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

Dear investors, good afternoon. I am Daisy from the IR department. Thank you very much for attending today's Investor Day 2024 of Sunny Optical Technology. This is our 15th Investor Day, and we are celebrating the 40th anniversary of our company this year. And again, I'd like to extend my warmest of welcome and the sincerest gratitude for your presence. Some of the investors may be unable to physically attend to the session. So we have arranged a webinar to virtually involve them as well. Today's communication will focus on the nonfinancial side of the company, highlighting the development of the optical market and the technological trends. And we hope that you can have a deeper understanding of our company and the industry. And first of all, please allow me to introduce the management present here today. They are Executive Director and the Chairman, Mr. Ye, Liaoning; Vice President and Joint Company Secretary, Mr. Ma, Jianfeng; General Manager of Zhejiang Sunny Optics Corporate Limited, Mr. [indiscernible]; General Manager of Ningbo Sunny Automotive Optech Corporate Limited, Mr. Qiu Wenwei; General Manager of Ningbo Sunny Optech Corporate Limited, Madam [indiscernible]; General Manager of Zhejiang Sunny Optical Intelligent Technology Corporate Limited, Mr. Wang Zhongwei; General Manager of Zhejiang Sunny SmartLead Technologies Corporate Limited, Mr. Baozhong Zhang; Senior IR Director and Joint Company Secretary, Madam Pui Ling Wong; IR Director, Madam [indiscernible]. Next, I'd like to introduce you the agenda of today's event. So on your table, we have placed an agenda, and there are 2 half-day sessions. So in today's session, we have 3 parts. The first is the welcoming remarks of Mr. Ye. And the second part is the prepared remarks. And the IR Director Madam [indiscernible], General Manager of Ningbo Sunny Automotive Optech, Mr. Qiu Wenwei and the General Manager of Zhejiang Sunny SmartLead Technologies; Mr. Zhang Baozhong; General Manager of Zhejiang Sunny Optical Intelligent Technology, Mr. Wang Zhongwei; as well as the General Manager of [indiscernible] Sunny Opotech, Madam [indiscernible] are going to share with you the latest business update and the technological advancements in the sectors of in-vehicle, XR robotics vision and the smartphones as well as our technological deployment. And as for the presentation materials, you can scan the QR code on the agenda form. And the third part is the Q&A with the management. And after this session, we have prepared a dinner for you. And in the dinner, you are able to have a more in-depth face-to-face communication with our management. And tomorrow morning, we will have a tour of the factories. We are going to the [indiscernible] base to visit the production lines and the showrooms. And after the tour, the investors can have a brief communication with CEO, Yang Sun and Vice President Jianfeng Ma as well as the IR team. So this is the brief arrangement. And next, I'd like to welcome the Chairman, Mr. Liaoning Ye to deliver the opening remarks. Welcome.

[Interpreted] Dear investors and friends, good afternoon. So thank you very much for attending today's Investor Day 2024. And on behalf of all the colleagues of Sunny Optical Technology Group, I would like to extend the warmest welcome to all of you. In recent years, the company's development has decelerated due to various factors, including ongoing international geopolitical tensions, global supply chain restructuring and industry cycles. As we move into 2024, sluggish consumer demand driven by the global economic downturn persists, market competition intensifies and the company continues to face significant growth challenges. However, the digital economy and AI technologies will remain the primary driver of the global economic development in the future, creating new growth opportunities for the Opto electronics industry. Sunny will not be hindered by the macroeconomic situation or hold our progress. We will maintain strong confidence in our development, enhance the refined management of our existing businesses and ensure a positive net operating cash flow and high-quality profitability. We will refine our strategy to speed up the growth of our in-vehicle and XR businesses, aiming for significant improvements in our industry standing. We will strengthen our renowned and a supportive revolve strategy to secure key projects by aligning the group's resources end-to-end with the needs of strategic customers. We firmly believe that by sticking to our strategic positioning, heightening our crisis awareness, expanding open source initiatives, cutting costs and maintaining our commitment to innovation, we will overcome the challenges ahead and achieve even better results. We would like to thank all the investors for your continuous support for the development of Sunny. We value this opportunity to communicate with you and hope that this session will deepen your knowledge and understanding of Sunny. And we also look forward to your valuable suggestions and opinions to support us to have a more sustainable high-quality development and to create greater value for our shareholders. And again, I would like to express my sincere gratitude to all of you attending today's Investor Day, and I hope the complete success of today's event. Thank you.

Thank you, Mr. Yi, for your opening remarks. And next, we will have the second part. First of all, let's welcome the IR Director, Madam Li Yanfeng, to introduce you the latest business updates of the company. Welcome Madam [indiscernible].

