18 per basic and fully diluted share in the year-ago quarter. In U.S. dollars, the fourth quarter revenue increased 2.71% sequentially and was up 18.41% year-over-year. The gross profit in the fourth quarter of 2023 was USD 51.9 million, an increase of 1.44% from the previous quarter and an increase of 16.19% compared to the same quarter of last year. For the fiscal year 2023, the consolidated revenue was USD 441.25 million, representing a decrease of 35.1% from US 679.92 million in the prior year. Gross profit was USD 192.93 million, and the operating income was USD 62.87 million. Net income was USD 64.97 million or USD 0.82 per basic share and USD 0.82 per fully diluted share. These results compared with net income of USD 167.25 million or USD 2.09 per basic share and USD 2.06 per fully diluted share in the prior year. Based on the current business outlook, Parade is providing the following guidance for the first quarter of 2024. Revenue is between USD 114 million to USD 126 million. Gross margin is between 43% to 47%. Operating expense is between USD 32.5 million to USD 35.5 million. On November 29, 2023, Parade announced 2 new eDP Tcon devices: DP821 and DP823 that comply to the newly released eDP 1.5 standard. Systems utilizing eDP 1.5 start production in 2024 and Parade's new devices target the mainstream, high-volume display market. 120Hz is trending as the major frame rate for both consumer and commercial premium notebook models. The DP821 supports display resolutions up to WQXGA 120Hz, and the DP823 supports up to WUXGA 120Hz. The DP821 and DP823 provide full eDP 1.5 functionality including Early Transport, Panel Replay, which is the preferred function to use for Panel Self Refresh and other advanced features including GPU brand-specific variants. Both DP821 and DP823 support 30-bit input and global dimming for DisplayHDR 400 performance. The new DP821 and DP823 devices offer backward compatibility with eDP 1.4b and earlier devices as well as compatibility with Source devices compliant to the new specification. On December 6, 2023, Parade announced the availability of the PS8481/PS8483 DP 2.1 2:1 retiming MUX/retimer family, and the PS8431 HDMI 2.1 2:1 retiming MUX for commercial and consumer PCs, host systems and peripherals. PS8481 and PS8483 support DisplayPort 2.1 up to UHBR20 20 gigabits per second per lane, delivering up to 80 gigabits per second total bandwidth. The devices are fully compliant with VESA DP 2.1 standard. PS8431, in compliance with HDMI 2.1 specification, features FRL support up to 12 gigabits per second and backward compatibility with TMDS up to 6 gigabits per second. The devices support low power consumption for standby and low power states, greatly extending the battery life of mobile devices and enabling system EnergyStar compliance. [Foreign Language] It is my presentation for 2023 Q4 and the year 2023 financial results. Now I transfer to CEO, Dr. Jack Zhao, to answer your questions. Jason, you may begin.

[Operator Instructions] And our first question will be coming from Fion Chu of Daiwa.

This is Fion from Daiwa and Happy Chinese New Year ahead. And I'm just wondering since recently AIPC has become a hot topic. And could you please share with us what's your view on AIPC demand this year? And do you think it will really help accelerate the PC replacement cycle for this year? And what's your business opportunity for Parade or any design win we have seen so far?

Thanks and Happy Lunar Year. And yes, the first question regarding to the AI. And yes, we were in the [ CSU ] and went to several private booths to see the AI demo and the performance. I think so far, we saw the AI notebook or PC perform [ edge ] AI calculation or AI performance. The productivity improvement are impressive. And some of feature, previously hard to believe, the notebook could perform. And I think the 2024 will be the first year, the notebook PC equipped AI acceleration, the competition for those -- the performance improvement, productivity improvement. Of course, among those features of functions, the Microsoft, the copilot, play a significant important role to enable those features. In terms of AI notebook PC, one of the key performance improvement is a large computing calculation and the current CPU hardly catch up. So you would need to have the AI acceleration, the calculation, either through the external graphics card or you should integrate into the CPU chip or the third thing, you put a acceleration chip into the notebook to achieve certain performance. And we had our device, in fact, demonstrate together with our customer and through the [ architecture ] interface on the external graphics card and that graphics card, in fact, has our PCIe Gen 4 retimer and through the cable, OCuLink cable has our PCIe Gen 4 [ redriver ] there. So we're proud and we are associated with those -- the first generation and the performance on the edge type of AI machine, actually performed pretty well because you have external graphics card there. On the integrated solution, we engage with the OEM to designing our USB4 retimer into the Qualcomm platform. And soon enough, those notebook will be on the market supplied by multiple OEMs. Yes, we foresee the more AI-enabled notebook into the market, and we will have more opportunity largely associated with those high-speed PS device will be introduced to the market. So we are pretty positive. We would like to see more functionality, productivity improvement into those AI machines.

