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

Welcome everyone to Parade Technologies Limited 2025 Q1 Webcast Investor Conference. Investor Relations of Parade Technologies, Mr. Yo-Ming Chang will present 2025 Q1 financial results first. [Operator Instructions] And after the presentation, there will be a question-and-answer session in English by CEO, Dr. Jack Zhao; and VP of Finance, Mr. Kuowei Wu. And we also will remain last 15 minutes for the attendees who would like to ask questions in Chinese. [Operator Instructions] Now I would like to introduce Mr. Yo-Ming Chang, Investor Relations of Parade Technologies. Mr. Chang, please begin.

Thanks, Jason. Welcome, everyone, to Parade Technologies 2025 Q1 Webcast Investor Conference. Parade Technologies' first quarter 2025 consolidated revenue was USD 126.23 million and net income was USD 20.19 million. Its 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 of USD 121.28 million and net income of USD 18.21 million or USD 0.23 and USD 0.23 per basic and fully diluted share in the year ago quarter. In U.S. dollars, the first quarter revenue decreased 0.93% sequentially and was up 4.08% year-over-year. The gross profit in the first quarter of 2025 was USD 53.02 million, a decrease of 0.07% from the previous quarter. an increase of 3.40% compared to the same quarter of last year. On March 9, 2025, Parade and Spectra7, a Canadian analog semiconductor company, announced that they have entered into a definitive agreement under which Parade will acquire the majority of Spectra7's assets. These assets include intellectual property, products, designs, inventory and other specified items. With the purchase of a majority of Spectra7's assets, Parade is positioned to further strengthen its global leadership in high-speed connectivity solutions. The purchase will enable Parade to both continue marketing Spectra7's existing advanced active cable product portfolio and to leverage Spectra7's technology in new high-speed solutions. Parade anticipates that Spectra7's cutting-edge SiGe-technology, achieving data speed of 112 gigabits per second and higher, will provide valuable support for Parade's efforts to expand into high-growth markets such as the data centers, AI-powered computing and the next-generation consumer electronics. In addition, as part of the acquisition, a significant number of Spectra7's employees will join Parade, ensuring continuity of technical expertise and customer support. This strategic purchase will further empower Parade's ongoing efforts to deliver faster, more energy-efficient signal integrity connectivity solutions that meet the evolving demands of today's data driven world. Based on the current business outlook, Parade is providing the following guidance for the second quarter of 2025. Revenue is between USD 121 million to USD 134 million. Gross margin is between 42% to 46%. Operating expense is between USD 32 million to USD 35 million. The actual demand in Q2 will be impacted by tariff situation, which is hard to predict. It is my presentation for the 2025 Q1 financial results. Now I transfer to CEO, Dr. Ji Zhao, to answer your questions. Jason, you may begin.

Yes. Thank you, Yo-Ming. And ladies and gentlemen, we will now begin the English question-and-answer session. [Operator Instructions] Now we'll have our first question, Yi Wang, HSBC.

Can you hear me?

Yes.

This is Yi Wang from HSBC. So my first question is, can you share the product mix for the first quarter and the outlook going forward to the second quarter?

Okay. Good afternoon, everyone. So the first question is about the Q1 product mix. In the Q1, our DP product line is slightly above 35%. Our PS or high-speed product line is under 50%. Our TC or source driver is slightly above 10% and our touch TT is lower than 5%. And moving forward, and we continue to see the strength of our PS product line on the high-speed side and the DP on the Tcon source driver or our integrated solution are leading to change to recover our DP product line.

Next one, Daniel Yen, Morgan Stanley.

Could you hear my voice?

Yes. Go ahead, clear.