[Interpreted] I'm very honored to be the first speaker, and I hope I'll give you a great opening. And in my presentation, there are 2 parts. The first is the company overview. And the second is the market trends and opportunities. As you know, Sunny was established in 1984. So this year marks the 40th anniversary of our company and reviewing our development. We have encountered the financial crisis, and there were industrial competitions and there were reshuffles of the industrial players. But regardless of the situation, we have always focused on the main business of Optical. And our goal was to become the leading optoelectronics supplier. And for Sunny, we are able to integrate the relevant business, mainly in mechanical, electronics, optical and computing technologies, and we are able to integrate all these technologies and to assist our product development as well as the large-scale production. So in our whole group, there are 3 main businesses, and you also care a lot about the market share of these market segments. So the first is the smartphone lens sets, and we ranked #1 in the world in terms of the market share. And in terms of the handset camera modules, we also ranked #1 in the world and for the vehicle lens set also #1. So these 3 #1 are from the TSR December 2023 reports. So we have a 26%, 13% and 31%, respectively, for these three business segments. And for the vehicle lens sets, our market share had continuously increased and the data between us and the second and the third market player has been enlarged and we had always focused on CoCreate as our core value. And in terms of the distribution concept, we always focus on the concept of money flows, but people Unite. And we have optimized the share incentive mechanisms and the result has been quite good, and we have won a lot of the recognitions from the capital market. So in this slide, I had showed you some of the indicators such as the handset indicator and some of the sustainability-related indexes. And all of these has demonstrated great results. And in terms of the business segments, there are 8 of them. For example, the handset-related products, this accounts for the largest part of our revenue. And according to the financial results in 2023, handsets-related products contributed 66.1% of the total revenue. The second part is the vehicle-related products, including the vehicle cameras and also the modules, LiDARs, HUD as well as the projection headlights and the contribution to the revenue from the vehicle-related products also continued to increase. And in 2023, the number is 16.7%. And with the autonomous driving moving to the higher levels, we believe that this year will continue to expand. And in terms of the AR or VR related products, in 2024, it's about 6% and we believe that with the further development of different industries, especially the emerging ones, we expect that revenue wise, we will have a more even contribution from these different segments. And next, I'd like to introduce you the corporate development strategy, mainly around three aspects. And the first is in smartphone-related business, we will continue to explore the new potential and strive to improve the business quality. And there are 3 aspects to work on. The first is to benchmark against peers that is taking the lead in an industry and also strengthen the path that we are still relatively weak. And the second is to improve the product remix and optimizing the customer structure and whether the large-sized customers in overseas markets or the top customers in China and for all of them, we wanted to have a better and more in-depth corporations. And the third is to deepen the joint corporation capability of smartphone-related business because we believe that with the image development of the smartphones, we need to have more integration of optical technologies and electro-optic technologies. And with our advantages and expertise, we wanted to have a more coordinated development between the optical and opto-electric technologies and to improve the loyalty of the customer. And the second aspect is in the field of vehicles, XR and the robotic vision. We will continue to enhance our competitiveness and to focus on improving market positions. To be more specific, in terms of the vehicle lenses, we will continue to explore our potential and expand the competitive edges. And secondly, in terms of the vehicle camera modules, we will continue to expand our target customers at home and abroad and optimize the customer structure so that we are able to expand the market share. And the third part is to continuously break through the key technologies and the manufacturing processes, strengthen resource integration among business units to seize market opportunities in XR and the robotics fields. And the third part is in terms of management. We will strengthen management of the capital input and to enhance input output efficiency and optimize our operation excellency and especially in some of the more established business, based on the orders and the market trends, we will reasonably allocate the capacity. And also in some of the emerging fields, we will strictly control the investment risks. And our goal is SOP-based minimal investment. The next part is about the market trends and opportunities of the handset lens set. And I will give you a very brief introduction. So later on, we have invited the General Manager, Mr. [indiscernible] to attend the meeting, and we also welcome investors to raise questions in the later session. And on this slide, you can see the industry forecast for handsets lens sets from 2023 to 2027, what is the trajectory of the growth. And please take a look at those numbers, and it is a report from TSR in December 2023. So actually, the data after 2023 was not the final one. It was just the prediction of TSR as the final result was a little bit lower than this one. And from this inventory you can see that the growth is higher than 1.2%. All right. So that was the situation. So in the overall industry, that as the ending of COVID-19 and our economy actually started to maintain a long-term recovery. And in 2023, we can see that all different equipments like the mobile terminals, we can see that has hit the bump and also being helped by AI's fast development that we anticipated that smartphone demand will actually have a very gradual revival for the future. And what comes after that is that as a key component, our handset lens set will maintain stable growth speed. And in terms of the change of the camera structure, as you can see on this slide, this is actually based on the introduction of our optical equipment and products because I know that some of the investors, they actually focus on the fast recovery of the industry. And as the launching of the new products, we can see that these high-end smartphones are actually selling pretty good out there. And actually, the camera handset lens set is pretty high class as well. So what we're focusing on is it's the main camera and the telephoto lens. And as the size actually growth of the handset lens side, we actually changed the lens itself that will have more requirements in terms of the image size. And the trend is actually pretty accurate. For instance, like a few years ago, we're talking about the 1.7 of 1-inch lens is actually a very high-end product. Now we say it's 1.3 of 1 inch or 0.9 1 inch. And in terms of large image size, what we can see over here is that manufacturing side and design side, the difficulty of manufacturing, one lens is actually becoming more difficult, because in terms of the molding and other procedures, the difficulty is actually growth because it requires higher precision. And in terms of the verification of the lens is actually becoming more difficult as well. And how do you cope with the chip itself of the sensor itself. That requirement actually grows as well. So in terms of a lens production side, actually challenge comes. Another thing is about our hybrid lens, it's glass plus plastic lens. In terms of the glass lens, what we can do is, can hit larger aperture and can cope with more using scenarios for G+P structure, it can cope with not making the cell phone that thing as well because hybrid, we have non-spheric glass lens in there. So the reliability is actually more reliable. When it's in higher temperature situation, we can still maintain a stable image quality. And as a company, in terms of the molding is actually the typical thing in there. And our motor actually in-house technology and in-house manufactured. And how do you bring these components together and how do you make sure that it's aligned in a single line and to ensure the quality of this optical performance is what's difficult behind there? And also testing is pretty challenging as well in this sense. And you can know that already, we have some Android customer. They have this hybrid lens in their main camera. And the performance is actually pretty good. So besides these Android players, we believe that more and more players, they are going to equip with this hybrid lens. That's on the main camera. In terms of the telephoto lens set, normally speaking, in order to hit better performance that we need a large image size plus large aperture. And also, we want to use this telephoto lens to be adapted into different scenarios. For instance, that we can use internal focus to hit Telemacro photo shooting. And besides that, we can have high-power applications and so on. And also for this multi-reflection periscope, by using that, we can make this -- the structure of the lens smaller. And we all know that within the industry, we have already got customers using this kind of technology. Besides that customer, we have also Android players from China. They do have a precious view on this technology. And another point is about our plastic Prism. So for plastic Prism has been used on our medium to lower-tier products. For itself, we have got many advantages, especially the cost can be lower if the volume goes up. And when the scale goes up, it's yields rates and reliability will start to mark up because it's made by plastic, [indiscernible] Prism, so the light -- so the weight is pretty light. And in terms of the driving of the motor is going to cost less energy and less power in order to drive that prism. And that was about our straight phones. And probably you will be more focused on foldable phones. In terms of foldable phones, the development is pretty fast as well. But for these foldable phones because of their structure is pretty different, so they have limited space for our camera sets. And the selling point was not on the camera. So it makes foldable phones, camera modules, not in the top tier, but it's really high potential. In terms of the industry development, what we're seeing is that more and more customers, they would like to equip their phone with periscopic lens. And also, we have higher requirements in terms of making it lighter and thinner. So next, I would like to briefly talk about our strategic goals for handset lens sets. It's pretty straightforward actually. So what we're doing here is that we want to ensure our top market share in the world. And also, we need to continue to optimize our customer structure and product mix by using four pillars. One is our design and simulation capabilities, second is about our molding and forming capability, including our hybrid G plus P molding capabilities. And third is our coating capability like our ALD coating technologies and so on. And next is our equipment development and testing capabilities. So for this type of equipments, we have our own in-house team. They're making automations and transformations in their upgrade as well. And we have also our own teams to have different capabilities. So all in all, in terms of the lending of the strategy, we have got 3 perspectives. One is marketing second technology and third is manufacturing. In terms of marketing that's on the sales end, what we are doing here is we want to implement the product strategy of [indiscernible] deeply and carefully. That is to dig out the potentials of our product and also to make our products more reliable and to improve its quality to improve the satisfaction rate of our clients. And second is what we want to do here is to firmly adhere to the innovation-driven technology road map to release new technology, new products to create new technologies. And second is that we would like to enhance the core competitiveness of our three high products, including high spec, high quality and high added values. And the last one is on the manufacturing end. So on the manufacturing end what we're doing is we want to deepen the road map of lean and intelligent manufacturing system. And next is that in terms of delivery, we want to ensure the high-quality delivery. So that will be all of my introduction for our handset lens set business. Thank you so much.

[Interpreted ] Thank you, Madam [indiscernible]. And we all know that we have been deeply rooted in the automotive field for more than 20 years and also with our automotive lenses considering the first in the industry for several consecutive years with the continuous development of the automotive industry towards autonomous intelligent driving. The importance of various automotive sensors is increasingly prominent. One market opportunities will certainly face in the future in this industry? And what preparations have already made Next, let's invite Qui Wenwei General Manager of Sunny Automotive Optics to share his insights with us. Welcome.

[Interpreted] Dear investors, good afternoon. So here, I would like to talk about in the past years, our business situation here in the vehicle business, in the lens vehicle business. So here, our positioning is automotive plus Optech. So our product has been surrounding in a few fields like this vehicle-based LiDAR, camera, HUD and also intelligent headlights projection lights and so on. So next I would like to introduce these by modules. So first of all, I'm going to talk about the automotive camera market for the global vehicle lens. So we can see that the market is actually pretty big from -- based on the third parties report, we can see that for the future trend, that the growing trend is phenomenal. And in 2023, that the global vehicle camera market volume comparing to previous years, we have 12.6% of growth. For Sunny vehicle lens set shipment comparing to last year, actually, we have 15.1% of increased. So we are slightly better than the overall industry. And based on that trend, we can also tell that the ADAS product application in the automotive lens is actually growing in terms of the share because ADAS has always been the strong capability of Sunny. So for the ADAS lens within the global market share, we have around 50% of market share for all the lenses comparing to the second place player, we have a very big leading gap, holding the first in a world position. So people are focused on the new EVs because in the past, what we're doing is this overseas markets. What we're doing is pretty good in the traditional. Markets we're doing pretty good out there for overseas market. But now for the new EVs in China, it's actually going pretty fast. And for all these automotive lenses, 1/3 of these equipments are using on the new EVs. So here in Sunny within all the brands and new EVs, we actually made a calculation. We have the statistic like more than 80% of the new EVs brands actually adopted our own product. So here on this slide is about our facing the fierce competing market, how are we going to bring our clients and to bring the market, offer more competitive products. So here, this slide is talking about that since 2012, we have the first ADAS application lens. And for the last year, we successfully made a breakthrough of 8 megapixel technology. And this year, we are now shipping these products to our terminal clients. So in terms of G plus P, we are in the leading position in our competitors. So by the end of 2023, we have more than 36 KK of ADAS vehicle lens sets being shipped out. So on the high end, 17 megapixel application, we have already finished the preparation of large production. And very soon, the 17 megapixel can be launched to the market. So these are our lens sets. And now I'm going to talk about the LiDAR market. In 2023, the overall market growth is actually not matching the forecast that we did, slightly lower, actually. But in terms of the growing speed, it's still relatively fast. So we think that although we are hearing that people are thinking whether they should choose LiDAR or not, but we are still optimistic about that. In terms of the sales results of Sunny Automotive Optech in the past 3 years, the growth has reached to 10x. And up until today, in 2024 and '25, there are about 15 projects hitting the SOP. And going forward, they will have a very positive contribution to the total revenue of the company. We are very optimistic about it. And we also have done some statistics surveys for all of the LiDARs used on the vehicles, covering 96 models. And among them, 60% of the LiDAR are using our own products. And on this slide, it is about HUD. We mainly focus on the AR HUD because for the TFT HUD although there was a big market size, but there is not much that we can do. And for the AR HUD the current penetration is going deeper and deeper. And every year, there is a growth of over -- growth of demand at over 100%. And then we are also adapting to this trend. Starting from last year, in 2023, the AR HUD PGU business, which is the core projection module had a hit over 100% of the growth. And recently, we also have the nominations from multiple OEMs. And it's expected that in 2024, the AR HUD PGU market share in the global market will increase from 3% in 2023 to 6% in 2024. And next, let's talk about the smart headlamp or projection handler. And it also has a huge market size and it's in established market as well. And we focus on the digital pixel applications. And in terms of the future growth of the digital projection headlamp, we believe that every year, there will be over 60% of the growth. And based on this kind of future momentum, we believe that 0.01 megapixel headlamp will have faster applications. And although the [indiscernible] are great products, but the cost is a bit high. So we believe that 0.01 megapixel headlamp in the coming few years will have a very quick development. And in our company, we also have made some statistics as well. And in the top Tier 1 companies, we have gained a lot of SOP projects. And in 2024, we believe that the Pixel where digital headlamp will have a greater market share for us, growing from 1% in 2023 to 18% in 2024. So this is my introduction. Thank you.

