Qisda Corporation (2352) Earnings Call Transcript & Summary

Hello, investors. Good afternoon. Welcome to Qisda Corporation 2024, the Fourth Quarter Results Investor Conference. This conference is chaired by Chairman, Peter Chen; President, Joe Huang; and our CFO, Jasmin Hung; Co-Chaired by GM of each business group; GM of Information Technology Business Group, Daniel Hsueh; GM of Commercial & Industrial Business Group, Yuchin Lin; GM of Medical Business Group, Harry Yang; GM of Business Solutions Business Group, Joshua Tzeng; GM of Networking & Communications Business Group, April Huang. Today's conference is estimated to take 1 hour, agenda as follows: first, our CFO, Jasmin will bring us the fourth quarter of 2024 financial results; and Chairman, Peter and President, Joe will bring us the business update and outlook, followed by GM of each business group to give us a briefing about each business group performance. Later, we will enter Q&A session. [Operator Instructions]. Before we commence, we want to remind you to pay attention to safe harbor notice as the forward-looking statements are included in today's conference and that might subject to risk. Please spend some time to read Slide 4, safe harbor notice. Next, let's pass on the microphone to Jasmin, our CFO, to bring us the result of the fourth quarter of 2024.

Hello, investors. Good afternoon. I am CFO of Qisda Corporation, Jasmin Hung. I will bring you the financial results. About Qisda Group, we have established 40 years focused in ICT and Medical and SBG and Networking, Communication. Our global presence, our manufacturing site focused on Taiwan, China and Vietnam. Sales offices, we have more than 200 locations. Our R&D center located in Taiwan and China. Number of employees, 26,000. Other than our business investment, we are seeking the ESG performance as well. We have won best company to work for since 2019 to 2024. Consecutively, we have won AREA award for 2 consecutive years, Best Company Social Responsibility. And we have won Finance Asia, Asia's Best company. In 2024, our revenue was TWD 201.7 billion. Revenue breakdown by area. Asia accounted for 54%, America 27%, Europe 18%. This is the performance of each business group. The purple blocks are High Value-Added Business Groups. Green blocks are our original business. IT revenue reached TWD 110.5 billion. In recent year, we also invested in IT_HVA accounted for TWD 14.1 billion, Medical revenue reached TWD 26.3 billion, accounted for 13%. We have medical services, mainly focused on 2 hospitals, 1 located in Nanjing, 1 in Suzhou. And second, our Pharmaceutical Healthcare Channel. In November last year, we have incorporated NORBEL BABY, which is Tin Tin Drugstore and Medical Management Consulting, which is Concord Medical and Equipment and Consumables. We have dialyzer company -- factories in Taiwan and Shanghai. BSG revenue reached TWD 31.2 billion in IT and OT and OMO solution, and we provide an integrated solutions in AIoT. NCG revenue reached TWD 21.4 billion, accounted for 11%. Others mainly focus on BMC, polarizer, functional film and advanced battery materials. And we also have key investors, Darfon and Rapidtek, low earth orbit satellite and FVOCI AUO. Let's take a look at the fourth quarter 2024 financial results. The fourth quarter, the entire quarter revenue was TWD 54.1 billion, the highest in the last 2 years on a quarterly basis, whether in Q-o-Q or Y-o-Y performance, revenue goes up around TWD 3 billion, up by around 7%. Our consolidated revenues starting from the first to fourth quarter last year has grown quarterly and mainly focused on IT industry, also grew on Q-o-Q basis, HVA as well. And our entire gross margin was 16.3%, surpassing 16% for 7 consecutive quarters and the highest in the same period in 20 years. Let's take a look at the performance of each business group. IT revenue was TWD 29.1 billion, up by 8% Y-o-Y, with display revenue at TWD 21 billion, up by 11% Y-o-Y, hit the highest in recent 10 quarters. Not only revenue grew, profit also grew on a Y-o-Y basis. High Value-Added