Sunny Optical Technology (Group) Company Limited ($2382)

[Foreign Language] Executive Director and CEO, Mr. Wang Wenjie; Vice President and Interim Company Secretary, Mr. Ma Jianfeng; Ms. Wong Pui Ling, Senior Director of IR; Ms. [ Lu Yan Fong ], Director, Investor Relations. First of all, Mr. Wang [ Thang Zong ] will make opening remarks, please.

Honorable investors, analysts, morning. Last night, we published our 2025 annual results, and this is quite a satisfactory report card. AI is bringing to us very wide opportunities. We have already set a new round of RMB 100 billion strategy, and we have planned a clear road map. Even though there are very complicated external environment, and in the industry, there are short-term fluctuations as well. We have much confidence in the high-quality growth in 2026. In Q1, we enjoyed record high results in our operations, and this is laying a very strong foundation for us. So now I will defer to Mr. Wang Wenjie to go through our business results and then the management will be happy to answer your questions. Thank you.

Investors, good morning. Welcome to Sunny Optical Technology's 2025 Annual Results Presentation. Today, I will begin with 4 key judgments to directly address the issues of greatest concern to you. First, Sunny Optical's handset business continue to achieve reverse trends in 2026, building on the implementation of our premiumiization in 2025 to effectively market vulnerability to sustained ASP growth, market gains with key overseas games, achieving the trend growth in our handset business. Second, have established full stack soft algorithm and integrated hardware, software solution capabilities. We have completed the development and engineering delivery of algorithms across the full spectrum of imaging, time caption, demand segmentation. They show nationalization and CD reconstruction. We have achieved the auction of system-level products for warehouse automotive robot AI industrial cameras secured cession in visual and within practical applications such as body intelligence and smart manufacturing. Now this is the capability for large-scale delivery of integrated hardware/software solutions required to bring AI into the real world. Third, in addition to our handset products and vehicle businesses, have identified a high certainty growth opportunities for the [indiscernible]. Growth momentum will stem from the continued expansion of AI-enabled wearable smart hardware and robotics. In the long term, we'll optical forces our core starting point and take that strategic deployment across [indiscernible]. The information of perception transmission, processing, storage, display. By cross applying precision optical optoelectronic integration technologies have been validated through large scale production will under term growth prospects. Fourth, regarding spin-off, our vehicle business, which has affected significant engine, we capitalize on industry dividends through the spin-off at the same time line by reaching an independent catalyzed platform to maximize the value of the vehicles, deepened upstream, downstream collection across the industry chain and going to build an open and mutually beneficial industrial ecosystem. Moving on I will now elaborate 4 [indiscernible] covering a review of our 2025 miss business highlights, future outlook and ESG movement. Let's move on to the first results review of 2025. 2025 outcome achieved revenue of RMB 43.23 million, representing a year-on-year increased 12.9%. Revenue growth is primarily driven by the combined effort of the 3 major segments, and that's vehicles at the pan IoT sector. With the company's diversified business layout getting significant [indiscernible]. On profitability, our full year gross margin stood at 19%, 1 percentage point a year, driven by 2 key factors: first, focusing on more opportunities from premiumization on smartphone imaging. The product mix for lenses, handset lenses and camera modules continuously optimized driving improvement in gross margins of [indiscernible] the continued rise in revenue in vehicle business. In terms of profits, our net profit attributable for the full year at [indiscernible] increase of 71.9%, maintaining high-quality growth despite a hard base investment income of RMB 119 million generated from the equity investment in [indiscernible], the company's net profit grew 37% year-on-year. In terms of cost control, our overall expense ratio of stood 11.6%, down 0.8 percentage compared to 2024. Selling and distribution expenses fell by 2.9% year-on-year, demonstrated significant success in cost management. R&D expenses was up 11.4% year-year as we continue to ramp up R&D investment in a vehicle related businesses to lay a technological function for long term takes our overall expense increase further with target range 10% to 11%. All financial data are detailed in the announcement, so I shall not elaborate them here. Session business highlights for the whole 825. Firstly, handset products business. In 2025, set this achieved steady new growth rising 8.6% on year on the industry as a whole. The core driver this growth are our continuously deepening premiumization strategy and the going to main of our product. whilst ship volume of HS and camera module line ASP saw a significant increase with lens ASP rising by over 10% and volume by 15% demonstrating the remarkable effectiveness of our premiumization strategy. Specifically, revenue from our glass plastic high HRS improved by 95.8% year-on-year. Revenue from risk expenses rose 20.7%, accounting for 18% HLS Revenue from Paris got modules was up 5.9%, accounted for 20.4% of handset modules revenue. Continued press in high-end products have laid for business growth. [indiscernible] be the most ultra-miniaton than technology and AOA ultraprecision technology, we have successfully over numerous challenging technical bottlenecks enabling mass production of multiple products. For instance, our high-performance ultra large aperture cement periscope solution utilizes our proprietary AOA multigroup high precision signal to achieve group access technology breakthrough and so supplier to a certain high and more is our integrated lens water module technology, which has successfully enabled mass production of a car at landfill with a belonging malnutrition and weight reduction. It has been successfully adopted clients flagship high end module. Furthermore in 2025, we committed into units major overseas plans in key breakthroughs across projects being a solidation future growth. Next, the products business. In 2026, and intelligent ride continue to rise. Vehicle optics sector is entering a period of rapid growth. have seen these industry opportunities steadily in easing on to share with key clients, which has driven 21.3% year-on-year increase in vehicle revenue. We have successfully achieved mass production of several products, including 7 pixel ADS cameras, long-range LiDAR, transceiver malls and none glass plant preproduction less. In terms of internal collaboration, our land module teams together