[Interpreted] Thank you, Mr. Qiu for your presentation. I believe that now we have a better understanding of the capabilities, plans and the strategies of our vehicle lens sets. With the electrification, digitalization and the intellectualization of the vehicles as a very important part of the smarter cockpit and the smarter cabin. Camera market have faced greater demand, bringing new opportunities for the companies. And Zhejiang Sunny SmartLead Technologies have accumulated a good experience and have a great expertise in opto-electronics, and we can very quickly respond to the market needs and the customer needs. And we have established a very professional teams. And since 2018, when we had accessed this field, we have been taking a lead in the industry and the customer structure has also become more and more international. And next, let's welcome the General Manager of Zhejiang Sunny SmartLead Technologies, Mr. Baozhong Zhang to share with us opportunities and the challenges we have faced in the industry as well as our future strategy. Welcome.

[Interpreted] Hello, everyone. I'm Jan Baozhong Zhang. So automobiles a greater battlefield of Sunny and just Mr. Qiu shared with us the vehicle lens sets. So from my part, I'd like to introduce you camera modules for vehicles, some of our latest development and progress. Looking back to our development in camera modules of vehicles, we had experienced at exploring stage. And in 2018, we had clarified the strategy of accessing the front cameras of the vehicles. And back then, the Chinese market did not have a very high requirement of this facts. And after deciding our strategy, we believe that the components and parts of the automotive have a very high [indiscernible] levels and we must work with a great customer and to improve the qualities of our automobile parts and components, and we had a long-term cooperation with the Tier 1 company from Japan. And I still remember the requests. There was 30 PPM. And after several years of development, we could reach only a dozen PPM and that was very rare in the whole industry. So with our development with the Tier 1 company from Japan and based on our observation of the industry, we believe that the perception capabilities of the vehicle should be could increase and the pixels of the cameras should be increased. So in 2019, we had deployed the 8 mega camera modules for vehicles ahead of the industry. So back then, we mainly collaborated with the famous company, which is a platform basically in Israel and in 2021, the Chinese market had a quick adoption of the 8 megapixel cameras. And we were also one of the first companies in the world that have the mass production of the 8 mega products. So we were the early mover in its market in terms of the 8 mega solutions. And we still maintain a great relationship with that company. And we still are an important supplier for that company. And in this process, we believe that to work with the international leading OEMs is very key to us. And then we have got the certifications from Japan. And on the one hand, we had to meet the great demand from the market. And on the other hand, we need to look ahead. And we believe that China provides a great consumption market of automotives, but the global market is even bigger, and it's more appealing to us. Therefore, we had successfully passed the Tier 1 certification of South Korea and of Germany and also of Europe and non-German OEM inspections. So at the same time, for the surround view, from the VGA camera modules, 1.3 mega cameral modules to 3 mega camera modules. And for the e-mirror, 3 mega camera modules, we also had a hit the SLP. So in 2022, it was a year for faster development of Sunny's SmartLead Technologies. We not only covered the productions of the perception-related technology products in China and also build a sand-relationship with the domestic customers. And in 2023, we also made great progress, and we have the software algorithm and integrated solution nominations and some are from Europe. And we also got the nomination of the perception-related products from the Japanese OEMs. So we officially initiated our perception supplies in Japan. And also we not only need to take care of the surround view, but also the under car and we have provided the solutions of the under car cameras year. And for LIDAR, we also have more development, which support 3D additive materials, and we are able to better integrate the 3Ds with the perceptions. So in 2023, we had seen initial progress in overseas markets, and we got more nominations from the overseas OEMs in 2023. So this is a brief overview of our past development. And with that, we can categorize our products into several groups. Usually, we have the sensing-related products and also the nude eye products. And for the sensing products, we also have the front and the rear camera products as well as the window or the in-cabin products. So with this kind of categorization, we can have a more intensive designs and better meet the needs of the customers and to have a deeper understanding of the manufacturing process. While we are further developing our products, we have also been reviewing about how we can better meet the needs of the customers, especially the OEM customers who made an assess about that. So here, for the automobile market, it's very different from the consumer market because we really need to have the IFI or IFQ from the customers. So we must be certified by the customers, and there was a very high requirements. And the larger OEM is the stricter the requirement is and they have their own independent inspection systems or certification systems. And the next slide, I'm going to show you the situations of the certifications. And this is a must for us. And for [indiscernible] and for the ESD, we must be certified and also the cybersecurity and the software development certifications, although camera is a kind of hardware, but in handshake most of the software ware are ECU-related software wares and this is for the communication with the cameras. And also [indiscernible] is of paramount importance. And over the years, we have been certified in so many different systems, as you can see from this table, and this is what we have done over the past few years, we established all these service systems and being certified by the customers. So as for the customer certification, we have been certified by VW and BMW and Mercedes Benz and a series of other well-known OEMs across the world. From Europe, we already have about over 10 OEMs certifying us and in Japan, over 10 OEMs and several in America. We believe that it's important for us to be certified by the institutions and customers and also the ecosystem is very important for us. Surrounding our computing platform, so we had to build a solid ecosystem, the image sensors and cameras as well as the in-tandem devices, we have the in-depth interactions with the customers. And based on their demand, we can better develop our products so that we can make sure when there is a project, we can quickly provide the solution to the customers so that the development cycle can be further shortened and the lead time can be further shortened. And this is why we are always favored by the customers. And the SoC platform partners, including mobile AquaCon, NVIDIA, Horizon all that. And if we need to further improve our perception capabilities algorithm is a must. Therefore, we had collaborated with some of the leading companies in sensing-related algorithm companies, such as [indiscernible] and some other companies through some projects and also Momenta, [indiscernible] and JB, both the domestic and international algorithm developers so that our product development can go in towards a very high-quality direction. So what we talked about is that how do we build interactions between the ecosystem and our customer. So what we are here is we are making more deployments in both hardware and software end product. So in terms of camera and control, how do we make them together -- to make them connected together as we're making our further deployments. So here, we have fully digitalized our company for global market share. And also here, in terms of the sensing product, camera modules, the pixels will be increased up to 18-megapixel. In the future, this will continue to increase in terms of image itself. What here is we have launched our own COB technology. So the COB experience from our mobile department, we want to connect them to the auto industry. And through our analysis, we think that this year's camera in terms of the developing technology, the way of dealing that is not enough. So we have improved this type of performance. And for our camera, we have the self-cleaning capabilities, including a small box, dust and so on. Our camera can clean these type of things off the lens. And also, the pixel has been growing and the communication between our camera and ECU is important. And we -- through cooperation, we are improving this domain as well. We think that in the near future, our camera will be deeply connected to sensing capability and also will be connected in different light spectrums, infrared spectrums will all be connected together. And second is about our intelligent in-cabin. Now we have already got 8 megapixel in this product. In the past, started from 2 megapixel, 5 megapixel, to now 8 megapixel. And we need to make it senseless, so we want to make them as small as possible. So we need ultra compact design. Also we have DMS and OMS and these need to be connected together into one camera. So for the intelligent cabin, we also got RGB and IR processing technologies as well to ensure that the functionality within dark situations or night situations can still be functioned. For instance, for these infrared lights, it cannot -- it needs not to be sensed by a human eye. So you need to have anti-red glowings and so on and also the interactions between human body and the car itself, we need to have the ability to sense it. So we need to have the ability to do 3D sensing. Within intelligent cabin, we will include XR. So we are now making this type of exploration. And for the future, we need to make all these highly reliable and also high precision and high performance positioning, and we need to have the ability of highly simulation. Now the temperature also needs -- is very [ crucial ] as well. It's very challenging in terms of the environment. And so we need all these products to be high quality in order them to be on board to our vehicles. So we -- so the automation of production and the digitalization of our plant is crucial to us. And we think that all of these are required to our product. So these are our capabilities within our manufacturing technology. So what we're saying is that to cope with the group, if we want to make further development, our business to spread it to the world is something that we need to do. So we need to satisfy the demands from -- the demands from all over the world. So we have more -- we have a lot of collaborations for more than 85% of the OEM plant and manufacturing capability is really important. Now we have already implemented a plant in Vietnam. And second is that we need to have an on-site service to our customer, like in Germany, in South Korea and also in Japan. And also for our overseas plant, we need to duplicate the capabilities we have here in [indiscernible] and to throw them out overseas. So that we can construct the capabilities, same as [indiscernible] overseas. So the qualities from overseas plants can be secured. Okay. All right. So that will be all from me. Thank you so much.