Got it. That's very clear. And the other question from me is that, could you please update us the product mix for fourth quarter and also your guidance into first quarter and the demand outlook of our standard plus customer?

Okay. Thanks. In the past Q4, our DP product line is above 30%, our high-speed PS product line is above 40%, our TC product line is lower than 20%, our TT product is about -- is close to the 5%. And into the Q1 and the Q1 is a typical lower seasonality for PC and notebook, largely because we will have about 10 to 2 weeks of holiday season, and that's about 10% of your working days. So typically, the Q1 for PC or notebook is a lower season. However, in our guidance, and we already provided our guidance, and we have guided pretty similar to the what we had on the Q4. So we think relatively, to Parade Q1 is compared with traditional Q1 quarter, we think we are pretty happy to see the strong demand. And we do see more short-term demand, pulling demand, in the -- just Q1 -- just in the first months of Q1. So that's what we see so far.

Got it. Could you please also update us on the outlook of each product line, like which we're seeing growth or decline to the first quarter this year?

I would think the PS product remains a good momentum on the demand side, largely because of more machines, more notebook will have USB4 connectivity there. So our retimer chip will have more opportunity with a good volume. Our DP product might have a good recovery because previous 2023, they were -- had quite inventory in the channel. Now those -- the channel inventory are pretty diminished. So they will have more shipment in Q1 for our DP product. Rest of them are pretty much similar and noticeable that our high-speed parts may have a good opportunity really associated with the USB4 retimer.

Next one, Daniel Yen, Morgan Stanley.

My first question would be regarding more near term on your gross margin. So when I look at your margin trend in 4Q, it's inched down slightly, but your guidance for 1Q midpoint remains at around 45%. And you mentioned that in 1Q, your high-speed product, which is the PS product line, will show pretty -- probably same growth. At the same time, your DP also recovery. So I'm kind of wondering what's the -- what's really driving the margin fluctuation here because it looks like the product mix is similar in 1Q versus 4Q. And how should we think about, going forward, your gross margin trend into 2024?

Okay. Yes. Thank you for the question for the gross margin moving forward. I think the gross margin is complicated factors. And there are a few things -- factor. One is the cost of your product. The second one is the selling price. The third one is really the -- we had sort of continue -- will have a certain amount of inventory write-off as the aging product by our rules. So those 3 factors are play together, and we try to very -- manage our gross margin to the range of our guidance. And we don't think the gross margin will have a dramatic change or big change but remain in the guidance within our guidance. But it's [indiscernible] to manage that -- the gross margin could be difficult. So there will be some slightly change and up and down, but we try to work hard to manage this. And those are the 3 factors. And as I said, our product cost, the manufacturing cost, and I think the manufacturing cost at this moment is slightly benefited to us because the -- whether foundry, whether the assembly line, try to reduce the price to attract more the customer and volume customer. And the secondly is your market, the product price. And on that side, I have to acknowledge that all the parts or mature parts, you start to see customers push you to reduce the price. And the third factor really is the inventory and when it's getting aged -- aging, and we have to written-off as per our -- the inventory rule there.

Yes. If I can follow up, you mentioned about the last point, which is the inventory write-off. Could I ask, did you write off any inventory in 4Q? And what's the amount? Any chance this inventory could buy back into 2024?

Okay. So we have been written off our aging inventory since the second half of 2022 per our aging rule there every quarter and quarter-by-quarter. However, those products, we also sell those products once there's a demand there. So on the book, you've written off, but you really did not scrap those parts, and we happen to be laid out and a lot of them sell to the market when the demands come up. So yes, that's like a push-pull thing and yes, to the specific of Q4, we did have the certain -- I think kind of a small amount of written off on the inventory, and we continue to do that by our -- the inventory management, the aging rule there.

Sure. My second question is regarding your PS line. You mentioned about the USB4, the adoption continue to go up. Could you update to us what's your expectation for your -- for the USB4 adoption this year? And also, I think we mentioned a couple of times that PCIe Gen 5 retimer is going to ramp up into [ 124 ]. Would you also give us some updates on the schedule for both USB4 adoption and the USB -- sorry, PCIe Gen 5 retimer ramp-up time frame?