to tackle key challenges. [indiscernible] projects, including real Epsilutions and cleaning solutions have passed validation by leading clients. The relevant technological achievements are being rapidly coned into mass product projects foundation for the continued expansion of our core business. Third is the XR business. In 2025, overall revenue from the XR business declined year-on-year, primarily due to weak demand in the VR MR sector and adjust to the product launch those of major clients. However, revenue from our AR smart glasses, camera modules surged by 8% year-on-year. effectively offsetting the impact of the decline in the VRMR business, the same overall gross margin for XR segment reached 19.6%, up 3.8% year-on-year, representing a significant improvement in profitability. In terms of internal synergy, we build collaborated capabilities across multiple subsidiaries optimized management model engage with top additional clients and it service interface to achieve end-to-end coordination of most demand response technology and product delivery. In 2025, we achieved several milestones. Firstly, we success end supply pains of future overseas clients for this pay equipped products. Second, we achieved mass production of glasses and device on Qualcomm AR1 and [indiscernible]. And third, our solutions reference design top-tier international clients. In 2025, a share swap, we completed a strategic mutually beneficial arrangement with [ [indiscernible] that leverages our complementary strengths. By aligning equity interest, we have achieved efficient synergy in technology, talent and industrial resources, delivering 2 key strategic values. First, we're closely collecting to become core technological near-eye display, establishing a world-leading waveguide mass production platform, covering the entire process from [ Kunono ] designed to mode processing and front back-end manufacturing by consolidating our core strength, technology and scale manufacturing. Second, everything, the industrial piece of both companies, we have achieved mutual are customer resource and capital strength establishing a complete chain technology R&D to market implementation and jointly drive the development of AR optics in Fourth, an IoT business. By 2025, our formation into a provider complete smart solutions is put substantial sales we completed the device development and compete mass production shipment, I industrials and AI webcams in the robotic sector, we establish end-to-end development capabilities core modules device, collaborative projects and clients achieve stable mass production and shipment. It is worth noting in where automation projects for leading overseas clients, we have progressed from mass production of individual modules the interconnected system-level products comprising multiple device business on to our capabilities and development certification and overseas servicing of system-level products enabled to successfully enter supply chains of each overseas clients, not warehousing operations. in funding for expanding for the high-value system-level projects the precision is business. In 2025, we achieved breakthrough in mass production capacity for integrated optimisms. -- time, our group formerly established precision company to further strengthen core competitors in the fields of outposition optical veining and loaded thus through our proprietary high-efficiency technology, pressure molding has been significantly shortened. Production efficiency was up Cost per unit fell 21%, laying a solid technological foundation for future expansion into new market segments. Finally, I would like to highlight our achievements in 2025. Regarding implementation of technology and development of our core capabilities of integrated hardware and software. In terms of our implementation, we on scalability and scenario-based applications to drive empowerment across entire production process, forming a close system and compensing governance, training, production cation and data feedback. Multiple AI application scenario have been all implemented. Driven [indiscernible], we have achieved an average 10% increase in UPH on production lines without modifying equipment. Through AI recommended forming machine parameters, we have show product development sales by over 30 AISP visual modeling, we have achieved real-time boost loop interception of noncompleted operations, abnormal risk to process plasma cleaning thereby improving product acceptance. In terms of core capability even leveraging a full R&D expertise optic device, electric and computing. We have developed multimode optical in system and stain end-to-end technical capabilities, spanning option processing and application all cortices of under successful product rotation. This system is based on our 3 multivision matrix and high-precision division sensing solutions combined with driven imaging enhancement technology and edge lightweight intelligent caption algorithms and have already covered scenarios such as optic detection and biometric recognition currently related average mass shipments core algorithm being platform successfully used across all projects. Furthermore, we have mastered high precision multiscalibration and multimodal intrusion technologies. -- buying on a full standevelopment Archit, but we have established an integrated system design featuring hardware, software synergy by fortifying our system delivery barrier, building the system capability, developed a role vision solution featuring between perception hardware, intelligent algorithms, device system has been deleted customized way to several new clients on various indies receiving positive market feedback. That concludes our overview of our business and capacity building achievements in 2025. We will move on to Part 3, outlook for the future. Firstly, handset business. Although the global handset market is forecast to contract by 12.9% and in 2026. We're confident that our handset business achieved growth against the trend. This confidence stems from the sustained increase in ASP driven by a solid program made in our the premium in 2025 as well as the optimization of our customer structure. 