Thank you, Mr. [indiscernible] for you excellent presentation as the continuous iteration of the [indiscernible] technology and a drive on various applications, sales or factors such as real-time performance and reliability. There is a growing trend towards age development, bringing about new transformation for a right range of intelligent hardware. Envision plays a critical role in the process as a key input. Under the backdrop of AI empowerment, so here what are Sunny's perspective in the preparations to the [indiscernible]. Next, let's invite Mr. Wang Zhongwei, General Manager of Sunny Intelligent Opotech to share his insights with us.

All right. [indiscernible] investors. So now I would like to share the situations from my side. As we all know that in the beginning of this year or within these 2 years, AI has been a hot trending topic. And we believe that AI will be the next boost of intelligent hardware, which is what we're using apps and so on. Those were trained based on clouds. And the logic has been [indiscernible] cloud. And as technologies development, now we have turned out to have some perspective that is from cloud training is going to migrate towards -- is going to merge towards the edge. And also for the future, the reasoning and the logic thinking has become -- will become a necessity for the support of this intelligent hardware. And because the reliability of the Internet will improve, right? But if all the things stays on cloud, if your Internet is not stable enough and then the performance won't be secured. So Edge will be a certain trend for the future. And under that trend, due to the reliability of the data and the security of the data, the safety of the data, the certainty of the data, bid with load optimization and so on is going to cost a lot of change to our hardware, although that what we are doing is a robotic vision. But today, the AI I'm going to talk about will touch on mobile phone, automotive, XR, including laptops and other device and also robotic as well. In terms of the neural network models perspective, these are the 3 main elements. One is about the input. And second, is about processing. And third is output. In terms of the processing. This is something we're talking about recently, like for the future, is it going to be centralized processing or is this going to be a distributed processing. So people have different perspective towards that. And now for the large models, the computing chips, the neural networks is actually booming recently. And people have different opinions upon them. And within the industry, we're actually talking about business world because robots, they are not humans at all because to do distributed processing, we had advantages like for the airplanes. They don't need to fly like a bird, spreading its wings, right? It has a fixed wing. So input that is what Sunny is very good at because there are a lot of visual stuffs in there, including audio stuff. And in terms of video stuff, we have image recognition. We have video analysis. We have the somatic segmentations, treating point cloud constructions and so on. And in terms of the fanatics, it is about speed recognition and somatic comprehensions and so on. So we have a lot of deployments in Sunny within this perspective, including the AR and VR display. In terms of VR, including pancake. For AR, waveguide in hardware and so on and including human machine corrections, right? In terms of output in robotic, localization and recognition and navigation is something that plays an important role here. So based on the previous slide, like after AI have video input, right, and other types of inputs, audio, touch and force and so on. If you plus age computing, age AI in there, what's going to change? First of all, I would like to talk about on the phone end, right, on the mobile end. So on this end, as you can see, this is very down to earth. 2 days ago, we also -- that the A company actually launched their own SILO -- upgraded SILO model. And now the present smartphone or the traditional smartphone, the input of the video is about 2D and 3D image processing. In terms of the processing, it's using ISP and 3A processing, like auto white balance and auto exposures and so on. In terms of output, it's about photography, videography and face unlock and some AR applications based on the mobile phones display. So that's what normal phone does. Now if we're talking about AI phone, the requirements for 2D, 3D image will probably have higher requirements because it needs to analyze that. So it's going to escalate the demand for visual hardware. And also it's going to need higher computing power in terms of processing. That's something besides the video quality or image quality itself because it needs to do image recognition. It needs to have the semantic segmentations. In terms of output, this is what we are so excited about, especially for a smartphone, it can actually become our life assistant, everyday assistant and also, it creates a lot of alternatives when we are doing jobs. And in terms of large models, it provides us a lot of professional suggestions and for instance, like content optimization, right? 2 days ago, I was actually some exchange with a professor from Fudan University, the whole opinion that in the future, APP will no longer exist because all these will be integrated into AI large models. So our phone is going to change along towards the trend of AI growth. And it is going to change and how it appears right now. And so it's going to escalate the demand of visual hardware, also it's going to trigger people switching their phones, upgrading their phones. So in terms of smart car development. And now we're adopting more and more high computing power chips on board these vehicles, and the traditional visual elements are for humans. But now we need to make the car understand. And now all the sensors will be connected together. They don't stand alone. And the next 2 parts will be smart lights. And for AR/VR, there are 3 phases. One is on the B side. Some professional applications like education and training, and second is the CN applications, which are very common right now, including the gaming and entertainment. And we believe that with the further upgrade of the Edge side AI, going forward, we may turn MR into a daily tool for improving the productivity. So for example, copy writing, therapies for diseases, trainings and simulations and collaborative designs. And of course, there's a higher requirement for the hardware. And if you need people to use it as a production tool, then I believe that we need higher confidence of using this kind of hardware, and there will be a higher requirement for the display. And for eye tracking, just for our recognition and [indiscernible] staff, there will be higher requirements. So how you feel when you use this kind of devices, will you wear it and antiglaring is very important. You must be very comfortable. And also with the development of the Edge side intelligence, we believe that in terms of the robotics, there will be new formats of the products. And just now, we have mentioned the centralized process and distributed processing. Right now in this industry, we have some communications with the institutions and the experts. And we believe that there is a higher possibility of developing distributed processing. So it's very likely that we will have the motion organized products in the robotics. So for this kind of motion parts, they need to receive the signals transmitted by the brains. And as for the detailed sensing like how you smell, how you see, how you hear, we can have to distribute it and more Edge side processing, and we could also have autonomous motion controls, and we can make decisions based on that. And of course, this kind of motion organs, there will be joints, servers, producers, coders, et cetera. And we will also add vision sensing to it. So this is what we mean by organoid smart hardware. And why we want to transfer to that direction or evolve towards that direction? It's because the processing tasks of the brain should be reduced. And also the dependency on the bandwidth of the network should be reduced if it's on the cloud. And if it's on-premise, then the bandwidth should also be reduced because if we put everything into the brain, there are a lot of things to be transmitted and that's too much. And also the organized functions can be normalized or standardized. For example, we can have the -- standardize the [indiscernible], the limbs, the hands, the foot, et cetera. And it should be translated to maintenance and repair. And what's the large-scale production -- should be highly standardized. And therefore, we are able to reduce the cost further. And based on the current development trends, we believe that the organoid motion hardware with the distributed processing may be a form of [indiscernible] that will developed for a long time. And lastly, I'd like to share with you some of our observations about the products, what are the categorizations and trends of those products. And right now, the most of the things we see is the collaborative AI. For example, the smart eye pieces and VR, the smart watches and even the smartphones because they still need to assist the people who are using them. And the second type is called the functional AI and it means that they are not general. They are not collaborative. They can fulfill some tasks independently, but those tasks are very specific, such as the AGV, delivery, robotics or domestic robotics and also the vacuum cleaners and autonomous mowers, et cetera. We call this kind of robotics the functional AIs. And last but not least, with the Edge side AI intelligence further develops, we believe that the universe of AI has the widest scope of application. But at the moment, we cannot achieve that yet. And it still takes some time. But going forward, we believe that the universal AI is able to adapt to multiple scenarios, and that will be the trend. And we have already some deployment in the first and the second type. And for the third type, we are also actively communicating with some of the potential customers. And for the functional AI, we already have very sufficient deployment in the past few years. And in some of the business, we already have over 50% of the market share. And in some other projects, we have over 20% of the market share because the total market size is not large yet, so I believe that the investors are not paying much attention to it. And for the collaborative AI, we mainly focus on the smart IPs and VRs. So in terms of the Edge side AI further develops, we believe that it will promote the traditional hardware to transform into the smart hardware and I believe that a lot of the hardware will be able to have a wider applications in multiple scenarios. And we should also dig deeper into the values provided by those hardware, and we can also develop more types of the products with various formats, and that concludes my introduction. Thank you.