Okay. Yes. For the USB4 retimer, and we are actually pretty positive. And we, in the 2023, were shipping good amount of retimer, we talk about millions and millions. And in the 2024, we see a significant ramp-up, and we're talking about multiple times of demand in the 2024 versus 2023. So that's pretty positive. Mainly our device is on the AMD platform and Qualcomm platform. So those are the positive things. And we also developed -- during the Q4 quarter, we also successfully developed USB 4.2 or previously people called the USB5 or Thunderbolt 5 retimer chip, which had 80 gigabit per second on the FinFET technology. And that's a prototype. And we think our technology take a lead on this particular segment. So we're pretty positive for the USB4 and the current generation and the future generation. In terms of PCIe Gen5 retimer, as we previously talked about in Q1, we will have one of our customer, a pretty credible customer, will start to ramp up the -- our PCIe Gen 5 retimer. We still hold this view, and we, in fact, did ship some [ MT ] parts to our customer. So that's the -- what we see. And we'll continue having the USB4 retimer device shipping to our customers, having the new design wins associated with those, the workstation and so on and so forth. And actually, pretty interesting, those devices are fitting to the workstation or those traditional, our customer, workstation pretty well.

Yes, looks like the USB4 demand is much stronger than our previous commentary. Lastly, just also I want to ask about DP, mainly on the AMOLED Tcon. So from, Jack, your observation, how do you think about the AMOLED penetration into no matter the notebook market or the pad market? Also, could you share with us how you think about the competitive landscape since this is a high entry barrier, high-margin business? So maybe there will be some other competitors. But how would you think about the competitive edge from Parade?

Okay. We have been shipping the AMOLED Tcon solution to a Tier 1 customer for a few years already from the notebook. And we will have a major ramping up AMOLED Tcon in 2024 or pretty close to ramping up with a large volume. And AMOLED, the solution for -- whether for notebook or tablet, I think a tablet is probably more attractive because the -- those are the consumer application and display -- vivid display are more important. The color accuracy may not be as important as the notebook. Besides the AMOLED may provide other features for tablet. For notebook side, the AMOLED is one of choice for the high-end segment. However, the AMOLED still is more expensive panel for the notebook application. And for commercial application, the advantage of an OLED notebook to those commercial notebook could be quite limited because you care about power, you care about the accuracy of your color. So it's a competition there, depending on OEM, how they present those notebook to which market segment. And certainly, the people hope an OLED panel may get cheaper along the way as technology is getting mature, but at this moment, it's still kind of expensive, and it remains in the high-end segment of notebook, it's still quite niche I would think at this moment because we are shipping quite some volume there. But compared with the -- whether LPTS (sic) [ LTPS ], whether the oxide panel, the volume remains more.

Okay. So just one last thing. Could you also share us about the competitive edge from Parade on the AMOLED Tcon? Yes, also any...

Yes, I think the AMOLED Tcon at this moment largely is an ASIC chip. It's associated with a panel customer definition of the AMOLED. And the customer -- the panel customer in the Samsung versus BOE are different or LGD are different. So you have to design towards the other panel spec. So that's kind of -- it's very different from today's amorphous or LPTS (sic) [ LTPS ] or oxide. So we work with those panel customers to design sort of ASIC-type of chip with them, okay? It's different from today's business model, which you typically design a Tcon, you can fit into Panel A or Panel B factory, you're pretty much similar, right? That's the thing. But we'll continue work on the mainstream, work with our OEM customers to define for those AMOLED solutions.

Next one, Eric Chen, UBS.

So Happy Chinese New Year to Jack and Yo-Ming. My first question is on USB4, just a follow-up question to talk about the win on AMD platform, also Qualcomm. So I'm just curious about your TAM. Is it possible for you to get any further beyond AMD and Qualcomm? And what's your expectation about the penetration this year in notebook?