2026 will continue to drive both from both the product and clients, further consolidating with more terms. On the product shipments of low no are expected to decline, we'll continue to strengthen our core technological advantage and per vertically integrated solutions to drive sustained volume growth for high-end products. As the in high-end products is several times that of standard products can effectively get industry fluctuation through continued improvement in [indiscernible]. We forecast that by 2026, revenue from last plastic HLS will grow by over 150 Paris and revenue increased by 40% year-on-year. Periscomodule revenue will rise by 8% year-on-year. And revenue from integrated data malls will grow by over 50% year-on-year. These products will deliver stable and predictable profit growth to the buses, becoming the core draws of counter trend growth in handset sector. The trajectory for our client side is clear. Firstly, we continue to increase our overall market share among leading clients, Huawei and so with this growth primarily concentrated in the product lines. Secondly, we are achieving continuous growth in cooperation with major overseas clients, with our 1 market share steadily increasing. Substantial progress has been met on relevant main projects are encouragingly have expanded the product lines. Revenue from major overseas clients is projected to grow by over 100% in 2016, checking signarevenue and growth into the handset business. In TV, we entered that revenue of handset business will grow by 5%, 10% year-on-year with margin for mobile handset lenses stabilized at 25% growth gene target for handset camera models at no less than 8%. Next is vehicle business. Vehicle optics have become a core necessity for smart cards driven by technology and the software find vehicles smart cars are evolving a mere means of transport into a third space that encompasses the entirely. This one will shift nature demands on driving safety in massive cabin experience human-vehicle interaction. And optical solutions are the core foundation underpinning the industrial transformation based on some conviction regarding the long-term growth of this sector and to further unlock development potential of our core business, is pursuing enough listing of the vehicles on the market with the scale of a big offering not exceeding 15%. Objective of this office to utilize dependent capital platform to further amplify the industrial value business, track global talent and simultaneously introduce cornerstone investors with synergies, industry results that are deepening the performant and large capability in the vehicle supply chain. Subject to the Hong Kong Exchange disclosure rules, recruitment of listings those presentation will provide all official information regarding the eco-business without doing into further details. Please refer to our company's official enhancements for subsequent developments. Lastly, the 2026 plans for the XR business. In 2026, due to launch schedule of new product by major overseas clients, the related business within the XR side continued to face pressure, with full year equal revenue approached at RMB 2 billion. We remain confident in the segment's long-term growth primarily due to key certainties due support of growth in core business and the expansion of strategic layout. In 2026, we'll continue to deep cooperation within industry clients to consolidate our global leasing market share. in the industry pain points of lightweight and high integrated AR glasses leverage our accumulated capabilities in optical miniaturization, R&D large mass production to drive the element of pack optical as a system integration modules and other products aligning with the new product development life cost. Gradual [indiscernible] in '26. We're jointly developing optical engines lens competition products with top international clients with mass production of these products scheduled for 2027, which is expected to become a key growth driver for the XL business year. Furthermore, through our strategic equity stake, in Karoli, we're securing strong footprint in the AR optics sector. In 2026, Cortera's overall revenue will reach a new level. Currently, they are advancing pro several major core electronics clients in our sector simultaneously product R&D across various technical parts, ringing solutions for defective we guys nonsolutions different serials such as resin, loan SRC support the utilization of client products. Regarding the whole devices, we'll continue to iterate on products. Existing projects, refine our multi-platform capability and drive breakthroughs more application scenario. Secondly, the large-scale proliferation of heart for real-world AI assistance. The strong sales of overseas clients classes in 2025 have made it clear to us that with the further development of AI technology our AI assistance moving from concept to co-applications. For such a assistant to create real value, the first amen to see the world really. Only by accurate perceiving physic teams through achieve understanding, decision make and value output and the is the refrigeration of such interactive AI leases, serving the. Industry is currently a variety of duties, including AI advances, AI, smartphones with visual capability and desktop hardware regardless of which category achieves market adoption in the future reception will remain a core feature. Consequently, the logic behind the industry is clear. as AI continues to iterate AI-assisted real-world scenarios will runs rapidly, driving continued expand of the consumer hardware market and fueling steady growth in camera shipments. At the same time, etch AI vision is subject to strengthen constraints with computing power consumption and format with this performance being dependent on the quality of raw data from front-end visual perception. Moreover, the more for the AI abilities, the higher demands on accuracy, efficiency and environmental adaptivity of visual perception. These factors will drive evolution of cameras towards maturization low-power concerned, high dynamic range, high redness and distortion, there by continuously enhancing technical specifications and of individual units currently building upon 2 hardware capabilities, we have established a lot waiting system. For consumer rate I heard, featuring tech capabilities, edge side enhancement spatial semantic understanding, steel station post tracking and high-precision reconstruction at a closed range. Through [indiscernible] between algins and Heartbeat, we have established a core missive advantage based on integration of were in hardware, thereby enhancing added value of our products. At the time, we're able to provide composed solutions tailored to clients' needs. -- by continuously strengthening our technological barriers. This represents 1 of Sundyoptical's high certainty growth opportunities for the next 5 years. Fourth is robotics business, a strategic sector in which we're focusing our efforts, and we'll continue to invest carefully. Currently, we have established end-to-end development capabilities ranging from core robotic module, the whole device for typical applications, larose logistics, long and small pool plan. Through in-depth collaboration with industry-leading plans, we're closely building up core visual technologies and visual perception systems for human robots. Future will the technical expertise across upon scenarios to extend our capabilities into more car scenarios, providing critical visual support for practical implementation of the robotics industry. In 2020 an IoT revenue grew rapidly with revenue growth exceeding 60%. both outlined strategic positioning and implementation pace of our various business over 2026, the group's revenue and operating profit are both expected to a growth of no less than 7%. Next, I would like to share with you our long-term strategic access of the convergence of AI and or intersection at an AI information, a