Sunny Optical Technology (Group) Company Limited (2382) Earnings Call Transcript & Summary

With respect to investors, good morning, everyone, and welcome to the 2020 Annual Results Announcement of the Sunny Optical Technology Group. I am [ Daisy ] from Investor Relations department. On behalf of the company, I'd like to take this opportunity to thank you for your long-term support. Due to the epidemic, I'd like to ask for your understanding that this event can only be conducted in the form of online conference. First of all, please allow me to introduce the management present today. They are Executive Director and Chairman, Mr. Ye Liaoning; Executive Director and CEO, Mr. Sun Yang; Vice President and Joint Company Secretary, Mr. Ma Jianfeng; IR Director and Joint Company Secretary, Madam Wong Pui Ling; Associate IR Director, Madam Liu Yanfeng. Next, we will present the annual results to you. The presentation that has been uploaded to the company's website. Please feel free to download it. Now let's welcome the Executive Director and the Chairman, Mr. Sun Yang to review the 2020 annual result. Let's welcome.

Honorable investors, good morning. It's a period that where we can still not meet you face to face. And we hope that very soon, we can do physically. And I'd like to, on behalf of the executives, to introduce to you the 2020 performance of Sunny Optical Technology. First, let's take a look at the financial overview. We should say that 2020 is an extremely challenging year, as we all know that we have to face the challenges of the pandemic. And also, there is a challenge of the Huawei incident. And we should say that we have a very well hold through these 2 challenges and delivered very satisfying results. And first of all, let's take a look at the revenues. Last year it was CNY 38 billion, 0.4% year-on-year growth. The gross profit was CNY 8.6 billion, grew by 12.2% year-on-year. The profit before tax was CNY 5.6 billion, grew by 24% year-on-year. And the profit for the year attributable to the owners of the company was at CNY 4.8 billion, grew by 22.1% year-on-year. The earnings per share was CNY 4.45, grew by 22.2% year-on-year. And this was the general results of the financial performance. And next, let's take a look to the expenses. This year, the overall proportion of the expense was 9.3%. Compared with the same period last year, it was -- grew by 1%. And I'd like to clarify that, it was the selling and distribution expenses, R&D expenditures and administration expense. In terms of the growth rate year-to-year, we had a very good control of it. And based on the long-term consideration, we had further increased the R&D expenditure, and therefore, you can see that there was a 1% year-on-year growth in the proportion of the R&D expenditure. And we believe that with the growth of the revenues, the proportions of these operating expenses were still maintained at between 8% to 8.5%. Next, I'll briefly go through some other financial indicators. Currently, in 2020, the current ratio is 1.9. Operating cash flow was CNY 7.1 billion, and it was very strong. And currently, we have about CNY 11.5 billion cash and cash equivalents. The net cash per share is CNY 5.11. The gearing ratio has been reduced to 16.8%, and ROE was 29.4%. And the CapEx last year maintained at CNY 2.8 billion. And I'd like to briefly update to you the 2021 CapEx. And we expect that it will reach about CNY 3 billion. And according to the operating status, we will have some adjustments, but mainly CNY 1 billion will be used for handset lens sets capacity expansion and the technology optimization. Another CNY 1 billion will be used to the construction of the Yuyao Chengxi new base and the new base infrastructure construction in Vietnam and India, about CNY 800 million will be used on the technology upgrade and the capacity expansion on the handset camera modules and the CNY 200 million will be used on the vehicle lens sets technology optimization and capacity expansion. And this is the distribution and the guidance for the CapEx for 2021. Total number is CNY 3 billion. And this is the breakdown of our business portfolio. And you can see that 85% come from the handset-related products. And I'd like to highlight on the vehicle-related product that is the light yellow part, related with the vehicle-related products increased by 1% from 5% to 6% now. And I believe that with the further development of the vehicle-related business, this proportion will be further increased. And this is the breakdown of the revenues. And the other parts maintained at a stable level, and I'm not going through the details of it. On this slide, we can see the gross profit margins. And last year, it was very satisfying. And the gross profit margin of the group was at 22.9%, grew by 2.4% year-on-year. And in this slide, you can see the gross profit margins of these 3 business segments, and let me introduce you one by one. The first is Optical Components. And the gross profit margin has been grew by -- reduced by 2.4%. And we all know the reasons. It was mainly because of the pandemic last year. During the pandemic, there was a downgrade of the handsets. And also, we were impacted by the Huawei incident. And this is for the Optical Components. And the second business segment is Optoelectronic Products. And the gross profit margin has been increased by 3.3% year-on-year. And the main driving force are that we continue to optimize the production process. And after the optimization of the process, we had to increase the yield of the products as well as the productivity of the product. And thirdly, we had enhanced the automation and upgraded the IT systems, and therefore, the gross profit margins of Optoelectronic profits -- Products have increased by 3.2%. And as for the Optical Instruments, the profit margin has been reduced a little bit mainly because of the lack of rate of