So maybe to start, I want to focus on your guidance on your second quarter outlook. I think during the opening remarks, you mentioned about right now, the tariff is adding some uncertainty on your near-term outlook. While you are guiding the revenue on a USD basis sequentially to be flattish. So I'm just wondering because as we can see from the market in the very near term, because of the tariff, there could be some pull in demand, for example, for PC and also for some of the other devices. And you mentioned about the uncertainty. So I'm just wondering how do you see the tariff impact your second quarter? Is it a positive? Or is it a negative? And how should we think about if there's any change on the tariff, how would that impact your second quarter guidance? It will be my first question.

Okay. Thank you. And I think the bottom-up work we did is at the beginning of the tariff announced on the April 2 time frame. So when we provide those guidance and the situation remains a lot more unclear at that time. And the thing had a kind of dramatic change. We had the reciprocal tariff at the beginning at which the rate was very high. And after a few days, we had the 3 months delay, and we immediately see customer request to pull in. And then we heard being announced the PC notebook that get an exemption from the tariff. So while I've been in the Taiwan for a week and in the China as well, and we feel the customer is now getting pretty calm, I would say. We do see some points on the Q2. On the other hand, customer looking for more long-term solution, however they do to address the potential -- the tariff and for different areas. The customer now is getting more rational or solution-oriented to address long-term issue. In particular Q2, and as we said, the uncertainty, those uncertainties could be positive, could be negative. So far, it looks like the more positive than negative for particular Q2. We don't know what we'll end up with, and we just try to meet -- do our best to meet our customer needs because some of them are pretty rushed -- the pull-ins. And longer term, we actually take a quite conservative view as we think those tariffs in the longer term or uncertainty may impact customer behavior, I mean, end of customer behavior. So like many, our customers, we still remain to see what's going on. But in the Q2, at this moment, I wouldn't think more negative than necessary, but I think probably in terms of positive side, and yes, we just try to do our best to meet customer needs. So that's what we have.

So to follow up, could I ask -- so you mentioned about there are some -- I think more negative versus -- I'm sorry, more positive versus negative. And you also mentioned about some pull in. So I'm just wondering, so for our 2Q guidance, essentially, we are looking at flattish. Could you give us what -- which product line is up sequentially or which product line is down sequentially?

In terms of each segment, so far, I would think that it's flattish because Q2 in the normal seasonality is a weak period, right? It's a weak Q. And so we think the flattish versus Q1 is on the positive side compared with the normal seasonality if there were no the tariff or nothing, and we're pretty happy with our guidance. I think we continue to see our PS product take strength and demand is high. And we start to ship our DP integrated solution in the latter of Q2. So I think where DP is in the recovery the period to recover our business and with our integrated solution. So overall, I think in terms of percentage of business on each segment are more similar as Q1.

I see. I see. And to follow up, I also want to consult your view on the overall -- maybe the PC market because I always remember that I think before the COVID, you were the very first one to call out -- the demand for PC will not be just lasting for 1 quarter, it could be last for several quarters. I always remember your view. So right now, I think we are already maybe 1 year after all this AI PC launch, I think, from different platforms. So I'm just wondering, from your perspective, maybe to -- I think tariff macro is complicated, but just looking at the AI PC or the overall PC market, do you expect AI PC this year or any like end of Windows 10 could drive the acceleration of the PC replacement or you don't see that? Yes, I'm just wondering from your perspective, how would you see the market?

I think the AI PC in particular and since launched last year and generated a period of momentum of shipments, and we are strongly associated with that business. AI PC has been get more significant applications. And I think the demand for AI PC will increase. One of the example you will see is the content creation segment and which is more towards high end will be start to replace by AI PC. And I think you will see the new platform with very high calculation power and I mean, very high TOPS will start to address the first segment on the content creation segment. There are the AI heavy segment. And those -- the content creation, the tools, software are ready to take advantage of the AI provider feature, right? So those are good. And I can identify a few of the particular area, the AI provides the significant productivity improvement and in some cases, create an entertainment features and that previously the notebook cannot do. So those are the good things. And we are particularly associated with the newer -- the content creation segment and we foresee to see those will have increased demand or those content creation, the PC or notebook will have higher the price because they are feature-rich. Gradually, you will see the AI thing become a hobby for many consumer space, right? So now we see more and more people to use the AI PC for mini minutes and so on and so forth. And I'm kind of positive to see those will continue. And we -- as we understand, you will see a few of competing platforms come out, try to address the high TOPS, the PC segment. And so that will become interesting and to observe. And so that's what we view as a positive and it will happen in the high end for concentration segment and so on and so forth.