common cornerstone makers as the fundamental carrier of information in the physical world whilst AI represents the parade for information across current -- the focus competition AI is shifting from which model is larger or greater computing power entity be stands the lowering the evolution of the world and which can in more into real physical systems. Ecosystem serve has the core gateway through which AI acquires remote data. The performance determines the jet and precision of physical AI standing of reality. Based on this charter, we have divided the evolution of optical perception into 3 progressed stages with only at completed corresponding strategic planning and atin at each site first, which is seeing the world clearly for intelligent systems to perceive the real environments in a stable and reliable manner. They may only recognize the appeal of objects, but also grasp the patio temporary context, relying on high-precision optical percept systems, we are constructing a dimension or spatial, temporal coordinate system, that's perceptible, active and variable. Optical technology capabilities enable AI systems to capture detailed information from the physical world with stability and position. And our comp in this field have achieved a leading global position. The second which is understanding the world. True standing revised not only on algorithms, but all the information capabilities of sensors, traditional RTB vision technology to capture a sense of object. For example, it's not effectively distinguish between an IC road service and the word service, there for technologies such as spectrum, hyperspectral and polyonending are required to the physical property objects, ensuring that understanding is built upon a reliable foundation of optical perception. Our [indiscernible] algorithm platform poses capability to such, develop and implement algorithms for full chain modeling of optoelectronic imaging, multiple physical information present, appreciation spatial post estimation and 3D geometric construction. This enables to cross scenario we use of core arms, providing underlying tech support for a wide range to greater hardware software solution. The third stage involved to participate in execution as the dimensions of visual perception become richer and data was increase, the trial model of submitting the entire video stream to the back-end processing cannot meet the means for low latency, high purity operating and real-world scenarios. Consequently, optic assumption systems evolve computing integrated architecture, deal integrating to the production decision execution closed loop, enabling optical modules not only to submit raw video streams. So to output sure cement streams. Through compute power and algorithms integrated at the sensor and cementation also reasoning and rapid making a completely [indiscernible] a low-latency response mechanism currently, our warehouse automation systems products, robotic systems and AI industrial cameras have all achieved close implementation from perception to execution. As I mentioned earlier, with light serving as the carrier of information, optical perception represents the core entry point for data. We'll take this as our starting point and develop a comprehensive strategy along the information chain depicted in the diagram, sensing, transmission, processing storage display. Today, I will focus on the core hub of the gene, the transmission stage, specifically introducing the optical interconnect that is of such interest to you all. Our natural extension into the field of optical interconnect is underpinned by the fact that manufacturing processes for optical sensing and optical communication device share a high degree of commonality. The technological and process advantages our company has accumulated over many years in the traditional optical can be directly transformed into core support for optical interconnect industry chain primarily manifested in the following 2 aspects. First, the reuse of auto electronic packaging and active alignment technologies. Our large-scale application of COB processes as well as our independently developed in degree of freedom, AA alignment and adjustment equipment enables micron coupling and alignment between optical chips, lasers and optical fibers, ensuring high yield rates and high consistency in optical material packaging. Secondly, the reuse of ultra-precision micro nano optical manufacturing capabilities, leveraging our deep expertise in ultra position machining and coating processes, we can not produce core passive optical interconnect components such as micro length arrays prisms and high-frequency fiber arrays, meeting the core requirements of low loss and low-cost talk and high-speed optical communications. At the same time, to meet the ever-increasing demand for high-speed interconnects and computing networks and data center we have established a strategic focus on silicon-based optoelectronic chip technology. We have already achieved significant milestones in the R&D of core optoelectronic integrated devices as high-speed optical modulators and optical switches. In summary, by leveraging the synergies of these technologies, our forward-looking strategic positioning, we'll be able to establish a clear competitive advantage the field of optical interconnect. Our core high-precision packaging technology will further evolve into the cornerstone for the future manufacturing of intelligent optoelectronic hybrid sensors and photonic chips, a solid foundation for suliopticals rapid development in the AI era. Moving forward, we'll continue to take AX+AI as our core driving force. Leveraging our robust technical capabilities and engineering and manufacturing expertise will continue to deepen our strategic positioning along the information chain, unlocking long-term growth opportunities for the company. Now we move on to the fourth part, ESG outcomes. In 2025, we continue to deepen our commitment to ESG, maintaining an AA rating from MSCI ESG, a globally leading position in the industry. FTSE Russell ESG score rose from 3.5 to 4.0. At the same time, we formally published our first climate-related disclosure report and updated the group's carbon reduct targets to reach carbon peak emissions by 2028, reduced total common emissions by 20% by 2030 and achieve carbon neutrality by 2050, thereby putting corporate social responsibility into practice through concrete actions. Ladies and gentlemen, investors, the curtain has risen on the AI era. Optics serves as the core gateway through which AI enters the real world. And Sunny Optical stands at the very center of this pathway. We possess mature technological expertise, proven business achievements, a clear growth trajectory and a well-defined long-term strategy. We very much look forward to working with all of you our investors to seize the historic opportunities in the optical industry during the AI era and to witness Sunny Optical's long-term growth together. That concludes my presentation. We will now move on to the Q&A session. Thank you all.