capacity utilization. And I believe that you're interested in the outlook of what the gross profit margins for 2021. And currently, we should say that in all the main production lines, our expectation is that compared with 2020 the gross profit margins in 2021 can be maintained at a stable level. Of course, there are some challenges. But we believe that with our efforts, this is a realizable goal. And there are several favorable factors. The first is that I believe that no matter in the handsets or lens sets or the vehicle lens sets and handset camera modules, there will be a trend of product upgrade and differentiation. This is a continued trend. And we will continue to have a lot of upgrade and differentiated products. This is the first reason. And the second reason is that there will be more orders concentrated for the top companies. And then we will reach the effect of the scale. And this is the second reason. The third reason, we believe that with the further optimization of the production process and further automation and upgrade of IT systems, we still have room for further improvement. And based on the above-mentioned favorable factors, we believe that although there were some challenges for maintaining a stable level of the gross profit margin that this is still a realizable goal. In all of the business segments, we can realize this goal. Next, let's take a look at the R&D development. First, let's take a look at Optical Components. This year, we had divided it into 2 parts, the first part you're very familiar with it. The R&D and the mass production situation in the main production lines and also the innovation in terms of the new production line. First, in the Optical Components, we can see that in the continuous zoom handset lens that we had finished R&D. And the second one is that the 8P high-resolution handset lens that have also completed its R&D. The third is that the free-form handset lens set had completed its R&D. And the fourth one is the millimeter-scale ultra-macro shooting handset lens sets had completed its R&D. The last but not least, the 2-mega pixel hybrid front-view vehicle lens set had completed its R&D. And this is about R&D. And on the right column, this is the mass production. And the first is that 100-mega pixel large image size handset lens set has started mass production. And the second is that the super-small distortion wide-angle had reached 115 degrees. And with the design of the free-form, we can realize a very small, a very limited distortion. And then last but not least is that the 8-mega pixel front-view vehicle lens sets with glass aspherical lenses had entered into the mass production. And this is the first BU. And the second BU is Optoelectronic Products. Let's take a look at R&D first. And we had completed the R&D of the continuous zoom handset camera module. We also had finished the R&D of the sensor-shift handset camera modules. And last but not least, in the front-view, side-view, rear-view, specifically for the front-view, we had the 8-mega pixel vehicle camera. And this is a first in this industry. And on the right column, you can see the mass production. The first is that gimbal stabilization handset camera modules has entered into mass production. And the second is that MOBII, MOCII based on the advanced semiconductor technologies had entered into the second generation of mass production. And now we are under the development of the third generation. We want to make it smaller, more thinner and have a better heat dissipation. The third is about our Optical Instruments. And for those, we have completed or already completed, and we have the laser scanning and it's a high-precision and high switchable confocal microscope. And also we have this high-power wide FOV. It's like 20x to 60x of the first innovated in China. And for different BU, our product lines in 2020, the R&Ds we've achieved and the mass productions we have achieved in last year. And here our next slide and different BUs, these are our emerging product lines and their R&D status. First of all, it seeks the Optical Components, what's our first achievements here is in our 8-inch wafer. Here we have achieved the breakthroughs, the 8-inch wafer nano-imprint technology of DOE, that's the first achievement we received. And second, it's really exciting as well. Here, we have completed the R&D of single-color AR diffractive waveguide. Well, this is for single color. And in three-color and mixed color, we are now making on trials in these parts. And the third one is based on megapixel lens sets of vehicle smart headlights. We've already completed the R&D process of that. And finally, here, we have this diffuser in mass production. And then we have the Optoelectronic Products. These are our new product lines R&D status quo. And so first of all, we have completed the R&D of the structured light system applied in smart door locks. And second, in the sweeping robots, no matter our ToF-related solutions, our ToF solutions, we've already finished R&D and delivery -- achieved delivery. And third one,is that in the face live detection solution. This is even more than just detection because we need to prove it's a living bio. So here, we have like 2 standards, one is the BCT standard and second is the WeChat standard for the enhanced level of the facial recognition they all face this certification. So no matter in smart door locks or in mobile payments or maybe in the field of medical, this is our new achievements. And finally, it's about our Optical Instruments, achievements in that domain. So first of all, this is just quite long. So what's this for? And this is that we've completed the R&D of the immunofluorescence screening equipment for peripheral blood and achieved sales. And second is that we have completed the R&D for digital, pathology remote consultation platform. So both patients and doctors, they can do this. Then