So from your perspective, do you think this high TOPS platform new AI PC will be announced during ComputeTX?

Yes. I thought there will be a well-known platform with the U.S. with Taiwan joint design together, and we are glad to associate with them multiple chips on that particular system. And I think we are all very busy and to make the -- reach the production. And besides that, we also know other customers and also other OEMs are to work on those areas. And those content creation demands much high speed, and we will need a lot more high-speed device, and we are happy to see those will happen.

Next one, Lucas Liu, KGI Securities.

The first question is a follow-up for the overall PC and maybe IP market. And I would like to ask if you're still confident that like Windows 10 EOL and such as the COVID-driven replacement cycle will still be a meaningful tailwind for the overall PC and IP market for this year and next year?

If you talk to the customer, people who like Microsoft, and they think that the cycle will start. And they are prepared quite a lot of things to enable the next wave of transaction. And certainly, we are happy to see those will happen. However, as we said the tariff situation may impact those transactions and I hope than not. But the current platform of PC is getting tied or start to be obsolete. And in terms of today's the AI or other functionalities. So yes, I think we will see those things happen and in particular, the Microsoft push very hard.

Got it. It's very clear. And just curious about the recent tightened U.S. tariffs. Is there any -- can you share more about the observable change in customers' behavior?

Could you repeat it again?

Can you share more about the change in customer behavior due to the recent tariffs?

I actually at the beginning of the remark, I think we have not seen customers make any significant change on their behavior, and you may see some pull in the short term in Q2. And you also see customer start for their new facility outside the Asia and particularly in Mexico, and they will take a longer shipping time, so demand the shipping product earlier. And after all customers are pretty calm, as I said, and they have developed more long-term solutions. And after all the U.S. market, which may impact tariff -- impacted by tariffs, the percentage is like overall 30-something percent of the notebook PC and customer will just focus on this to address those issues. And so we are happy to support them for those transactions. And so as we talk to our Board, our management, yes, we are in California and have a resource in California. It will be very true in near future, we need FAE to go to Mexico to support their production. And as we do currently in China, and so it won't be surprise and the customer will ask us to provide support resource over there. And in fact, I had a review with our major distributor, and we also talked about this, how they to arrange the support resource and how we train those support resource and they are the first line of support resource and how we will support them afterwards. The good thing is we are in the California. So it's okay. We build the support resource in Mexico. It's pretty convenient for us. We used to do that to support there are a period of time the TV manufacturing in Mexico, and we didn't support them. But yes, let's see how the whole -- the manufacturing flow goes, and we are ready to support.

Got it. And regarding to the pricing pressure issue, which we had mentioned in the previous earnings call, is there any change in we see pricing or we see pricing pressure across different product lines?

No. The price -- cost always is an important factor for our business. We have not seen particular people ask for price reduction because of tariffs. No, so far, we have not.

Got it. Very clear. And another -- we have said that ASIC project may be a potential gross margin driver in the future, and we have 6-nanometer test chips so far. And are there any notable breakthroughs we see in the ASIC business for Parade?