We hope we could penetrate beyond the AMD and Qualcomm platform, right? Our customer, in fact, encouraged or their self trying, talking to their supplier to have a supplier like us into the, for example, Intel platform, right? So a few OEM customers are talking to Intel and -- or they try to define the retimer differently if the Intel cannot provide the solution. So we saw the OEM customer try to kind of do this. And however, we don't know whether they will be successful or not. We certainly willing to support our OEM effort to penetrate to the other platform. And however, for Parade, we would think the USB4 retimer in the 2024, just started from beginning, there we have more into the notebook and eventually the USB4 on notebook will be pretty high percentage. And once -- by Microsoft rule, once you have one port is USB4 and your entire notebook other port has to be USB4 as well. So for the system, which has 2 USB Type C there, so they may demand 2 of those chips. If 3 or 4, you might demand more. So the unit wise, it could have a good size even in the AMD or Qualcomm platform. We're excited to see not only for this generation and the year before, we are marching towards next-generation on the USB 4.2 or previously we called it USB5 or Thunderbolt 5. And we think those will carry more value to us and provide more technology advantage to us, and will have higher ASP price as well. So we are moving forward to that direction.

Okay. Maybe a quick follow-up on that. And I have another question. So I think you talked about USB 4.2 and the potential content gain. And I think in your earlier remarks, you talked USB 4.2 moving to FinFET nodes. And I think in prior call, you said the USB4 retimer is priced at about [ $247 ]. So may we have your initial gauge about how much you see 4.2 pricing could be?

I don't know exactly because the market has not getting over there yet, but only can judge, you have to use the more advanced technology to do this and complexity increased, price has increased, and that's what we view that our selling price has to go up. And hopefully, the margin also will be better because that's more advanced technology there. I'm stuck on that view, but it should be much better than the years before itself.

I understand. And my second question is about your competition. I think Chinese players are right now very aggressive in the driver IC spaces, and they're like going beyond mobile. They're also getting into IT devices. So how would you see your competition in China shape up? And how would that affect your driver IC margin profile and also your [indiscernible] sales strategy?

Okay. Yes. Thanks. And for us, we are selling the driver, it's so-called CP-based driver. That's our proprietary interface. So those drivers can only working with our Tcon which equip the CP interface there. That's where our bundled solution together, yes, we saw on the low-end segment of driver, and there's a lot more that fuel for start-up go very aggressive to -- on the price side. And I don't think -- we do see those ones there, but those are low-end solutions, and it does not impact that much on the middle or high-end market. And besides those driver does not work with our Tcon anyway, right? So that's the one thing our interface is proprietary in certain degree help us. And in the large -- in the direction-wise, we're moving or we push forward our integrated solutions, which is our TD and that's a Tcon driver integrated solution. We had a success on our 3210. And now we are shipping a newer device, 3230 with the PSR there and start shipping large volume. And we also have the low-end, we call it, for the amorphous solution. And those ones on the low-end are really to compete your driver Tcon separate solutions and the cost towards the panel, towards us, really improved. So for the larger picture, we are moving the game and go to the TD solution. And besides, we're also not only Tcon source driver integrated, we also integrate our touch into it. So recently, we actually had a win with a Tier 1 customer on our TD device for the Chromebook. And because those touch source driver Tcon integrated solutions provide value to those customers, even in terms of price, in terms of integration level. So our solution towards the competition really moving up the supply chain, the full chain, to go to the integration. And I think that's not only benefited to us, also benefited to our panel customers.

Our next question, [ Jimmy Ye, KGI ].

Happy New Year. I have 2 questions. The first one is for your first quarter guidance, seems that it's better than seasonal, and it translates to 25% around year-over-year growth. Do you think that we can expand this kind of growth into the rest of 2024 and which products will grow higher than others?

Okay. Thank you. And I think -- thank you for the positive note for our Q1. I think the -- we have a better visibility for first half year of 2024. And we think we remain good, the growth momentum there, and compared with 2023. And the second half, and we think it will -- if the momentum remain there, we will do better in the Q3 and Q4. And I think we are pretty positive on this. And partially because 2023, we had a pretty bad year. And we had or every semiconductor company all had the inventory overhead issue. Now on the channel, the inventory overhead are gone. So we could ship a lot more than before. And so we're pretty positive on the 2024. And besides the general momentum for our product, we have a few of new category segment join the force to have -- create more revenue, which we did not have previously. For example, the automotive, we have started shipping more. And we started shipping more on the server area, data center area. And those are the positive sides, which we did not have in the 2023, but we certainly will have on 2024.

Jack, when you say if the momentum remains, second half will be better, do you mean sequentially or compared with last year?