Thank you, Mr. Wang, for your [ accented ] sharing. I believe now that we all have a better understanding of the Edge side AI development and its applications of the vision-based solutions and our Executive Director, Mr. Wang [indiscernible] had just come back from a business trip and he also [ attaches ] a great importance to today's Investor Day. So he has immediately come to our venue after he has landed from the airplane. So let's welcome, Mr. Wang. Next, let's welcome the General Manager of Ningbo Sunny Opotech [indiscernible] to share with us the development of the smartphone market in 2024, the trend of product development as well as our core capabilities, especially the processing capabilities. Dear investors next, I'd like to share with you the handset SaaS-related business. And in 2024, the global economy is growing slowly, but there is a recovery of the economy and the handset market, and we predict that the sales of the global smartphones in 2024 will be about 1.169 billion with a year-on-year growth of 3.5% and in 2024, the smartphone sales in China would be 276 million with a year-on-year growth of 0.4%. And the camera adoptions of the smartphones compared with the previous year would be similar and the affordable phones is expected to grow by about 38.8% year-on-year and the flagship model, focusing on the telephoto image experience and in terms of the aesthetics of the cell phones, we will have a further miniaturization of the cameras. This remains to be a stronger month. And in 2024, the competition continues to be ferocious, but our company has to continue to optimize our product mixture. And our goal is to further focus on the integrated solutions and to integrate the modules, actuators, et cetera, and to enhance our profitability. So with the further development of the technologies for the core components and devices and so we can support the large image size, actuators, and we are the first to support the larger scale productions of the long stroke cameras, and we can have a further miniaturization and high performance of our modules and the competitive edges of the premium products that can be further enhanced and the market share can be expanded and the product competitiveness as well as the profitability can be increased. And in terms of the miniature versus the packaging, we can have the variable aperture and parascopic development and take advantages of miniaturization. And in terms of the flagship high end of products as well as affordable products that we are able to improve the added value and the customer loyalty can be further increased. Reliant on the optical long-board advantages of miniaturization and high-precision assembly, we have achieved the first largest mass production of monochrome color micro LED optical engine in industry. And in this area, we will continue to take advantage of our integration in the vertical sectors, we will create the smallest micro LED with some mono colors and to further expand the gap between us and the run app and our Vietnam plant had already reached a scale effect, and we have the cost advantages and our global production and supply capability will further be enhanced. Next, I'd like to introduce you our product upgrade trends for the handset camera modules. The first is the continuous favorable aperture module. And we wanted to have the image effects catering to all the application scenarios. We cover the things such as the physical learning with large aperture and fulfilled adapts, mainly used in the main cameras of the flagship modules. And the second is that the advantages of the integrated modules between the actuators and the modules and the lens, we are able to have the low shoulder height of the module and the ultra miniaturization of X, Y. So this kind of technology can be widely applied to the ultra thin and foldable phones. And the third part is for one over 4-inch large image format telephoto cameras, the AOA technology can support the separate lens group movement significantly enlarge the amount of the light intake and in constant resolution, and it will create the outstanding portrait image quality and the multifocal lens telescopic as well as the 5-centimeter macro ranks the first in the industry. And the fourth trend is in the continuous optocozoma modules, we have the 24-axis AOA technology, supporting the full focal lens coverage to simultaneously meet the needs of a portrait and telescopic photography. And we can have the nondestructive zoom or the last [indiscernible] zoom. And we can meet the needs of users in various scenarios, and those are all about the upgrade of our module products. To support the module upgrade, we also need the actuator technologies. So at Sunny, we have a very innovative guiding rod structures, and we are able to have the ultra long stroke, very limited tilt actuator. So we can improve the image performance of the large image size contributed to the same handsets, and we can ensure the far and near focus resolution. And in terms of the 3-axis OIS actuator, we have the very exclusive and proprietary technology of the one single layer ball-type cross-slot patent. We can have the high precision optical optimization, provide high stability and the quality photographic effect under the state of motion, and we will continue to expand the scale of mass production and then we also have the periscope actuator for the telephoto large-scale application and the multiple guide rather structured periscope actuator can have the low dynamic tilt combined with the COA, we can reduce the size and to have the high resolution miniaturized variable zoom module. And last but not least, we have the packaging technologies to support the micro-LED optical engine and the full color optical engines can reach 0.4cc and for the mono color ones, we can reach 0.2cc. And for both of these products, we have hit the mass production scale. So just now I mentioned several different product upgrades, and then I would introduce the core platforms. So one is about our ultra compact molding packaging technology, this type of technology not only can we lower our shoulder height and the XY compared with conventional solutions, we can also extend this kind of application in extreme miniaturization fields such as XRs. And for the high precision optic assembly AOA, technology, we use these active and optic alignment system. And for instance, like we can make this [indiscernible] to cover into other optical properties. And third is our high precision actuation technology, just like the motor I just mentioned. And so in terms of the module, in terms of the motor and the lens set all these can be mutual beneficial. And next is about our high precision insert molding technology because we're miniaturized all these different components. So this insert molding has now becoming a key technology in order to achieve all these different technologies and this will become our core competitiveness. So now will be -- our process capabilities. So -- besides the carline for CCM, our actual production line and our extra production line has already achieved industry-leading closed-loop assembly and testing line. And besides these, we also achieved headline for CCM as well. So this all in one is not just about design. But besides the design phase, the molding, the module and the production of the motors can now be offered into the same grade of technology. And that will be all of my introduction. Thank you so much.

Okay. Thank you so much, madam Wong. And so that will be the end of our presentation sharing session. And before we begin our Q&A session, I'd like to reiterate again that our discussion today will not involve financial data, but we'll focus on market developments and technological trends.

[Operator Instructions].

Management, I am from [indiscernible]. And my question is about AI, AI mobile phone because AI is a really hot trend nowadays. So for Sunny, this Generative AI contribution or when you're talking to your clients, is it about input because we have more cameras required. You actually mentioned the smart glasses because in the past, we're talking about XR. But really, I don't know what are the hardwares that we have already talked about that probably we'll see some volumes next year. That's the first question.

So currently speaking, in terms of robotics, both input and output is what we're doing. For input, we're still using some sensors that we mentioned about. For output, it's going to involve navigation positioning, obstacle maneuvers and also the feedback output of the sensors. So we -- that's what we're touching.

So what will be the form of the hardware is going to be like?

In terms of the form of the hardware, one is what I mentioned in the PPT is that for the future, we think that will -- we will be involved in some maneuver joints and also for the case of the robots. That's what we're doing. And for the vehicle-mounted lens, what you mentioned is that we are now -- we have now covered 80% of the clients, right, globally because there -- there's a North America clients takes 20% of the global share. I don't know if it's that already our clients or probably that's what we're focused about today. Yes. 80%, I think maybe there is some misunderstanding here. 80% of the new EV players is what already we got, not 80% of the market share. EV -- is not the 80% EV market share. So if there are 10 EV brands and 8 of them are using our product. Because the market is focusing on the largest EV player right now, are they our clients? I think we need to put some efforts in it, and we're already there. We probably will be there soon.

Managment, I'm from [indiscernible]. I've got 2 questions. One is about AI mentioned by the investors. So here, what I would like to know is that this is a focusing topic by the market. In terms of mobile optics, what are the upgrades you can do?

For -- recently speaking, I think that will be these kind of auxiliary cameras, it will be assisting AI to get input. In terms of module and lens and the motors, they all need to be upgraded. Not necessarily the motor or the actuator, but for the auxiliary cams, we probably will have some touch on them. Then probably will need some upgrades.

All right. And my second question is that last year, the industry actually experienced a pretty intense competition. And so we are looking forward to see your rise again of your report. And thinking about next year, if the overall mobile phone market did not increase and what will be the financial increase of this company?

Well, so today, we actually are talking about technology and trends. And your topic is a little bit over that. And so first of all, in terms of smartphones, recently, we have 2 core topics. One is that our balance of international clients. I think we need to make more efforts on that. In our North American clients, their share is still a little bit far away from the target that we set it. And in terms of module, we probably will need more high-end and mid-tier projects to improve, but what we need as core is what [indiscernible] mentioned that the upgrade of the lens, the core is the constant upgrade and renewal of the products, including the adoption of the new technology. We need to reshape the product structure so that overall, it can pull up our GP margins increase in these related products. So in terms of handsets, next year, this will probably be the direction what we're going to take. And in terms of the automobile industry, [indiscernible] actually mentioned, and we talked about this to the investors know where there is the vehicle awarded camera, so the modules will be a major input for the future.

All right. So can I ask another small question because in the past, the management have really objective perspective towards the market. So are you -- why do you see the volume in terms of AI mobile -- mobile phone for next year? What's volume is going to be like?

In terms of growth, it's going to be there. But in terms of the actual volume and the connectivity between that volume to camera, it's going to take some time because all these mobile phones needs to custom made, right? The industry chain needs to be prepared beforehand, and it will be quite difficult to run through that preparations were going just a year. But the future trend, I think, will be beneficial to that.