We have been doing the ASIC business for quite a long time, right? And we -- in the Q1, we had our high-speed 6-nanometer test chip come back and not only 6-nanometer, 12-nanometer as well, both are working very well. And so we verified our high-speed side and very happy to see those great results. We shared our results with our customers, and they are pretty happy. And we're pretty much sure we will have some chip and build on the 6-nanometer soon. And -- but the project may take a longer time to do. And so yes, 6-nanometer to us is no longer a barrier anymore. And so in fact, we are happy with the 6-nanometer capability for low power and high speed. And so those are good. And you wouldn't be surprised we will move further and to take a lead on those opportunities. And there will be more opportunity come up. And so since we have many high-speed IPs, right, we talk about -- we probably have more complete high-speed IPs than anybody else. And so customers look at the opportunity and like to work with us for the other opportunities. So we're happy to work with those Tier 1 customers. Of course, those -- once you do the 6-nanometer or beyond, you have to justify the project size and to justify the mask cost, right? So because those are expensive. So customer all I understand.

Okay. The last question following the ASIC business. And can you share about the ASIC, how long will it take for the projects to take off and to tape out? And when do we expect to see like such projects to have NRE revenue contribution at the earliest?

You mean the project will consume those the master cost. I think the project start from the development to the production at least 1.5 years to 2 years period. And those are -- will be higher price to justify -- high volume to justify the mass cost. And you probably will know the master cost that we are talking about for 6-nanometer, USD 8 million to USD 10 million. And moving forward, more expensive and the wafer also quite expensive. So yes, you have significant projects to justify.

Next one is from [indiscernible]

Can you hear my voice?

Yes, clear.

This is [ Anthony Liu ] from [indiscernible] continuous trends through the supply chain dynamics. So I have the following 3 questions. So the first one will be like historically that we are extremely consistent to the overall PC market. And we also talked about that the PC vendors or our clients now behaviors have some changes, but not a lot. But overall, do you think in this year for the overall PC market, the seasonal pattern will change a lot comparing to last year or even 2022. Do you think maybe second half of this year, PC shipments or orders to be flattish compared to the first half of this year?

We hope the normal seasonality of the second half much stronger than the first half. That's what we call a normal seasonality. However, this tariff situation change could be days or very quickly. Good thing is the U.S. new administration and now start to behave more practical or more working with the companies or work with the corporation. And I would think a lot of people lobbying on them as well. And if there is any tariff, we hope it is a rational small amount, not significant amount, allow the industry to behave change to make sure end customer will not see the price increase. And if we can achieve those, I don't expect a significant change from the previous years. But certainly, we don't know. And we hope that we wouldn't have the same situation as April 2 and because after April 2, everybody got shocked, right? That happened before, and we think the administration will be a lot more considerable what the impact would be to announce or change things. And yes, after U.S. did not produce any of notebook PC or consumer product at this moment, it didn't make a lot more sense to do this because it didn't increase any employment or anything in the U.S. And so rather, it may cause the consumer to pay more. And that's -- I don't think the administration -- the current administration wants to see this. So let's keep a positive and hope that wouldn't impact. But I knew that include our distributors and others and all predict or project U.S. will go to the recession in the Q3 and Q4. And I joke with the people you guys are a lot more than the U.S. and everybody tried to think the U.S. will become a recession. I wouldn't that negative on this. And I hope the government will be much more smart not to go to the recession because of tariff.

Strongly agree, and it's really hard to predict the macroeconomic issue or political issues.

Yes. I talked to the Asian distributor, and I understand they all projected that U.S. will go into recession. I talk that you guys are more negative than necessary.

But let's just take -- maybe just turn to our star business, but not just focus on the overall macro dynamics. So if we focus on our high-speed product line, can you provide any update to the USB4 sales contribution in this year because we have the complex product portfolio? And also, can you also share any kind of changes for the competitive landscape for the USB4 repeaters market?