they can actually do a delivery in remote delivery. So these are the total solutions in that field. So as you can see, this is an introduction about the 3 achievements in the 3 product line of BUs. So here in this slide, we're going to talk about the patents. In 2020, we have relatively many patents. We've increased, 575 patents added. Now we have reached 2,100 of patents already. So until the end of last year, we still got around 3,212 patents are pending approval and they will be approved majorly. And these are related -- patents are related to the fields of smartphones, vehicle imaging, AR/VRs and robotic vision and so on. Now let's see our shipment volumes. First of all, let's see our handset lens set. So we have increased 13.9% by comparing the shipment volume of the company's handset lens set. Now we've reached a relatively high level, that is 1.5 billion and 3,000 (sic) [ 1,529,757,000 ]. So we estimated that in 2021, the shipment volume should increase around 15% to 20%. And so on the right-hand side -- is a lot of people are caring about this, that is the shipment volumes for above -- 6P and above. So the -- you can see that increase is pretty significant, higher-than-average growth speed. And here on this slide is the shipment volume of the company's vehicle lens set. So last year, we have 12.1% of growth. And we reached around 56 million. And we have an estimation of growth. And this year is for 20% to 25%. So that's for the vehicle lens set. And the next part is for handset camera modules. So comparing 2019 to 2020, we have a 9.7% of growth. Our estimation of growth for 2021 will be around 20% to 25%. So on the right-hand side, we think that is quite a feature of Sunny because this is based on, for instance, large image or large focus and so on. And this growth is pretty fast, and that's around 93.7%. Okay. So I'll just skip this. These are current base in India, in Vietnam and also we've got the Yuyao Chengxi production base and the 2 production base at overseas. They need to conquer the COVID-19 situation. And so as you can see here, we have received a lot of recognition, both from a client and from capital. So I would like to briefly talk about our outlook. So first of all, our -- 80% of revenue from smartphones. So I'd like to talk about some of -- the things that we're going to touch about, first of all, is main camera and something we really need to touch as the large image size. Now we're trying -- making trials for 1-inch. And in the main camera, we've got a lot of new applications as well, right? For instance, for the OS and for the chip itself, it's going to be anti vibrations and handshakes and so on. And the third part, we're going to talk about the variable apertures and so on. And for high-power or telephoto cameras and also for periscopes and so on, this will grow as well, and also people are focusing on the continuous optical zoom periscopes, how are we going to do that? How we going to achieve that? Here, we have a lot of technology breakthroughs required. And third is about wide-angle. In terms of wide-angle, we are going to -- because 5G is growing and these video resolutions are growing and also we need to achieve many things, for instance, like the free-forms and also for key issues. These are the things we need to solve. And in the future, we have high requirements for video. So we need a large angle for anti handshakes and so on. So for other things, for instance, like the portrait modules or macro shooting, depth modules and so on. Or for in ToF, no matter if it's D-ToF or I-ToF, we're making our preparations here as well. Today, the applications of these are for fast focusing in dark environments, and we believe that this will be highly related to AR applications. So for -- one thing we need to talk about is we need to lower the front camera, maybe to put it under screen and so on. Also, it's going to require auto-focus functions. For the main cameras -- to main camera to telephoto, wide-angle, 3D and front camera. So in these points, that will be our perspectives and touch on that. And next is about vehicle. People care about this field as well. From left to right, we can see that we've got video camera-related products to display, and we've got all these sort of solutions. In terms of display, we have DLP, we have LCD, we have maps. And these are our solutions for HUDs, PGU, including our optical parts and total solutions. These are the things we can offer. On the right-hand side is the LiDAR. So here, we're going to offer the key optical components. And also, we are going to help our clients to achieve total solutions, to offer total solutions for them. So these are the sensors and displays that we can achieve. And now we're going to talk about -- so we need to have a really close relationships and cooperations with Tier 1s. And we need to make some related breakthroughs with them and to help them achieve these car manufacturers. So this is about the vehicle situation. And the final part is something based on IoT. The point is how do we do smart eyes. And we're going to focus on 2 parts. One is that we're going to focus on recognition, we're going to focus on positioning. So these will be our top 2 focus. In terms of product, we'll be focused on like modules like Oakley and a lot of modules we are their supplier or sole supplier. And second, we want to do a block that is outside the module. We are going to offer chips and SDK to merge a combination of that. And third is about AI module. So here, we are going to make development of our own visual chips by using our algorithms. And chips and sensors, we're going to combine them together to offer a better user experience. So the door of IoT, just open -- just opened. So here in these different fields, by using these total solutions, we're making our discoveries in them. So that will be the end of my brief, and thank you.