And typical, the second half for notebook or PC segment will be better than the first half. So yes, it will expand to both sequentially so as the year-over-year because 2023 -- yes, yes, year-over-year.

When you talk about the new category like the automotive and server, do you think that these area -- new areas will contribute like 5% to 10% after your...

I did not calculate an exact percentage. You probably have to talk to Yo-Ming afterwards. And we do -- especially automotive, we do have new parts worth up to -- or adding more device to our current automotive customers shipping in the 2024. And it's not only one and multiple automotive customer start to contribute to our bottom line there or the top line and the bottom line there.

I see. And my second question is about it seems like the AIPC NBs will benefit Parade from the high-speed product like retimer on USB4 and PCIe retimer. And I want to ask about -- ask your opinions about foldable, because the foldable smartphone seem -- is likely to cannibalize tablets. And do you think that may -- somehow we need to worry about the tablet demand for this year or foldable trends will actually increase OLED penetration on tablet even if now as expensive.

I think the display side, AMOLED penetrated into the portable device like a tablet, probably should happen and as we previously discussed, because it does provide advantage for portable device. In terms of AI going to portable device, we think -- just because the computation power requirement, we -- in the short term, I think we will more see on the notebook or PC platform. It's ready for improved productivity and more commercial usage and also the -- it does have a computing power with good experience for users. And in the CSU, we had tried few of the generative case for the AIPC and you might take 20, 30 seconds, you will get all the solution, pretty appreciable and pretty amazing. And however, it does take -- took a lot of the computing power and those PCs tend to be -- or notebook tend to be big size and those kind of things. And in some cases, you have to put -- as I described, you put the external graphics card, OCuLink the interface to plug in and -- but I'm sure the mobile device will have the AI functionality, will accelerate in the future. I'm not sure in the 2024, 2025, but I think in future definitely because those AI function is attractive and it did improve people's productivity and so on and so forth. And it's amazing, I would say. Yes.

And for the portable, do you expect that we will see foldable tablet in the coming future? And because I want to ask you that if we see the foldable tablet someday, we -- I mean, will the spec benefit Parade like maybe we will need more Tcon.

I think that's possible, but at this moment, I have to comment on this. But I really think the notebook PC is tangible and is happening now. And that's the...

I want to ask the foldable.

I do think those are happening now.

And for the foldable?

Foldable, I think it's a good thing, but I'm not sure the -- I'm not that sure, but I think it's durable and very much durable and I'm not there. Yes. I cannot say too much on it.

Okay. I see. And I want to ask about the tax rate assumptions for 2024? That is my last question.

Kuowei, could you comment on the tax rate?

Yes. So I think for 2024, the model [indiscernible] 9% to 10% is still a reasonable assumption.

9%?

Yes, 9% -- 9% to 10%, I think, is still a reasonable assumption.

Next one, [ Lee Ving Yon ], Nomura.

Jack and Yo-Ming, Happy New Year. I have 2 housekeeping questions. First is regarding your inventory level. I think your inventory level is still at a relatively high level in fourth quarter. I would like to ask, will we digest some inventory in the following quarters? Or would you prefer to maintain at this level going forward? That's my first question.

Yes. I think I explained the previous conference call as well that those inventory are equivalent for our standard plus customer for new product introduction. And yes, those are the pretty new parts there. And moving into the 2024, first of all, those parts are in the big shipment now. And secondly, we did amend several long-term agreements with our wafer foundry, our assembly lines and to allow us without any punishment or any fee involved to significant take fewer number of wafers and take fewer of those discount -- those long-term agreement to take a few of capacity. So moving forward to the Q1, Q2, you will see a quite amount of inventory were reduced. And what had surprised us was some associate with our customer, Tier 1 customer, did not take the -- supposedly the parts were shipped early, but they didn't. So -- but however, now it starts to MT shipment. And in addition, we had a certain commitment with -- not an agreement we signed, but we successfully modified or changed those long-term agreement with our partners without any penalty, without any fine. So that's -- we are happy with it and in 2024, we'll take significantly less of wafers for the capacities.

Okay, sure. And my second question is regarding the OpEx guidance. I think the dollar amount is slightly higher. So I would like to ask maybe for the whole year, how should we think of the OpEx?