We are -- since our USB4 introduced, we are doing quite a lot and quickly become our #1 high-speed product line contributed to our revenue. And we'll continue to see we win the models because our maturity of product and because our competitors keep finding the issues. And so our approach to the USB4 retirement, not a single device, we now offer end-to-end product line, which means we offer not on the notebook side, we offer on the monitor the receiving side. And so our new product, PS9010, USB4 hub and generate a huge interest in those segments. And we offer redriver for cable. And so we basically offer the complete solutions. And we think that strategy works out reasonably well because USB4 eventually we dominated everywhere. And in addition, our USB4.2 80 gigabit per second chip already working with the key -- the SoC or PC, the CPU suppliers, and they are all in the process test our USB4.2 80 gigabit per second and the test chip. And those are the -- we continue to show our customer that we are capable to do a lot more than what they can expect. Certainly, on the USB4.2, 80 gigabit per second, we might offer more different category device. And so USB will offer a lot of end-to-end approach to every piece of USB4 area, we will have our device there. So that's our strategy. On our high-speed side, besides the -- we talk about notebook monitor and maybe a dongle dock, we have successfully moved to the automotive and quite a lot of automotive win with our high-speed device. We penetrate to the server side as well. Our recent acquisition, as we discussed, the Spectra7, those ultra-high speed, the silicon germanium and the solution are intend to address the data center, the cable market. So those are our total solutions. Those are our approach. We continue to expand our high-speed portfolio.

I see it's very clear, Jack, the elaboration about the high-speed product line outlook in the future is very bright. And because we just mentioned about the USB4.2 like this repeater, and we are also working with the scaler vendors. So because Qualcomm competitors, maybe you can say end vendors plan to launch their CPU in the coming quarters for AI PC? And are we more optimistic to the overall AI PC market after this vendor's product published in the market? And also can you also -- do you also think like this vendor's product to generate meaningful business upside for us in next year?

I think we are very positive for their systems. And those systems are so powerful and the newer system is so powerful. And typically they require 2 to 3 retirement device. And in some case, they even need a redriver on the motherboard. And so because those notebooks tend to larger size. And yes, I would think those content creation AI-oriented notebook will have a good share of the market and our device associated with it, will have a lot more to go. And we also see -- we are focusing USB4 retirement on the system. On those systems, in some cases, they also need PCIe Gen 4, Gen 5 redriver and we already have opportunity or design cases on those notebook with our silicon germanium PCIe Gen 5, Gen 4 redriver. So we are pretty positive to work with those high-end segment, and we think we gain a lot of the shares. And just as an emphasis as a company strategy, we think we have a good shares of our PC notebook on the high-speed side. We move to the motor side, we move to the automotive, we move to the server and those are related. So we are really broadening our reach of high-speed devices.

Very useful and very helpful.

Next one, Evelyn Yu, Goldman Sachs.

I got 2 questions here. So first of all, I wonder if we can talk a little bit more on our acquisition of Spectra7. So what exactly are our new product or market segments that we will be targeting? I think you mentioned a little bit on data center cable market. And I also want to know what kind of synergies should we expect? And how will it be reflected in our revenue or earnings? That's my...

Spectra7, we announced. In fact, we just closed the deal today or yesterday. And so Spectra7 officially now part of Parade. And we are proud of and we are happy that this case. And the Spectra7 in particular, the product are in the data center ACC cable. And they are shipping and all [indiscernible] will continue shipping the data center solution for 200 gig the cable, which implies of their parts. And they already introduced their 112 gigabit per second. So we might jump on the wagon to 400 gig the cable system. And they have the design ready to tape out for 224 gig system and the device. So we are -- right after acquisition, we will tape out this 224 device. And they have a very unique design, and we feel they have its unique edge with patent protected to allow us to market higher speed ACC cable segment. And that's the new even pre did our silicon germanium solutions and for more the USB or lower speed, for example, 56 gig. But for the ultra-high speed, we think that solution has its uniqueness there. Moving forward and the team, we will continue looking for the data center cable solutions, whether the more advanced one and because we are in the silicon germanium, and we can imagine to do a lot more than today's. The best thing we have sufficient cash to invest in this area. And yes, we are looking for on this, they are shipping data center device, and we all reach out a few of our data center, the cable and rock solutions. And our customer or potential customer are happy we acquired the Spectra7, and we got a comment from the customer that they say that Spectra7 had a pretty decent or good technology compared with the competitor. And however, they had financial issues and we come in to -- for the supporting financial side, and that's the stable financial that's the customer very much like what we are doing. So yes...