Okay. Thank you, Mr. Sun, for your sharing. And now we'll be entering the Q&A session. So the investors, you can -- through dial-in or you can use voice or you can use text to raise your question. [Operator Instructions] So we're going to welcome the first question. Mark Li.

Management team, Mr. Ye, Mr. Ma and the management teams. I am from Citi and the [indiscernible]. So I would like to congratulate the great performance. First of all, I would like to ask -- can you share about this year in your handset camera lens set and the vehicle best cameras. What's about the increase of capacity? What's the goal of that? And also in 2021, future outlook in your handset lens set growth. That growth speed is kind of conservative comparing to other 2 domains. Can you share with us about the challenge with them?

Ma here, I would like to share about the production rate and that's around 160 million per month. And we are going to reach 180 million. That's for the handset camera lens set. For the vehicle lens set, that's around 6 million. And after expansion, it's going to be hitting 7.5 million. And as for the handset camera module, that's 75 million module set, and we're going to hit 100 million per month. That's the first question. That's the answer for the first question. For your second question is about the handset lens set. And so the predictions about our shipping volume, that's around 15% to 20%. Comparing to camera module, that's relatively slightly lower. Because seeing that in 2020 for our shipping volume, we're already #1 in the world. That market share is higher than camera module. So for camera module, we're going, I believe, it's more reasonable to achieve a large market share. And about the market information or sort of features of the technological products. In the presentation of Mr. Sun, we also touched upon some details and some of the information had been recorded in the presentation deck. And if you still have further questions, we welcome you to contact us.

Okay. Thank you very much, Mark, and thank you, management for your answer. And next, let's welcome, Alice Chen, for asking the questions.

Mr. Ye, Mr. Ma, Mr. Sun and IR team, congratulations on your great results in 2020. My first question is about the technology leading position in the market. Just as Mr. Sun had mentioned in the modules, you have started the mass production and completed a lot of R&D. And this year, generally speaking, there is still an obvious trend of the upgrade of the commerce for the handsets. And in terms of the camera modules, we have the chip stabilization -- or the gimbal stabilization. And what is the added value for the camera modules? Can you share with us that? And also for the domestic clients for both the chip stabilization or the gimbal stabilization or even the periscope adoption rate, what is the general idea for that? This is my first question.