Yes. On the 2023, because the business was not that good, we controlled our spending significantly. And yes, we did not do any headcount cut, so on and so forth, but we did sort of cut our spending side. Moving to the 2024, we set up a goal, we are kind of more towards normalization of our business. So we [ did ] accrue those necessary bonus payment, our performance related to the bonus and those kind of things be accrued. So we consider -- taking into consider 2024 more normalized business, not like 2023, we did cut a lot of the spending side. So that I would like to explain here. And Kuowei, do you have a [indiscernible].

Yes, just like Jack mentioned, 2023, we cut down a lot of spending, especially on the employee bonus across the board. So for 2024, we start to accrue those bonus. We're always looking for opportunity to optimize our expense rate based on revenue. So I think as Jack mentioned, like I just mentioned, bonus to accrue versus 2023.

And next one, Evelyn Yu, Goldman Sachs.

Can you hear me?

Yes.

Okay. So I just have 1 quick question that is related to the CXL, like market time for your PCIe Gen 5 retimer. So when do we expect to see a wider market adoption? And have we started to see some revenue contribution already for your CXL retimer solution? Also, are we seeing new competitors for this market? Are there other than current retimer competitors? Or how do we expect the competitive landscape will be like?

Yes, I'm sorry, somehow the line got dropped.

It's fine. I can hear you. Yes. Should I repeat my question again?

So I had an answer for the spending side. I said 2023 was a -- because business was not that good and we did cut a lot of spending. And in 2024, we think, yes, getting to be more normalized. So we are kind of putting the spending back. It's a lot associated with those bonus program and the performance related program. So we accrued those into our projection -- and yes. And I would like to see whether, Kuowei, you have any comment on the spending side.

Sorry, I think that was the last question. That's not my question. So my question is related to CXL. Sorry if the line wasn't clear earlier. I can repeat my question again.

Yes, please go ahead.

Can you hear me clearly now?

Yes.

Okay. So -- okay, my question is related to the CXL, Compute Express Link time for your PCIe Gen 5 retimer. So I want to know that when do we expect to see a wider macro adoption in this field? And have we started to see some revenue contribution already for your CXL retimer solution? And also, I want to know...

Yes, CXL, industry is still doing the qualification. And we have not -- CXL for memory platform has not been into production. We do work with memory and [ switch guy ] for the qualification. I think the CXCL might take another year to become volume production. And however, CXL is important segment for the PCIe retimer, so on and so forth. And I also heard you mentioned the question about OCuLink, right? Yes, OCuLink is one of the interface to allow the PCIe connected to the external graphics card or so on and so forth because OCuLink provide a pretty big bandwidth there. The OCuLink interface is quite similar to the HDMI, you just plug in both sides and then you have -- you can have graphics card as extension for your CPU. And in the CSU, we had our -- the OCuLink solution carried our PCIe Gen 4 retimer and on the cable, because the pretty long cable, it has our PCIe Gen 4 redriver. And both are in the small volume shipment at this moment. And we hope and those one will be applied to other models. Now we see -- have 4, 5 models, PC has those kind of solutions. I think most of the customers are still testing the market because it's pretty new. And -- but we do expect there are certain demand on this. Yes, I hope I answered your question.

Yes. So other than OCuLink, so CXL-related market penetration, you think that it might only happen maybe 2, 3 years after?

Yes. I would think about 2 or 3 years might be -- will become a major thing in the data center, and we are working with one of our key customer for the data center to work on this. And hopefully, the -- through the -- for the real applications, we hope -- and we heard that the performance did improve. And in the data center, you can use less those memory thing and also reduce overall the power usage for the data center.

Sorry, just one follow-up on the competitive landscape. So other than current retimer competitors, are you expecting more comers to join the market for the related...

For which one, the retimer for PCIe or USB?

For PCIe, for CXL -- for memory segment. Are you seeing any new players in this field?

Yes, we saw 1 or 2 or 3 guys are competing on this market segment. It's very subject to the performance of your retimer, especially on the latency. And our retimer has a very good latency number. And yes, it's really start to competing each other for the solutions. And the good thing is that there are many customer and main customer in this segment and besides this, and I would think the real CXL takeoff is not on the PCIe Gen 5 area, it's on the PCIe Gen 6 segment or area. And so it's -- that's the PCIe Gen 6 become more important for CXL. We are developing PCIe Gen 6, the retimer -- both retimer and redriver currently. And we think those will become more important for CXL.

And ladies and gentlemen, we are now moving on to the Chinese section of the Q&A. [Foreign Language]

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Okay. Thank you, everyone.