So how should we model their financial potential impact? Or how should we incorporate in our models?

The spending side is very limited and because there are not too many people there. And the tape-out is not much expensive. You probably can get a detailed number afterwards, talk to Yo-Ming. And certainly, the revenue they are shipping is not that big revenue and compared with our revenue. So that's not that big. So potentially, we might be able to capture much more as we have a much bigger sales force and we know a lot of the people that they have. But they actually have a unique technical ability to reach a lot of the people who are doing the cable side include optical side. And we with our team with them to attend they just finished the optical, the OFC, the conference in the U.S., and we're surprised to see how many people know the Spectra7 and -- so we're happy with that. And we think for us is -- the deal for us to still, and we're glad we did. And so let's see how much we can use that asset to grow our business. And we put our sales and marketing resource together with them in the U.S. side. Let's see how well we do it. We cannot promise too early, but let's see how well we do it.

Okay. So my -- sorry, second question will be -- so previously, we mentioned we faced some competition from TI. I think we mentioned that last time, which impacted our margin somehow for high-speed interface segment. But I would like to know after the tariffs that China has imposed to the U.S., have you seen any easing competition on this front? Or have we observed any new opportunities, especially in China market?

Yes. Last time when I talked about the TI go with a lower price, surprisingly and the customer from the TI actually has a buck there. So it's not because of tariff and it's because customer has a buck and a lot of customers switch back to us. And overall, we hear whatever the tariff on the U.S., the semiconductor. I also -- I was in the Shanghai last week, I also heard that the China government did announce it, but China custom did not announce it. And the answer from the China custom was you have to wait to see we announce it. Yes, if you noticed so far, China custom has not announced anything for U.S. the chip for tariffs. So far, it's doing as it is. So I really don't want the people to do that, that's -- it's not end with good. So maybe short term will benefit some of us, but the long term, it wouldn't do any good.

Next one, Haas Liu, UBS.

A couple of questions from me. The first one is regarding your second half outlook. I understand that there is a lot of turmoil in the market at this stage. But would you be able to provide some initial thoughts as we start to look at second half outlook? Historically, I think the pattern has been like 43% to 48% in first half versus 52% to 57% in second half. Do you think that is still like a reasonable assumption to make or some pulling is already happening in second quarter and so the second half outlook may not be as strong as seasonality?

If you ask me at this moment, I wouldn't -- I think that will remain similar as the previous years on the percentage it's because I don't have more information to provide on the tariff on the impact. Really, you heard a lot of things and -- but you have not heard the materialize anything change. And I said, the Taiwan distributors project U.S. will become a recession in the Q3 and Q4. I'm not particularly agree with that. And so if you ask me today, I would say the things should be similar as previous years. However, I could be wrong because it's really subject to the tariff situation. And yes, I hope U.S. don't go to recession, okay?

Okay. Yes. Just on that, if you could also share your end market exposure within U.S. domestic market versus your rest of the world or the China exposure. We understand probably you can share the direct customer exposure, but just would like to hear your view regarding the end market exposure, if you could share the detail.

It is not us, right? It is like the OEM, the PC market. And the OEMs depend on who they are and some of them more, some of them less. But overall, probably the exposure is about 30% or a little bit more than 30% to the U.S. market. I think we have no reason to think what's the difference from us. We think we probably will take a similar percentage because we provide the chips to the all the OEMs on the PC and notebook market. The good thing is at this moment, everything is exempt, right? So the -- let's see how it goes. And I would think the people like Apple committed $500 billion of AI, the contribution for U.S. infrastructure side, those are the meaningful and hopefully will become a way for other people to make a decision, right? At the last Trump administration, Apple, everything got exempt.

Yes, totally agree on that. So we'll see what is going to happen. But I think just a quick follow-up to your own business. On a full year basis, just based on the historical seasonality and you expect it to play out as it is in the past, do you think it is reasonable to assume that you will still be able to grow double digits year-on-year for sales this year?