Okay. Thank you, Alice, for the question. With the adoption of 5G, people have a higher requirement for video taking. Therefore, stabilization is an important issue. In concert, we have limited angles for stabilization. And also the main camera had become larger. And we need a larger force and have a better control in stabilization. And now there are 2 pathways. And iPhone -- Apple had been leading one of the direction, and the other is the dual OIS. And we need to improve both the sensor and the lens sets. You may be well doing well in each of the directions, but if you want to combine these 2 directions, it's more challenging. And also, the third one is the gimbal stabilization. And these are the 3 main directions: dual OIS, sensor shift and the gimbal stabilization. These are the 3 main directions. But we have met some challenges. If you want to further increase the angles of stabilization, this is very difficult. And this year, we are going to have a further investment with our clients to further improve the angles of stabilization. And we are still communicating with our clients and have an R&D of it. So we will not disclose more information. But the key is that a main entry barrier is stabilization in the age of 5G.

Okay. My second question is about the gross profit margin of the modules. Because by increasing the yield, we can have a better gross profit margin. And this is very impressive. But if we further upgraded the camera spec this year, will we see a higher gross profit margin of the camera modules?

Actually, we already shared that with you before. There are several main production lines, including the camera module. We believe that the gross profit margin will be maintained at a stable level. And optimistically, as you have said, there will be an upgrade of the spec. And also, we will optimize the production process. Further automation and technological upgrades, it will also help us to increase the gross profit margin. And on the other hand, currently, there is a relatively low rate of capacity utilization. Maybe there will be rationale to compete for some others in a lower price, but we will not enter into this price war. But we must have a full preparation where the situation is possible. And then it will make us fully ready. And we can see both sides of the industry. Some have been upgraded and some are downgrading. And because some of the companies have a lower range of capacity utilization, so they wanted to compete for orders in a lower price. And we need to stabilize the gross profit margin by neutralizing these 2 factors.

Okay. My last question is about the vehicle lens sets. And people believe that in the future coming years, there will be more resolutions for the lens sets. And you mentioned that the 8-mega pixel lens set had entered into mass production. Will we see the mainstream of the mass production of the 10-mega pixel or will it take more years?

Well, currently, it's very difficult to you -- for us to give you a specific answer of how many years it will take. Because for some of the companies, they have a similar requirement of what the pixels of the lens set. It's already beyond our imagination. It's not 8-mega pixels, it's even higher. And how to make it into a spec? And how well can our clients accept this spec? It's very difficult for us to tell you, it will definitely be this year or next year, but we should feel safe to say that there is an obvious trend of the improvement of the resolutions of the lens sets. Even some of the traditional MoUs -- traditional manufacturers are also considering to improve the resolutions. But I believe that it will take some time because it's a term of the upgrade of the specs.

Thank you, Alice, and thank you for the answer. And next, Kyna.

Thank you, management. I am from Crédit Suisse, Kyna. I have 2 questions. The first is in the second half of last year, the gross profit margin has been grown greatly. And is there any positive factor of the foreign exchange? This is my first question. And my second question is in the distribution of the clients. In your clients' mix last year, it was quite balanced. And this year, if you take a look at your client mix, I'd like to know what is your expectation and outlook? And will there be the contributions from some new clients? I'm sorry, I have another question. The proportion of the 6P lens sets. Last year, it was 27%. And there is no big changes in the past 8 years? And what is your outlook for 2021 in terms of the contribution of the 6P in the handset lens sets?