[Operator Instructions] The gentleman on the first row on the left, please.

I'm Huatai Securities, Huang Leping. Congratulations on your very good results. I have 2 questions. First question on the last slide, so there are 5 development stages, AIs optics development plan. My question is, first, right now, looking at last year's R&D expenses of RMB 2 billion, what is your future R&D plan in the future? Now most of your revenues are from perception related products. So if you want to realize revenue. So apart from those perception-based products, what about transmission-based products, how much revenue will be realized in the future?

Okay. Let me answer your question. originally, concerning our plan, well, it is made in relation to the industrial operations. So starting 2025, apart from making plans in the industry, our departments, our business departments have made many different plans and deployments. So as you know, we will establish many research institutes in Shenzhen, in Europe. And of course, we have other plans, which we cannot disclose now. In terms of core semiconductor production and packaging. So in areas where more advanced. We have already made some plans and deployments. So our consideration of this matter is that we have been paying attention then the volume and the scale was not big yet. for optical modules like 100G and so on, that are a bit more established than the investments and also the launch products are not many, but no opportunities have emerged. Now for our handset business, it has declined. That is because of the internal storage. Whereas inner storage, it has gone to the computing power. So for computing power development after that -- well, originally, in terms of technology, investment and output in the past return was not that good, but now it has changed to a more positive situation. So I have to solve a number of problems, for example, power consumption and also power supply. That needs new technology. So I think now we have a very good solution to the problem. So if you talk about the optical transmission, the information volume is a few hundred times, not a few times. So when it comes to resources consumed, it is totally different.