I'm from [indiscernible]. And got a few questions here. First one is about the Edge AI because what we're seeing is that on the mobile Edge, right, and for smart driving capabilities on the new EVs because we have got these optical products being used on them. And for the Sunny's capabilities on mobile end, on smart driving end, are there any synergies between them? Or these 2 points, what are the differences between them that we need to throw in different resources, invest in different resources between the AI capabilities of these 2 domains? So I'd like to hear from you.

So I would like to talk about smartphone, all right? So in terms of the phones, because we have limited space and size and for the future, it's going to become lighter and thinner. And so in order for this device to cope with AI to help AI to get the input, that controversial point that request technology breakthrough is to make it even more thinner and lighter, and probably it's going to be -- we need -- there is a certain need for this device to become lighter and thinner compared to past.

So I would like to answer this question. In terms of the automobile edge or end. Actually, there's a lot of synergies that we can take on, first of all, on vehicles, right? We are also pursuing lighter and thinner in terms of components within these vehicles, especially to miniaturize them. All right. And within these handsets that experience that we have in the handsets can be used in the vehicle as well, especially within the cabin because we want them to become senseless to the drivers and to humans, right? And second is that for these modules in the vehicles, the amount of them is growing from a small batch comparing to large batch production. For that model, we actually can learn a lot from mobile end. First like the highly automation capability that we have on the mobile phones and also the automation capabilities that we have in the production line and also the equipment capabilities. And all of them will be beneficial to us. And as the module amount increase, what we're seeing, obviously is that throughout the world, the packaging capabilities that we have for automobiles failed, the world is insufficient. And for the COB technology that we have in the handsets comparing to the technologies that we have of COB used in the automobile industry. This packaging and testing capabilities are insufficient, as I mentioned, that this can be learned from the mobile technology. And so that we can enjoy the synergies within Sunny, especially for the hybrid technology that we have, you can feel it as well, right? And also you need high reliabilities in automobiles and vehicles. And within the automobile vehicles, we need to hit the 10 [indiscernible] your rate, right? And that will be from project management through production. There's a lot of differences that we need to take on in the automotive industry. That is in the consumer industry and automobile industry [ differences. ] So -- also, we have different scenarios in terms of applications. Within vehicles, we have wider scenarios of [ applications ] that we need to cover, right? For instance like minus 40 degrees to 105 celsius degrees, we need to ensure the stability, performance of these optical devices and mechanical devices and also the cabin needs to be stable as well. So within the automobile is actually more challenging than the normal environment, right? And also the antiwear, anti-UV capabilities and so on. All these problems and issues are different from the consumer end. And also within the vehicles, we have higher requirements within automobile, we have high requirements for the quality. So that will be the key, all right.

I have another question. About the vehicle-related products because for the OEMs, there is a higher stress of lowering their price. And this comes from the upstream. So for vehicle camera modules and the LIDARs, there was also a trend of lowering the prices. So what are the products that give you a bigger stress of lowering the price from OEMs? And what are the products you can reduce the technological cost or the project cost?

We do see very heated competitions in automobile industry, and this kind of stress had been transferred from the OEMs into the supply chains. So I believe that for all of these products, they are in such stress, and OEMs do expect to further lower the price. And for us, in some of the new products -- maybe emerging products in a short term we may face bigger stress in pricing because everyone wants to first make a breakthrough and then to pursue a higher margin. And for the more established products at present, I believe that there is a less stress on the profit side. And in terms of the operation with technological innovation, we are able to further reduce the cost and to be more competitive, such as the hybrid technology, how to differentiate ourselves with the technology. And this is something we really need to work on in central environment. And also internally, how can we increase the yield and efficiency and to tap into the potentials. And from the customer side, we can also sense that feeling because our customers are the camera companies and they do have a requirement for the yield, and it's the same for the handset modules. So we not only need to improve our own competitive edges. For example, to adjust the control capabilities, we need to do better than before so that the cost of our customers can also be further reduced. And therefore, we are able to reduce the cost across the industrial chain. And everyone is trying their best to reduce the cost, including upstream and downstream. And what we need to do is to work together and to drive the R&D and to solve the interface problems and we can blow the boundaries and to work together in R&D. And finally, we are able to reduce the cost across the industry chain. So this is everyone's efforts and we're are trying our best to reduce the cost. Thank you.

Indeed, we have a sense to the stress from OEMs and especially with the NEVs. And right now, the NEVs are not making a happy profit especially the Chinese NEVs, and we don't have [indiscernible] making profit right now. So reducing the cost is definitely something we pursue. We should have an understanding or awareness, according to Elon Musk, we need to sell by kilo. And this is the underlying logic or rationale and in terms of the cost it is composed of several parts. The first is design costs. Although we have a lot of the application scenarios we can reduce the design cost even more. For example, we can use some specific materials or the process is to reduce the design cost. The second part is the manufacturing cost. It's related to the volume and the automation level with the larger scale, we can reduce the manufacturing costs. And we do have some chance to reduce the manufacturing costs, but the key lies in increasing the volume. For example, and we don't want to have the exclusive production lines for all the -- several models. And also, we need to reduce the product-related costs and this is something we should always pursue. And if there is a large size to recall, then the quality cost is extremely high. And the compensation you need to pay to the OEM is extremely high. So you need to pay extra attention to that. And also, we need to take advantage of the expertise of Sunny and camera module is very important for us, and we are able to reduce the sourcing cost as well. And by reducing these costs in different aspects, we can better meet the needs of the customers in controlling their costs.

Hello, management. I'm from the CICC. My name is [ Lilia Shang ]. Thank you for hosting today's Investor Day. And in our industry, sometimes we can hear some rumors about your company. So I'd like to take this opportunity to confirm some information with you. The first is that I'd like to ask next year the customer from North America will be further upgraded optical products. And from the industry, we have heard that they are concerned about the variable apertures or the hybrid land sets. I'm not sure whether it's true or not and also previously you provide more or less to the North America company because now they are going through the NPIs and maybe there are some opportunities aligned in the coming modules. So is that true?

I'll answer this question. And regarding the technology called road map of the North American company, we cannot disclose more details. This is the first part of my answer. And the second is that our core right now is to improve our handset lenses business, and there is still a gap between the reality and our goals, and we wanted to hit that goal in the short term and to increase the margin.

So actually, you did not answer this question, then it goes to my second question. It's more general and maybe it's easier to answer. I discussed with some of the other vehicle lenses companies and they believe that their advantage is that for Sunny, you're not only focus on the camera modules, but also the assets and for the conventional models are far real and some other companies are doing that more. So the other companies tell us that you work both on the lenses and the modules. So the module companies do not want to share the margin with their competitors. So when you get in the new nominations we're doing [indiscernible] problem, what is your strategy? How do you define the camera module business of the vehicles.

Well, let's compromise the development of the lenses companies, lenses businesses. So some of the other companies tell us that it's easier for them to get the projects of the camera modules. Maybe [ Mr. Chu ], you can answer this question.

Well, I would like to answer this question. This kind of a phenomenon not only existed for the vehicle, but also for the handsets how to balance the businesses of the lenses and the modules. So actually, they have different markets and applications. And in some occasions, there might be a conflict, but investigations, they are running independently, and you need to balance on relationship with your customers and the suppliers and maybe it seems to be a conflict, but you -- if you can do it well then you can develop both businesses in parallel. So what they say is just a stereotype or a cliche. And this kind of nomina had a long exist for the handset market, and we are confident in our edit capability in handling that.

And the second question is that you have introduced some successful products launched for AI. And you didn't talk a lot about AI but some other companies say that in the second half of the year, Meta is going to launch the AI eyepiece. Maybe you're going to use optical waveguide products. And in Sunny, when will you launch your AI product eyepiece product?

You're asking about the AI eyepiece? And what's the specific question?

So in the second half of the year, Meta is going to launch their AI eyepiece. And one of the companies say that they had provided that your aperture called guided wave products And for Sunny, when will you see such terminal products being launched with your product in it.

Well, to answer your question, you should first note that we have been deeply involved in the development of many of such products. And the Meta is our bigger client as well. for example, they cover VR and AR and AI but about the specific technology road map, I cannot disclose more details. And we are deeply involved in this process. That's what I can say to you and I did not hear that Meta is going to launch an AI eyepiece in the second half of the year. What is your information source. It's a public information. So maybe they will not have the SOP this year, but they will launch this product and another other company said that they had been involved in the geooptical guideways. So congratulations on that company because we are not sure and he already knows this answer. So definitely, we can say that they are ahead of us because we have never heard about such a thing before.

Okay. Thank you for your answer.

Hello management. I am Zhongheng. And there is one question regarding technology. Now on the one hand, we can see the optical upgrade and we -- at Sunny also have deployed some of their premium products. And on the other hand, we can see the quick development of the AI big models and the edge side, there is a wider application. So is it possible that going forward, we have the strong enough software capabilities. And then we don't need that premium hardwares and we can already have a great important output effect. I'm not sure how you understand this question. And also in terms of the software and algorithms what is your plan?