The first is about the question of foreign exchange. Last year, there was an appreciation of RMB. And for camera modules, some of the devices were purchased from overseas countries. And therefore, the appreciation of the RMB is a favorable factor. But the main reason is the optimization of the process and the improvement of the yield and productivities and also further automation and upgrade of the IT system. So the answer to your first question is that foreign exchange is a favorable factor, but not the main one. And the second question about our clients. The best strategy is still, as usual, we want to have diversified clients and we also want to improve the further contribution and the positions of different clients. We want to have a better communication with them so that we will have more orders from them. And the third question is about 6P. In 2020 compared with 2019, I believe there was a slight increase of the proportion, although not much. So it is related with the impact of the pandemic, there was a downgrade of the spec. And currently, the trend is to upgrade it to 6P and 7P. But also differentiation is another direction. And sometimes, if it had not reached 6P, but it might not necessarily be a downgrade, maybe they will use the hybrid materials. And also, there will be the free-form of screens. And generally speaking, in 2021, the 6P and the higher P proportions will be higher than that of 2020. This is the answer to your 3 questions.

Thank you, Kyna, and thank you management for your answer. Next, let's welcome Mr. Chen Xudong to ask the question.

Management, I have 2 questions. The first question is that the globalization is the trend in India and Vietnam, just as Mr. Sun has mentioned that we will expand the capacity and the continued construction of the production basis. So what production lines will be moved to overseas bases? And then the second question is continuous zoom modules had finished its R&D. And this is a high-spec trend and will it have a higher market share?

The connection is very poor. And your voice is not very clear.

Hello, can you hear me?

Yes, much better now. Can you repeat your 3 questions?

Okay. Mainly 2 questions. The first question is about your global distribution. Just as Mr. Sun had mentioned, you want to expand the capacity in Vietnam and India. So what production lines will be migrated there? And the second question is about technological upgrades. You talked about the completion of R&D of the continuous zoom. So looking forward, what will be the trend? Will it be a continuous trend? And how do you look at the trend of the under-screen camera?

Okay. In India and Vietnam, we don't have a specific plan about what kind of the business will be moved there. It still be -- will be based on the requirements of the client because we have Xiaomi and a Samsung. These are our main clients. And if you want to deliver their solutions in India, then they will set up some specs for the handsets and then correspondingly the specs of the camera modules, so we will do that in India. And in Vietnam, it's the same idea, and we're going to meet the requirement of the globalization development of Samsung. And some of the handsets developed in India will also have a corresponding requirements for the modules. So everything will be client-oriented, based on their needs for the local market development. We will support them. And I'm not quite sure about your second question. You mentioned that with the R&D of the continuous zoom, is it to say that we no longer needed so many cameras to -- with the requirement of FOV. So in our view, in the future, in the developed world, then the numbers of the cameras might not be necessarily increased. We agree with that. However, with every camera, there will be a high requirement. For example, for wide-angle, for the main camera and just for telephoto, there will be a higher requirement. As before, there was competition of the numbers of the cameras. But in the future, it will be more about the quality and the features of the cameras. The third question is about under-screen cameras. And we believe that we need to have a joint efforts with the manufacturers of those screens. And when the camera is not working, we can see a full screen. So [ JD ] and the team are working on that. And for lens, we also have some reserves of the technologies, for example, in such a limited space, how can we get rid of the diffractive lights and get rid of the interference. So the cameras and the screen manufacturers need to make the joint efforts. So this is our comments.

Thank you, Xudong, and thank you, management. Next, let's welcome [ Cherry ].

Hello management, can you hear me well?

Yes, very clear.

I have several questions. The first question is about ASP. In the announcement, the top line did not grow very quickly. It was because of the decrease of ASP and can introduce the handset camera modules and the lens sets ASP decreased. What was the range of the decrease of the ASP? And you mentioned that we will focus more on the quality instead of the quantity. And will we see the recovery of the ASP this year compared with the second half of last year?

So first of all, as for the ASP that is for the vehicle lens set, that's pretty stable. And for the handset lens sets for 2020 ASP was decreasing, I think, it's single digits comparing to 2019. I'm not going to repeat because the reason of that, that is because of the downgrade of the handset. And also in the second part of that year, we have some frictions between China and U.S. trade. So we've got a structural change there. And comparing to second and first part of that year, we can see a relatively obvious ASP drop. So that's the reason why of the phenomenon you're seeing. And seeing from this year, we can see that the vehicle lens ASP is stable for the handset lens set comparing to 2020. Can be relatively stable, that will be our goal. And for the handset camera modules, we believe that we'll receive some drops as well. So we're going to compare to the 2020 second part and trying to maintain a stable.