Business Group revenue was TWD 25.6 billion, up by 4% Y-o-Y, also grew for 3 consecutive quarters. And the main growth driver comes from Medical Business Group. Revenue grew 14%, hit historical high. And the overall operation grew healthily. However, we are actively pushing the IPO progress of BenQ Hospital. That's why the OP income amount was decreased. BSG revenue grew 11%, hit historical high. Gross margin, OP income margin and OP income amount increased on Y-o-Y basis. NCG, in December last year, impacted by the inventory adjustment of overseas subsidiary. However, the fourth quarter compared to on Y-o-Y basis still grew. Revenue decreased 17% Y-o-Y, but grew 14% Q-o-Q, mainly impacted by the inventory adjustment on client [ side. ] Overall, the fourth quarter, the revenue went up. However, impacted by the inventory adjustment at the end of the year, that's why the operation income amount was TWD 1.17 billion, up by TWD 0.3 billion Y-o-Y. Profit attributable to Qisda was TWD 0.19 billion. EPS NTD 0.1, down by NTD 0.12 Y-o-Y. And the whole year gross margin was 16.5%, exceeding 16% for 2 consecutive years and highest in 20 years. Revenue was TWD 201.7 billion, down by TWD 1.9 billion compared to last year, down by 1% with IT revenue of TWD 110.5 billion, up by 4% Y-o-Y and HVA business revenue down by 8%, but we can see the HVA market is coming back. OP income amount was TWD 4.52 billion, down by TWD 0.49 billion. EPS was NTD 1.11 down by NTD 0.41 Y-o-Y, mainly affected by the inventory adjustment on client side of NCG and loss of foreign subsidiary inventory of BSG. And regarding Qisda, last year, fourth quarter, the business investment we have mentioned. In November last year, we increased our stake in NOBEL BABY to 40.66%, switching to consolidated subsidiary from an equity method investment to enhance its presence in the Pharmaceutical Retail China market. And in January 20 this year, we have received a good news because we have to receive the filing notice of oversea issuance and list from the China Securities Regulatory Commission, and we have completed the CSRC filing, and we are proactively providing the financial statement of 2024 to Hong Kong Exchange and waiting for the review. And approved by Board of Directors, cash dividend was NTD 1.11 per share and payout ratio was around 100%. And to adjust the capital structure and improve the return on equity, we proposed a cash refund capital reduction plan. Shareholders should receive around NTD 1.8 per share in cash. All right. Now let's take a look at Consolidated Statement of Comprehensive Income. The fourth quarter revenue reached TWD 54.1 billion, grew by TWD 3.4 billion, up by 7%. Gross margin, 16.3%, up by 0.1 percentage point Y-o-Y. Operating income, TWD 1.163 billion, Op income margin 2.1% compared to last year fourth quarter, up by 0.4 percentage points. Net non-op income. In the fourth quarter of 2023, we enjoyed one-off gain, but it did not happen in the fourth quarter of last year. Therefore, there was around TWD 0.1 billion difference Y-o-Y. Net income attributable to Qisda, TWD 0.19 billion, down by TWD 230 million Y-o-Y. EPS down by NTD 0.12 Y-o-Y. As to Q-o-Q comparison, revenue up by TWD 3.3 billion, up by 7% Q-o-Q. OP income down by TWD 82 million. And due to the third quarter, we have received cash dividends. That's why in the third quarter, it's a positive number. EPS compared to the third quarter, down by NTD 0.44 Q-o-Q. The whole year revenue reached TWD 201.6 (sic) [ 201.7 ] billion, compared to last year down by TWD 1.9 billion, down by 1%. Gross margin 16.5%, compared to last year 16.2%, up by 0.3 percentage points. Operating income, TWD 4.5 billion, down by TWD 490 million. In 2023, we have enjoyed more net non-OP income, TWD 1.3 billion and less in 2024. That's why it dropped by TWD 1.1 billion Y-o-Y. Net income attributable to Qisda, TWD 2.1 billion, down by TWD 812 million. EPS down by NTD 0.41 Y-o-Y. Let's take a look at the Consolidated Balance Sheet Highlights. Total asset was TWD 206.4 billion. Total liability was around 