We don't know. And especially on this tariff there, it make everybody nervous. And -- but we do think the uncertainty there, it will reduce the demand for customer. I hope those uncertainty will get clarified very quickly. And the longer time to hold uncertainty there, the worst for the market.

Sure, sure. Yes. And my second question is really about your profitability. First, on the gross margins. How should we think about the trend for your business as you guided within your long-term range of 42% to 46% for the current quarter? And given all the macro uncertainties and mix shifting toward your largest customer at lower margins, with the price discount, you could also potentially benefit from your foundry partners who are trying to fill their capacity right now. So with the guidance you just provided for second quarter on the gross margins, do you think it could end up to be in the upper half or the lower half of your guidance?

I think that we will keep our long-term gross margin intact and will be stabilized, which will be good for the analyst or for market as well. We certainly hope the gross margin can go up and with our product mix there. The driver to the gross margin not increase is really the competition on the panel side and the panel side, people are much more aggressive and willing to sacrifice their gross margin somehow compared with others. And our solution really is we develop a new architecture. For example, our in-cell solution and integrated and our TED and those start to show the real revenue stress and we have successfully made the customer to large adoption our TED solutions. And so as our Tier 1 customer getting very interested to do those in-cell solution. And if people are moving -- panel industry moving to those integrated solution, and we think it will be benefit because the device is so complicated and now have a firmware there and have a security there. And it's a lot more sticky for the solution rather than today, the soft driver, everybody can change everybody's and that's become the price competition has really become a headache from the low medium end of China supply.

Yes. And that is exactly my follow-up question just on the competitive landscape in the timing. More and more -- yes. I mean just more of your peers, no matter is in China or out of China, your display driver IC peers try to penetrate into the high-end timing controller market along with their display driver ICs. So would you actually be worried about the potential market share shift in the near term with -- especially with your largest customer?

That's what we said. No, I don't worry about our largest customer because we keep doing things and getting very significant advance. And I don't think there's a competition there, okay? This goes very, very deep micro. So I wouldn't worry about our -- the standard plus customer at all. And the real thing for our -- for the normal DHL type of customer, the strategy for us to get off the price, [indiscernible] competition there is go with our integrated solution, okay? We successfully get our the in-cell solution, we will have a mass production pretty good volume for the TED device. So those are -- we try to out of this competition side of it. Otherwise, you stay with those -- yes, your margin impact a lot. But after the panel, regardless of what the panel gross margin is not -- cannot compete with the high-speed PS part.

Okay. Got it. That's very clear. And my last question for this call is just on the operating expense. Given all the macro events going on, would you update your expectations for full year operating expense outlook for this year?

No, we didn't do much because Spectra7 cost is kind of very low within our margin of error. So I wouldn't be that much because that's just a handful of people join us and for the continuity of our -- the product. And -- but we are quite caution for the uncertainty of this tariff situation there. So we did try to stay in the cost-sensitive practice and -- so that's the current situation. But we did -- we don't think we need to do much of the change or so on and so forth. And we hope that we can use in the current resource to deliver our new initiative and generate a significant revenue. And the first one, the PCIe Gen 4 retirement definitely, the second one will be our USB4 hub and automotive as well. And then the server and hopefully, the cable side and the high-speed cable side will provide another leg of revenue growth.

Okay. So just from the absolute amount perspective for your operating expense this year, do you think it will just be stable or just will be undergrowing your sales this year?

No, I think it will be stable, just in the similar -- as we have provided guidance, we did not make much of a change. And the guidance we provide already include the spending we foresee for Spectra7.

And ladies and gentlemen, we will now begin the Chinese question-answer session. [Foreign Language]

[Foreign Language]

[Foreign Language]

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[Foreign Language] quite high compared with the low-end segment.

[Foreign Language]

Okay. Thank you, everyone.

Thank you.