Let me answer your question. This is a great question. The development of AI has made everybody believe that hardware is not that important anymore, but you need to approach this issue from 2 angles. If from a statics point of view, with the empowerment of AI and the role of the hardware will no longer be so important as before because the software wear now comes in. But the issue is this hardware that we need will not be static. I can give you 2 examples to illustrate that the involvement of the hardware issue thing. Because the imaging technology is developing quickly, and now it goes towards 2 areas. The first is from 2D to 3D and in this process without the upgrade of the hardware AI cannot play its role. This is quite understandable, right. Therefore, in sensing, hardware still is very important because AI is responsible for processing, but hardware is responsible for sensing. And now let me introduce you to second area. The imaging we talk about right now is all about the visible light. But in fact, now the direction goes also towards the invisible light. As we all know that in IR and GENAI IR we can have a very quick development and the hardware for not just scenario also evolves, especially for the new IR, it involves both the visible light and some nonvisible lights different from the visible light, and we are now developing the new types of the sensors. For example, we are able to recognize the palmar prints and the vein prints. And you must believe that there is a basic logic for the development of hardware. And of course, AI will greatly support the development of the system and to facilitate its upgrade. And at the same time, it is going to create something that the traditional hardware cannot reach but they are not in conflict with each other. They are not the relationship of a substitutional replacement. I'm not sure whether I have answered your question.

That is my only question.

Hello management. I'm Cherry, I'm back here. Okay. So I've got 2 questions. One, is that I would like to make a follow-up. And [ Mr. Chu ], I think you mentioned you have new product. Now the GP margin is not that -- it's not that high. For the old products, the GP margin is actually higher. Can you actually tell us more about that. What are we doing in the new product? Because you have mentioned self-cleaning 60-mega pixel and all that RVs lower GP margin? You're talking about Sunny's product or you're talking about others products?

Okay. For the new product application, right, for instance, now if you want to use the automobile to turn it into old like the AI HUD, you can take that as new, right?

Okay. Understood. And my second question is that I would like to ask Zhongwei. This week, Elon Musk mentioned that for the future, we're going to have 11 prototype robot being produced. But from Sunny's perspective for these kind of robots -- human like robot, what kind of camera can these type of probably be adapted into it or sensing technology. We have some camera as a product, right? Can you expand on that and tell us about the human -- human life robot and what's that?

Okay. Thank you. I think there are 3 questions. One is Elon Musk mentioned the humanoid, the type of robot, right. I think we can -- they can have a multibillion market in the future. That's the kind of far away, I think. But talking about present, I think it's not going to be like that and there will be more things and materials you can find it on the Internet. But in terms of Sunny's perspective, in terms of camera hardware will certainly Sunny can actually play a certain role in the humanoid. And for the AI algorithm, their capabilities are so good. Are we going to lower the requirements on the hardwares in terms of functionalities in AI if your algorithm surpasses to a certain extent and the hardware requirements will be lower. But for general AI, the hardware cannot be downgraded because this needs to be adopted generally. So the requirements for the hardware needs to be a certain degree. So by doing AI, what Sunny is doing is doing hardware, we can have some upgrades in the hardware, right from 2D to 3D and now in terms of the functionalities of the robot. Now for the 3D binocular visions, has now become a major trend. And another thing as mentioned, like organ like product, for instance like, for these maneuvering sensings and large model age deployments and so on. So for Sunny one is the constant upgrade of the hardware and the age model deployment and another thing is visual and navigation. So for Sunny we need to find values within these points, all right? Is there any other questions that haven't answered.

If we add all these things together, in terms of value-wise, how much is Sunny offering?

And a few years ago, we started to do the camera asset right. In terms of the visual -- vision part, not adding the maneuver parts, the moving parts within the robots around 5%, 2.5% to 5% of that robot. For instance, for the maneuvering part, the control part, the multi-sensing you added that all together, the value will probably goes up as for ASIC. Now we are in a major production phase in AIoT. In terms of the volume, cannot compare to our mobile and automobile industry, all right.

Thank you, management, for the spectacular sharing. I'm Andy. So here, I've got one question. What we're seeing in the past 2 years within the downtrend and within the industry. Sunny actually has holds on to its R&D investment that you have a certain large amount of R&D investments. And this is like 2.5 to 3 and all is here or the managements are here. Can you share with us in the past 2 years, what are the technical perspective and sense -- we can sense that we have a larger gap between Sunny and the components because of the R&D investments. And one of the parts that we can sense that it is now more competing. The counterparts are catching up. Can you tell us that in terms of R&D investment, I think the managements are brilliant enough that for you to invest in the segments that have opportunities. So you can obviously see the risk within that and probably invest in 5, 10 projects. What are the projects that can succeed in the earlier phase, can you tell us that.

In terms of R&D investment for our company, we have a plan for that. From our long-term strategic planning, we already decided how much to invest it in the R&D, it will not putting out this R&D investment because there are some situations appears in the operation of the company. So for the R&D investment, all our different BUs will still follow their own pace to invest in R&D. So all these different business units, what they talk about, they have shared about their own achievements. That is the result of our R&D investment. Besides the use investments in the R&D. The group itself is making investments as well. It probably will be more futuristic or more long-term investments. So within your questions, actually shed a little bit of light on that as well. And so how can we talk about that? I think we don't really have enough time to talk about all of them. So if we have a special day for technological development, so I probably can talk about that. But in terms of the results, the performance of the investments, I think you can tell, right, the handsets, it is not that we don't have opportunities in them for this AI mobile phones, right? There are still changes for the future. There are still opportunities. The vehicle-based equipment, there's opportunities. For XRs, we don't have a significant result of popping up, right? And the humanoid, I think it's in the same category. I think we're in kind of like either dark before the dawn, the automobile industry will certainly be good. The mobile phone was going to be good. I think these are the 2 aces we have. So as long as here, we can invest in enough technology investments. If we have the right capabilities being built up and these business will still be future-proof and we'll still have prosperous futures plus of AR, robotic and other optical applications. I think this is the thoughts behind our R&D investment. I cannot tell you too specifically, right.

All right. I'm [ Yang Hyun ] because I'm wearing glasses today. So I probably I'm going to ask something about the glass. And the Vision Pro will start to be selling here in Mainland China because in May, Google actually demonstrated it's Astra project that is a simplified version of uptake plus AI because Sunny have multiple years of technological accumulations in this domain. So for this type of product, I think comparing to Vision Pro, there's a little bit more lightweight, which one do you think will be a better solution for the future? Because I know that we have -- we all have touches on this different optical solutions. So I would like to know what's your perspective on that and what the industry or what the market is going to choose.

Your question -- it's relatively a normal question, it cope with the what consumers thoughts. They are choosing between light and heavy full function and light function, they are making choices. But when we're using a glasses if I like it, I like it. What is it related to? This is not related to the glass self, right, or the eye. It is related to what's the purpose for you to wear that glass, to wear the glasses what's the purpose behind that you wear that. For instance, like for Meta, Google, Microsoft, or even Apple. They have made their own decisions and now what you're seeing light glasses I can basically make a conclusion that light glasses will be the most welcome product for consumers. But why Apple is doing this for function glasses. They have their own source, right? They have this spacious computing capabilities and so on. And it really related to what are the applications are. If we really need it for instance like designs, right, we need to make it as our productivity tool. This can only be done by using heavy weighted full function glasses or a device or if this is fully equipped and we can improve the efficiencies like if we can, we need to have the united design between U.S., China and so on, right? And then we need this type of functionality. So the form of these glasses is related to what your applications are. And in terms of our deployment within the market of the industry, yes, we've made our deployment with all these domains you've touched on, no matter is an MR, no matter this kind of a lightweight solution or made up plus or Ravin solutions. We have all thinked about that and we have made deployments on that. We are actually following them as well. I don't know if that answers your question. Yes, they understand. And yes, you need to satisfy different clients' demands because they're still in the exploration, right? I think your glass is pretty good, right? If you can put a camera on your glasses it will be even better, great.

And the second question is that MetWin has talked about in robotic visions, right? And there's a question that 3D has now entered in the consumer market. And also we're plusing adding some iToF functionalities within there. And this year, we're not seeing too many products adopting them. Why is that? And how many years later can we see that? Is it going to become a standard equipment for smart phones for the future if you're entering a 3D era, who's going to choose that? Who's going to adapt that?