68% compared to the same period last year was around the same. Let's take a look at inventory, was around TWD 42 billion, up by TWD 490 million Q-o-Q. Intangible assets up by TWD 2.4 billion. This is due to last year, we have cooperated some companies such as NORBEL BABY and [indiscernible]. Therefore, intangible asset went up. Book value per share was NTD 18.45. Financial Ratio from account receivable inventory and account payable turnover days on Q-o-Q basis remained mostly unchanged. And next, financial trend, quarterly trend. Please refer to the content. Please look at the upper left, revenue. You can see that since the third quarter of 2024, revenue account was TWD 50 billion and the fourth quarter was TWD 54.1 billion. And the lower left, gross margin, it has been exceeding 16%. However, operating income margin has exceeding 2% since the second quarter of 2024, and there's room to improve. And next slide, financial trend, the fourth quarter Y-o-Y performance. And please refer to the content on this slide. Let's take a look at each business group revenue trend. Upper left, that's High Value-Added business performance. At the fourth quarter last year was TWD 25.6 billion. The revenue -- the total revenue of High Value-Added Business Group has been over TWD 20 billion. Medical, the fourth quarter was TWD 7.5 billion hit highest. BSG last year, fourth quarter, TWD 8.8 billion, also hit highest historically. NCG since the first quarter last year to the fourth quarter remained around TWD 5 billion. IT_HVA, the revenue scope was around TWD 3 billion. IT_Original, mostly focused on monitor. The revenue starting from last year, the first quarter, TWD 21.9 billion to TWD 24 billion to TWD 25.1 billion to the fourth quarter, TWD 25.4 billion. Financial highlights by business group. The fourth quarter, the gross margin range, please look at the yellow column. Let's look at the Medical, the fourth quarter and the Y-o-Y and Q-o-Q performance from Medical, BSG, NCG and IT_HVA. The gross margin range other than (sic) [ of ] NCG was 15% to 20%. All the other 3 business group was around 20% to 25%. And in the past, both Y-o-Y and Q-o-Q remained around the same. As to IT_Original was around 10% to 15%, which was around the same. Others accounted in less percentage was around 10% to 15%. And the same period last year was 15% to 20%. The drop was mainly due to the polarizer of BMC. The gross margin went down. And next slide, revenue breakdown by business quarterly performance. Please refer to the content on the slide. Next slide, Qisda Group's listed companies' results, either TSE, OTC or ROTC companies. Please refer to the content, each business group performance. In IT, other than Qisda Group, we also have DataImage and SIMULA. And you can see the detail of controlling ratio and aggregate ratio. You can refer to the number and IT, DataImage and SIMULA revenue and net income went down. Medical, we have seen a much more positive performance. BenQ Medical Tech revenue went up by 5%. Net income slightly dropped by TWD 10 million. ConcordMed, both revenue and net income went up and hit highest in 2 years. And DIVA, although revenue went down, net income went up and hit highest in 9 years. Norbel was changed from equity method to consolidated subsidiary, revenue slightly dropped by 6%. BSG. DFI, AEWIN, Ace Pillar and Partner. All of them revenue went up and AEWIN and Ace Pillar went up by 2-digit growth. And net income went up as well and hit highest in 2 years. MetaAge was affected by foreign subsidiary. Revenue and net income was highly affected, went down. Grandsys was the subsidiary of MetaAge and changed from equity method to consolidated subsidiary. Revenue was around TWD 0.3 billion. NCG, we have Alpha, revenue went down. Net income also went down. Hitron revenue slightly went down by 4%. Net income also dropped. IDT, revenue went up. And you can see the net income also went up. However, EPS went down. That is because IDT -- the performance of IDT in last year was good, but it has issued convertible bond. That's why the EPS went down.