All right. That is really clear. And you've mentioned that some of the competitors back here, how can we make the strategy deployment and how do we get the market share from them? Because our target is 20% to 25% of growth, and we want to take more market share. So in the mid- and low-end project, how are we going to act on that?

I'm going to talk about that. Our strategy is pretty clear that is this year for handset camera module, we're going to hit global #1. That will be the way to go for us. Because global #1 market share, market position that is pretty key. So that will be -- I mean, that's the reason why we have a 20% to 25% shipment increase guide. And second is we're not trying to tank ourselves in the low-end price wars. And internally, no materials about supply chain or to the utilization of our production rates and so on. We're going to use that and try to hold on our gross profit. So really, it's a great opportunity for us to review ourselves in our own capability. So in terms of market share -- between market share and gross profit, we're trying to keep a good balance between them. So that will be our thoughts. Because we cannot just focus ourselves solely on high-end or solely on price war. And -- because that is not just not right. So we want the market share as well as our leading position in the high-end market. And also in the middle part of that, we're trying to get the market share with them as well.

Okay. So the third question will be in the expansion in the new customers. I was asking this every time. I would like to ask about the -- your customer A, what's the progress of that? Do we have any updates from them?

Well, maybe I should say it like this because of your all good regards and what I think we're doing pretty good, that based on some of the reasons when the analysts, I think your -- the way you analyze, I think, is reasonable and stands to point. So if we're able to share, we will share them with you. Okay. Thank you for all your regards.

All right. Thank you. Thank you, [ Cherry ], and thank you, management team. Next, I would like to invite Frank.

I am from HSBC, Frank. And I would like to congratulate you receiving a great performance. And here, I would like to ask your cost structure in CCM. Because according to the financial data you've disclosed in 2020 second half, your manufacturing costs have like 10% of drop. But that probably I'm not making a very accurate calculation. But you mentioned a lot of automation and information and so on. I think, within the cost -- the major part of the cost should be from materials, right? So can the management team try to share with us the -- kind of maybe to make a breakdown in the cost structures or to tell us about this year, should we have any rooms for dropping in the cost?

Frank, within our group, the [ core structure or no ] speaking, I think we don't have very obvious difference compared to 2019. And the material -- or the raw material stands for higher than 80%. That's the basic situation. And what should we focus on is to increase in the yields and efficiency, especially through our utilization. Frank, that will be my answer for you.

Okay. I understand. And my second question is that I want to ask is that the production expansion, especially from the expansion of our handset lens set, 160 million to 180 million, that include both Android and iOS, right?

That is our overall production rate expansion plan.

Here, I would like to ask from -- for the ToF shipping volume, do you have any guide for that? Because that should be counted into the handset camera module.

So we would like to do a breakdown on that. So ToF is not in the guidance.

So do you have any views on the growing speed on that?

So this is our perspective for ToF. For handsets ToF, maybe we need to wait for a little while. That's just our perspective. We believe that it will grow in the second part of the year, but still takes some time and still need to wait this year because the supply of chips are still trying to reach the point. We can say for ToF within the sweeping robots, probably you'll find some supplies in there, but it's a relatively on a scattered market. So we think that ToF probably can reach some growth in the floor sweeping robots.

Now I would like to add -- now I would like to ask Fu Tianzi to post your question.

I'm from -- I'm Fu Tianzi. And here, I would like to congratulate the great performance you have achieved, especially last year, it's quite a difficult year out there in the market, and you're seeing a great performance. As an analyst, I've long time been covering your company. So I really feel optimistic about the performance of the company, and you have this great managing capabilities and technical in the leading positions and so on so clearly demonstrated in the year. And here, I would like to ask something about the future shipping. You've mentioned that the chip -- you've mentioned about the -- in the chip issues because we have insufficient supply from the chips. So today, what's the situation about the insufficient supply of the chips out there in the market? And second is the insufficient supply of the chips. How long do you think it's going to last? And third is about the price of the module and its impact on the gross profit rate. And do you think that's going to pose any pressure to the end terminal?