I think I'll answer that question. So first of all, is it going to become a standard equipment? Or can it -- can 3D become a widely adopted functionality on mobile phones. Is the performance going to be good. If we're not talking about time, maybe not next year, the next after next year, right? From 2D to 3D, I think it's a certainty, right? But what the problems actually lies on the 3D content itself, if we shoot 3D content, how are you going to display it. We don't have a very good way of displaying the 3D content. If we're just watching it, on the normal display we have. And then what's the difference? So it is highly connected to the development of these AR glasses, right? So it's not just for the future the Apple is can sense 3D content. It can shoot 3D content or the phone will have this feature as well. And Canon, [indiscernible], there's a camera, it has 2 cameras on it. It is for 3D content creation. So when 3D content creation and 3D display is mature and all the industries will come up. So 3D will certainly be the future development trend because adding another dimension can makes us have more sense on the things that we looked at. And if we can plus AI on it, it will become even more valuable. And that is on large LLM to deal with the 3D infos and I think it's more available than 2D. That's the trend even if it's not applied right now, I believe that it must be applied in the future. And we want as future go nearer, and we share the same mind and we can work on that together and help everybody think so as we must expedite that process. I'm just the back of [indiscernible] because [indiscernible] is a hub of optical technologies and had attracted about over 20 exhibitions to go. And they are discussing about optical technologies and the Secretary of Zhejiang province was also graduated from the applied physics, focusing on the direction of optics and he understands deeply about this technology, and he also delivered and have our speech.

All right. Thank you, [ Mr Huan ]. My last small question. Because for the vehicle solutions, we have a very high expectations on that. And our road map is the human eye vision plus the robotics vision, but there is a new direction right now and the Chinese market is very quickly. First is the L3, very close to L3 and also for L4 robot taxi and very soon, we may be able to see the robot taxi on the road. And for the PGU, it actually serves for the human eyes. And in terms of the ADAS market share, we rank number one. So between these 2 markets, which one do you think will be larger. And we believe that if ADAS enters into L3 or L4, then there is no much need for the human driver's visions and have you ever considered about that?

Let me answer your question first. I don't think this kind of AI vision has a lot to do with autonomous driving. It's more about assisted driving -- assisted driving. So in terms of the scale, and for sure, the camera module scale is much larger than that of HUD because there are more numbers of the cameras on the vehicle.

I have something to add here. Now when we are developing a product, we can not only look at its name. And it's all about the technologies behind it. It's not only about AR HUD. It's also about the projectors. So the technologies related to the projectors are more important.

All right. Thank you for your answers. Very brief, but they are on point.

Hello management. I am [ Uliaw Zheng ]. I have 2 questions about the RI. The first is the consumer electronics industry chain in China still face an issue of migrating to the overseas market. So my question is about the levers, the facilities in our overseas production bases and in the longer run, how can you short-term the gap of ROI between overseas production based on the domestic ones?

I can answer this question. Many of you talk about our overseas production base deployment. And right now, we still focus on the manufacturing basis. So we build the factories overseas. What we are now do not have many talents in this industry. And what we need to do is to cultivate the talent by ourselves. And after we have built the capacity of manufacturing, we need to spend an extra time, such as several years to cultivate the local teams and talent. And finally, we can hit our goals of production overseas.

Okay. The second question is related to CapEx. So with the micro innovations for the handset lenses such as the upgrade of the pixels and the variable zooms. So in this kind of technological trends, what is the reusability of the products. And with the upgrade of the lenses of the premium modules, do we need to adjust the CapEx for the fraction per unit. What is the trend for that CapEx?

For the handset lenses, we do see the trend of upgrade. And on the one hand, it's about glass aspherical product application, there are more and more of such application and in that end the manufacturing testing are different from that for the plastics product. So we do need to make some investment. And on the other hand, when we are developing the lenses we need to meet the more and more stringent testing requirements. Therefore, in terms of testing, we have made some investment as well. So another thing is about AOA. So it involves the chipset. And for the opticals, it has not involved the chipsets and we can make some testing or modulations, you can call it in different ways. And there is a higher demand for that as well. And one of the reasons is related to the glass as verticals for the plastic aspherical so there is a sheer angle and you can match the angles. But for the glass aspherical's you cannot match the angles you need the absolute precision. So there is even higher requirements for the moderation or adjustment. And there is no standardized device for that. And this kind of device for testing had been impeded to by ourselves, and we have made some investment on that. And for products, especially the large image size products, there is a high requirements for testing such as group by group testing. And for those kind of products, we do need to meet higher and new requirements for assembly and testing. And as you mentioned, there is a continuous trend of the product upgrade and we do need to pay attention to that. And also, we have the multiple apertures, and there is a higher requirement for the product as well. And for different apertures, the imaging curves vary and you need to ensure that for all the apertures they are in their best status and deliver advanced performances and all of these are the new areas for us to explore. So maybe it's not the occasion to discuss more about the technical details, but that is my brief answer.

I am [ Dian ] from Oriental Securities. There are 2 questions. The first question is that some of you mentioned not invisible light business and the expansion of this business. So we have seen some of the downstream companies are expanding this kind of business. For example, previously, they purely focused on optical sensing and now they are expanding to the nonoptical sensing. And also on the other side, in terms of the technologies, well we discussed a lot about the AI's impact on opticals. But on the other hand, AI can also impact the multi-model sensing because it has a strong process in technology. So for the non-visible light or invisible light or in a larger scope, the nonoptical sensing, what's your plan? Will you have more deployment on that?

Actually, I have answered a part of that question. For the invisible light, it's a key area for us in the future. And so we already have the IR technology companies developing very well in that direction. And in terms of the IR, this company enjoys great reputation. And on that basis, and the near IR, we will have a further development and also for the visible light and its integration with other sensing technologies. For example, how to integrate towards this spectrum or how to integrate with the other technologies, such as in the robotics industry, and we can also integrate it with the RDO technologies so maybe 7% are about optical and over 10% is about acoustics. And this will be a normalized backup for the robotics. And previously, what we talk about is multimedia, but now it's more upgraded, and it's more enriched. For example, the force feedback or multi-spectrum and the understanding of the properties of the objects. So that is the situation. And a brief answer is, yes, we do have such plans.

And the second question is about LiDAR. And previously, our expectation about LiDAR was very high, but from about 1 year ago, Tesla started to express some opinions, not so recognizing AI -- I'm sorry, LiDAR. So what I want to hear is what's your perspective about the LiDAR? And is there any changes or updates?

About LiDAR, as far as we know maybe Tesla is taking a different road. They focus on the pure vision, but most of the other OEMs believe that the pure vision should be integrated with LiDAR. And some of the OEMs, even have more than 1 LiDARs. They have multiple LiDARs. And the ultimate goal is the same, but different companies can adapt to different technological routes even they can adopt several or integrated technological routes. And I think it's a question of diversity. And we believe that the future of LiDAR is branch. We are optimistic about its future. Therefore, we still have a normal investment in R&D of LiDAR.

I has something to add about LiDAR, it's more about the depths in the vehicles. There are multiple directions for example. Some companies developed the binocular solutions and some have the dToF solutions. And on both directions, we have made some investments in R&D and our XR and transmitting and receiving end are more related to optical technologies. So for the XR, RX or the transmitters, it's more about the point areas or face areas. And for the transmitters, there will also be some changes of its formats and we believe that this kind of change is going very fast. And for LiDAR and our LiDAR plans, it's very challenging.

Due to the interest of the time, we can take the last question.

Hello management. I am [ Pangea ] and I've got a question here because what we actually are talking a lot about robotics, right, like curation like Elon Musk, right, and from your perspective in terms of robot into vision input or output if you can pick 3 technology that's most important, which 3 technology would you pick?

Input, output? Input and output to pick 3 technology, right, based on the optic technology, binocular will be a trend and now we have these technologies are in parallel, actually, and iTOF and dToF. We have applications as well because actually investors win, why iTOF has not been used widely because there are some interfere issues. And within robotics, we have do a lot of years really a lot of iTOF through optical solutions, and we can raise that problem. So in terms of the optic input, the binoculars is the important technology. And [ Mr. Chu ] actually talked about this as well for us, like LiDAR can actually can have a lot of application in robotic and that includes rotating dToF or area dToF, right, sop phased array. And now structure light and then will is -- don't have a lot of applications right now. In terms of output, if we want to make it more valuable. And then we need to connect the training model between the optical parts and the moving parts. So it's about algorithm of efficient moving controls. So it's not a pure optic issue, and it's multi-discipline issue that we need to tackle. I don't know if I answer your questions. All right. Thank you.

As time is limited we may not be able to address all the questions today. And if you have any further questions, please do feel free to contact our IR team anytime. Thank you for your understanding, and that concludes the session of discussions with the management team. And next I would like to invite our online participants to take a few minutes to complete the survey and evaluate today's event. For those attending offline, we will provide the survey after the [indiscernible] tomorrow morning. The Sunny Optical Tech 2024 Investor Day and management exchange session concludes here. Once again, thank you all for your participation. And lastly, I wish everyone good health and successful investment. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]