Now I will pass the ball to our Chairman.

All right. Investors and friends from press media, good afternoon. I'm the Chairman of Qisda Group, Peter Chen. For the fourth quarter performance, our CFO had brought us -- first, I want to say that last year, fourth quarter, revenue reached TWD 54.1 billion. Compared to our original estimation, it went up gradually per quarter. However, we want to apologize the net income did not perform well and EPS was only NTD 0.1, and you might wonder why. And last year, we also reported in the investor conference that MetaAge, we have reported the situation. Last year, the oversea subsidiaries, the management, we have seen a much higher inventory level, which lead to the recognized inventory level, we want to offset at the end of the year. That's why we have been impacted last year greatly, impacted our profitability. Also, I want to say that this is calculated per the accounting principle. The inventory was written off. It still has value. And in this year, we wish to sell the product. And if it goes well, we should be able to retrieve the value and should come back this year. And partial product lines such as NCG, last year, fourth quarter, we have met our annual trough, and it should be the trough in the past 2 to 3 years. And starting from the first quarter this year, we should gradually see the comeback. NCG last year, the fourth quarter, the net income was not ideal and impacted the overall net income. The fourth quarter EPS was only NTD 0.1. The revenue hit historical high. This is not normal. That's why I want to elaborate. And after we remove all the unfavored factors, we should recover to our normal net income. And second, this year, the first quarter or the entire year performance, what is our prediction about the performance? This year compared to last year, in the past investor conference, we might have mentioned 2025 compared to 2024, we should be able to predict in a much positive trend, whether on revenue or net income perspective. Starting from the first quarter, January and February revenue, revenue grew 6% Y-o-Y. In January and in February, also up by 11%. And in March, so far, we can see the upward trend on Y-o-Y basis as well. And this year, first quarter performance is better than the first quarter of last year. This is evident. And we hope to see the revenue growth and net income come back to the normalcy and to give the operational performance. And third, the capital deduction. In the past 10 years, we have enjoyed profit. However, our financial statement, we see the improvement. But we can see that share capital maintained around TWD 19.7 billion. Last year, we have partial treasury stock repurchasing that also impacted partially. So the fourth quarter last year, share capital was around TWD 19.2 billion. Through capital deduction by 18%, we hope to improve the capital share structure. And most importantly, we want to improve return on equity for our shareholders and accompany with our profitability. Also adjusting our capital share, we hope to better return to our shareholders, and we are also grateful for your support. And these 3 items were the things that I want to emphasize.

Next, we will have our President and GM of each business group to bring much more detailed report, and then we will enter Q&A session. Thank you.

Hello, investors. I am President, Joe Huang. For the fourth quarter results and first quarter outlook, CFO and Chairman has bring us the details, so I won't further elaborate. For the tariff policy, we already have 2 production locations, and we are also evaluating the third place. Please rest assured. The first quarter is usually the slow season and change in U.S. tariff and monetary policy will impact the momentum. The market atmosphere is cautiously optimistic, and we will build a resilient supply chain to respond to the changes. Regarding individual sectors performance, display market, demand remained flattish. The demand of individual PC and IT security sector are steadily growing. For NCG, we have mentioned the inventory level has coming to a healthy level. For each business group, IT and Medical, display, individual display remain conservative. Commercial display is proactively growing. Medical, Hospital has completed the filing procedure and everything is on schedule. For the fourth quarter last year, we've also completed increasing shareholding percentage of Tin Tin Drugstore. As to BSG and NCG, both have progressively passing through the trough and keep planning the mid, long-term growth opportunity. The emerging market project of NCG are entering mass production phase, and we will continue to consolidate factory to increase operational efficiency. And in 2024, Qisda, except for business performance. We're also putting effort in ESG and won many awards, and we have shared this experience to our partner under the Grand Fleet. And we have win 35 awards altogether. And we think for long-term operation, we have to commit to the environment. So we value ESG. And we have announced that we have 3, 4, 5 targets individually, carbon deduction by 30% in 2030, RE100 by 2040 and net zero emission in 2050. And Board of Directors have been setting goals in social aspect and corporate governance separately. Due to our care and effort with the company under Grand Fleet to bring impact altogether, therefore, 7 company in Qisda Group won 35 awards last year, which include to be listed again in S&P Global Sustainability Yearbook top 5 for 2 consecutive years, over 62 industries worldwide, over 7,600 companies, only 780 companies were included. And we have 80 score up by 5 score last year. With the outstanding performance, we were listed top 5 companies again. And we have also won Best Company to Work for in Asia for 6 consecutive years. Last year, we also won National Sustainability Development Award issued by National Development Council. And this is the outcome gained by our Grand Fleet partner. The entire performance or individual performance, we have gained external affirmation and recognition. This is my report.