Okay. For the insufficient supply of the chips, this is pretty commonly understood or noticed in the market or in the industry. But trying to make -- show us to make an estimation about when it's going to stay like this way, I think it's quite hard. Now we really need to make discussions with our customers. According to our clients, to their own holes on the chips and also their own market of their own estimation about their own shipment when they need, we're trying to help them to get through this difficult period. So we're trying to help them in the way that we can -- according to their plan. We can help them and do it together. And second, the insufficient supply of the chips. In the cost of the modules, I really don't see any certain connections between them. In the image sensor, we're not seeing that due to the insufficient supply of the chips, the growth, the cost from that. Because if the price of the chip grows and the modules will grow as well. But I'm not feeling this trend right now. So in these 2 parties, so the growth -- the price growth of the chipset and the modules from now, we're not seeing any direct link.

And finally, I would like to add something is the third question. Do you think that the price growth of the chips is going to pose any change of the consumer getting their own handsets or cellphones going to increase the price of the cellphones is going to maybe to make an impact on the shipping of the handsets and further make impact to your own performance, do you think it's going to do that?

I think if all different kinds of [ EPI ] chips and [ RF ] chips and sensor chips, [ MCs ] all these different things, if they all grow for consumers, this will be really price sensitive. But now I am not seeing a trend of price growth. I'm not seeing the main chips. So certainly, that this is a trend that we're observing right now.

Thank you, Tianzi. Thank you, management team. Due to time limitations, now I'm going to invite the last question. [ Shin Wein ]?

I am from CITIC, my name is [ Shin Wein ]. And first of all, I would like to ask that in the handset lens set in Android lens set, in mid and mid low tier. And are you going to be focused on market share or its profit? And second, in terms of the camera module, I would like to ask that with the competing landscape, is it turning positively? And also in this part, what's the long -- what's the mid- to long-term profit change going to be like? Because actually, in the past, you mentioned that you're going to make some change in the profit stand portion in this field. But we're seeing in the vehicle part -- sorry, in handset part, that same part is growing. So I ask about the mid- to long-term strategy plan. What's that about?

Okay. First of all, in terms of the handset lens set. The overall shipping for last year, we already reached -- we're top 1. So next year, we're going to grow our market share. And during the briefing, we mentioned that we're going to have a 15% to 20% of growth in that. So yes, we're going to increase -- we're going to increase the quality of that. And in terms of the quality and surely, we're not going to make any loss on that. So when the volume grows, the quality grows. All these needs to grow together. And second, I don't really get your question over there. Can you rephrase it?

For the camera module, what's the competing landscape? And in the second half of the year, it's going to be turn positive. And what's this probability for that? And also for camera modules, what's that for your mid- to long-term strategy is going to be like in this part because actually, in the past, you actually mentioned you're going to decrease this stand, the camera module stand in your overall margin? So I ask about the positioning of that.

So for the strategy in handset. Handset is a really important marquee segment for us. In terms of the handset camera module, I think we are leading suppliers in the world, and we're going to continue doing that. Not just continue doing, but doing good. So we're not going to deliberately control or try to limit the growth in that part -- in that segment. And also, we need to see the market situation. If it's a relatively large market and we can really make a good play with our optical capabilities, then we're going to think about that. For instance, like the -- in the vehicle-mounted modules, I believe that the volume of capacity or the size of the market should be larger than the handset market. As for the specific proportions of these market, this will not be under our control. This will be a natural result. And we will consider about the increase of market share in each BU and a higher and a stronger market position in each BU.

Thank you, [ Shin Wein ]. Thank you, management. Due to the interest of the time, we cannot answer all the questions one by one. And if you still have further questions, please feel free to contact our IR team any time. Thank you again for your understanding. This is the end of the Sunny Optical Technology 2020 Annual Results Announcement. Thank you again for your participation. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]