Before Q&A session, I will ask GM of each business group to give us the briefing. Let's welcome GM of ITG, Daniel Hsueh.

Hello, everyone. I'm Daniel Hsueh, GM of ITG. The fourth quarter 2024 highlights. Regarding the fourth quarter performance, global display market in the fourth quarter remained flattish for individual market other than basic models, OLED model grew continuously for commercial market, sales amount did not meet our goal. Qisda display sales amount in the fourth quarter grew around 10% Q-o-Q, more than 5% Y-o-Y. The first quarter outlook. Global display market sales haven't bounced back. The Lunar New Year effect helped us as usual. However, due to geopolitical factors, individual sales amount was rather conservative, while commercial market is relatively active. We anticipate Qisda display sales volume remain the same on Y-o-Y basis. However, revenue should enjoy better performance.

Next, let's welcome Yuchin Lin.

Hello. I'm Yuchin Lin, GM of CIG. The fourth quarter of 2024 highlight. Demand for projector was conservative and were mostly for tenders and urgent orders, and we focus on chasing materials and manufacture per needs of clients. Demand for industrial and commercial new products has been good and slightly grew on Y-o-Y basis. For automobile customers continue to place orders and the demand is exceeding our expectation. Revenue grew in double digit compared to the same period last year. In the first quarter of 2025, most of the demand for projector remain to be for tenders and urgent order. Starting from the end of February, we can feel that the need of our customer went up. After demand grew continuously in the third quarter and fourth quarter, starting from the first quarter this year, industrial and commercial client turned conservative, and we will observe the market demand, demand for automobile industry continue to grow. And we have budgeted a new expenditure for this year's new model mass production and augmentation and testing and anticipate a double-digit growth in the first quarter of 2025 on Y-o-Y basis. Thank you.

Next, Harry Yang?

Hello, friends from Press Media. I am GM of Medical Business Group, Harry. Medical Business Group. Last year, fourth quarter highlight and this year first quarter outlook. The fourth quarter of last year, up by 4% Y-o-Y. revenue-wise hit highest. And Medical Business Group is separated into 3 areas, Hospital, Pharmaceutical Retail Channel and Medical Material. I will focus on the Retail Channel. We have drugstores and physical stores. And last year in November, we have incorporated Tin Tin Drugstore, and they have 100 stores nationally. And the entire performance was healthy. In the Drugstore, through Tin Tin Drugstore, we're starting to do some national integration because we have many single item drugstore that are dispersed, and we hope through the integration, we can see the outcome. For medical material, in the fourth quarter last year, we incorporated Era Bioteq manufacturing endoscope, and we want to augment the retail chain for ultrasound, we have distributed in Thailand, Southeast Asia and East Europe. And the -- we should see the feedback of centralized procurement in China. And in 2025, we see a positive trend other than drugstore, medical material should see a positive growth.

Next, April, GM of NCG.

Hello investors and friends from press media. I am GM of NCG, April Huang. NCG starting from the second half of 2023 to the end of last year, we have been through 1.5-year regulation. And during the time, only those companies engaging in India market or AI data center enjoy good performance. And other companies should underwent some adjustment and had a slow performance. And since 2023 till last year, we have been through many internal adjustments and focus on the subgroup redefinition and to avoid overlapping investment to allow each company to focus on its tasks and integrate each factories and to outsource the manufacturing of Hitron to Alpha, allow Hitron to focus on brand and additional value development. Other than Hitron and Alpha, we also have IDT focusing on system integration. And we also have another company that is also incorporated under IDT, and each company has their own tasks to allow our future operation to be more effective. And since last year July, we also established a subsidiary in India. Through this operation, we can see outcome in last year. And in the first quarter, starting from March to enter mass production phase. And last year, December, we also incorporated a company, which was the partner of IDT, a microwave communicational equipment company. And the current market situation, Hitron starting from June last year, the third quarter, the fourth quarter has enjoyed better performance on Y-o-Y basis. We can see the comeback on Wire Broadband and switch in Wireless Broadband. Based on our observation, we haven't seen an evident comeback. Also impacted by our clients' inventory level, but we have received nonspecific models urgent order. So under this slightly defect in material and existing inventory on clients' end, so we estimate in the second quarter of this year should be digested. And the second half of this year, our growth momentum should be positive. For Alpha Network, we see the comeback in the market. We have also reported that our new investment in India has also entered mass production phase. It will be our future growth momentum as well. For the mid, long-term distribution, which is also the goal of 2025, other than the new market development and new business development through organizational integration, we also hope the operational efficiency to go up. And this year, we put abandoned resource in AI data center development. This will be our future mid, long-term future growth momentum. This is the current situation of NCG, and I have also answered some questions submitted online. Thank you very much.

Next, GM of BSG, Joshua Tzeng.

Hello, friends from press media, investors. I'm Joshua Tzeng, GM of BSG. BSG, the fourth quarter last year highlight. The first and second quarter revenue remained unchanged and gradually go up in the third and fourth quarter. We have 3 areas. Enterprise Smart IT, we continue to optimize current businesses and assist oversea subsidiary in elevating operational performance. As to Enterprise Smart OT, Industrial PC performance gradually recover and revenue increased as well. Cybersecurity, we have received urgent order and delivery continue to grow and accelerated ODM projects and smart automation, we have seen return in market in Taiwan and continue to develop our key clients and OMO online and offline integration continue to enhance AI empower retail SCO and restaurant self-service kiosk and actively develop Asia Pacific market and outlook of the first quarter of 2025, focusing on computing power, soft service and smart core business development, and to optimize and adjust Oversea businesses. Thank you.

And that was the business update of the fourth quarter 2024 and outlook of the first quarter 2025. Now we enter the Q&A session.

[Operator Instructions] Due to limited time, we will compile the question and answer later. Hello, investors and friends from press media. I'm Peter Chen. For your questions, some of them I can answer and others, I will ask GM of each business group to answer. First, the reason why the payout ratio was around 100%. In the past 10 years, we have enjoyed profitability and the principle of issuing dividend was around 50% to 100%. That said, we value stakeholders' opinion and feedback, and we will try our best to meet stakeholders' requirements. And the principle of payout ratio is that when we enjoy profitability, the payout ratio would maintain around 50% or exceeding 50%. In 2021 and 2024, EPS was around NTD 4 and the dividend was around NTD 2. And when the operation was not good, when the EPS was around NTD 1 to NTD 2, like last year, our performance was not good. EPS was around NTD 1.1 and hit the lowest last year. And many shareholders have responded to that. Our profitability was not ideal. We will actively -- to improve the profitability and bring out the good results. Due to the unideal performance, that's why we decided that the payout ratio will be around 100%. This is -- this has been our principle of payout ratio. And for the OP income amount improvement, we have reported that last year, we have been struggling. And this year, the entire Qisda Group and each business group should have better improvement. As to the listing progress of the hospital, has it delayed? What is the current progress? And the reason to a higher income tax. These 2 questions, I will have Jasmin Hung, CFO, to answer these questions.

As to the BBHC to be listed in Hong Kong Exchange, the review phase is usually 8 to 12 months, and we have filed in April 2024. So the review period is around normal. And we have to receive filing notice issued by CSRC. And the good news is that in January this year, we have received the notice. So we have submitted the financial statement of 2024 to Hong Kong Exchange in February and entered the Q&A phase. And we hope to complete it as said. However, the progress is arranged by Hong Kong Exchange. And the second question regarding income tax rate. We have calculated the effective tax rate is around 27%. And why is the single quarter income tax rate was so high? This is mainly due to Qisda Group owns more than 200 companies and each company located in different country with different tax rate. And if the company enjoys higher profit, which also happened to locate in a higher tax rate country, we have to estimate a higher tax expense as well. And second, income tax calculation is complicated. There's a gap between financial statement and tax filing. And we adopt a much more rational way to calculate from the first to third quarter. But the fourth quarter, we have to go through detailed calculation. The gap between financial statement and tax filing is complicated. So we have to go through detailed calculation. The fourth quarter of 2023 was only TWD 0.18 billion, from the first quarter to the third quarter was around TWD 0.4 billion to TWD 0.5 billion. And after detailed calculation, we found transfer pricing in each country. When the tax rate is high, we have to estimate the tax higher as well. And the situation was reversed in the fourth quarter last year. And some of our overseas subsidiaries are closing, and we have to estimate the uncalculated tax, and that would express in the fourth quarter. And operating income tax is really complicated. Basically, company that report a profit, we will estimate the tax expense. For a company report a loss, we will adopt a much more conservative way. We will not estimate the tax profits. Company that reports a profit, we deducted the tax expense, but company that reported a loss, we did not estimate the tax profits. So we see a bigger change in a single quarter. But the overall year, the income expense was TWD 1.8 billion.

Next, we have 2 questions regarding each business group. How is tariff policy -- the Trump tariff's policy influence our business group. That has indeed kept us busy. So how would tariff policy influence each business group? That is the first question. And the second question, 2025, each business group, what is the growth ratio? These 2 major questions, we will have our President, Joe Huang, to answer these 2 questions.

Regarding tariff policy, the U.S. tariff policy, Qisda Group other than factory in China, we also have factory in Taiwan and Vietnam. Vietnam was the China Plus One policy, the one. And other than Vietnam, if Vietnam is also to be influenced by the tariff policy, we might find the fourth factory outside China, Taiwan and Vietnam. And regarding each business group performance, IT before February this year, it was 0 tariff. So we have higher percentage manufactured in China. And after February, it will be 10%, plus 10%. So in the second half, goods shifted to U.S. should be manufactured in Vietnam. NCG, it has been imposed tax in the first round. So the tariff policy did not impact greatly. And if there is a tariff policy against Vietnam, both NCG and IT manufacturer should shift to Vietnam. And we're also looking for the third-place outsourcing to India as well. As to other business group, they will be impacted less.

And we also have other question regarding industrial computer -- AI edge computing. How many companies entered this area? And what is the industrial computer growth situation? Let's welcome GM of AIoT Business Group, Joshua.

Thank you for proposing this question. Through [ DeepSeek ] of the high-cost effectiveness ratio software, it has boosted the application of AI. For edge computing, we have seen some future opportunities. Our business group, DFI is focusing on IPC. Starting from the fourth quarter last year, we have actively investing in this area. And also, we have been augmenting oversea company in edge computing and to develop more clients and enhance the European and the U.S. markets due to most of our product was manufactured in Taiwan. So the tariff policy has not been greatly impacting us. And we're also enhancing the market in Europe and America. Second, we're actively developing new products regarding computing power, edge computing. In our previous report, starting from the first quarter this year, we're enhancing the software computing power and intelligence automation, high-growth margin product portfolio. Through [ DeepSeek ] application, we have boosted IPC and edge computing markets. Most of the questions we have answered. As to capital deduction, we hope to gain support from shareholders. From the past decade, we have gradually improving our financial statement. Our share capital has been large, TWD 19.7 billion, nearly TWD 20 billion. After all, for operation, this has been a heavy loading. Therefore, we decided after improving our financial statement to proceed 18% capital deduction for long-term performance through this arrangement to bring profit in the future. And of course, we will put efforts through the capital deduction to improve the ROE to return to our shareholders, and we hope that you can understand this is an inevitable arrangement. And we have answered most questions. Thank you very much.

So far, we have answered online questions. This conference is about to end. Thank you very much for participating Qisda Group 2024, the Fourth Quarter Online Investor Conference. We will upload the audio and video documents after the meeting. Thank you again, and you may disconnect now. [Statements in English on this transcript were spoken by an interpreter present on the live call.]