Now for computing power center, we have intelligent systems. And now they are very active. How do you put it? I think we need to make use of intelligent way to enhance and ensure ourselves. So we think that this is the broad direction. However, at what time are going to see how much sales or revenue?

Well, I can give you an answer now. There are many big manufacturers. If you ask them, not even they can tell you the answer. So I think that it will be quite fast. It is not true that we did not know about it in the past in the past, the input output is not satisfactory. Now everybody is developing in this direction. And the big companies are striving to promote this direction. So we think that there will be many opportunities. So establishment of research institutes, both domestically and overseas is something that we will be working on in the future. there will be some new updates from us.

Second question is about XR. So now for VR, it is already quite stable. For AR, apart from the first one in the U.S., the second manufacturer is also launching many open platforms and new platforms. So what do you think about the XR market this year, revenue declined slightly. So when product format changes from VR to AR, then what would be the change in the volume for you? And then in the AR product line, if volume rises, then at what time do we need to pay attention to what so as to embrace an explosion stage?

Now looking at the current situation, for VR, it is already fixed in shape. So it is an expansion screen mainly to solve the gaming experience and scenario needs. In the market, there are already many products in use. For example, Quest series that you know, Apple Vision Pro and also in recent years, for whole device plant, a lot of immersive glasses have been produced. So whether these products can sell or not, how much is the DAU, how many -- what is the number of DAU. So for Vision Pro, the first day about it, I found it very exciting. So I spent the whole afternoon working with it. And then on the second day, I spent 2 more hours to sort things out. And on the third day, and then on the third day, I find it too heavy. So afterwards, I no longer used it. So it is a good product. Of course, you can use this kind of glasses in other scenarios. Now for VR in the past, the perspective was about experience. So now I think everybody is quite clear of it. So I don't think there is the possibility of achieving breakthrough in volume growth. But for AR, it's different. It is still evolving. For new products, new launches, there are many. As we all know, international big clients gave different numbers, and they are achieving forward. So for companies that are not working on hot where they may have 2 ROCE picture about the world, but then things are not that fast really. But the mentality has changed. In the past, we're talking about display. But then later on, when there are new products launched, it is not related to display anymore. So for display, I think it is about information delivery. It is still needed. I think XR is going to see very good development. So with these glasses, they are used to acquire and collect data. I think this kind of users will increase. Besides, it is like the AI brain and it is then connected to your own brain. It is like the half, linking these 2 sides. So if this is the perspective, then I think the AR glasses will see very good development. Of course, we need other market -- favorable market circumstances. When it comes to volume explosion, just now the investor asked a question. There are other big companies doing a lot of promotion. Our plan is that we will start mass production in 2027. Now we are doing preparation because there are many ecological or ecosystem software issues. There are more and more companies participating in the field. This shows that -- this industry will develop even faster. In the past, I thought it would happen 5 years later. But then now it would be within 5 years. I think within -- or after 2 to 3 years, we'll see a stage change. That will be the situation.

Next question, please. The gentleman on the first row.

I am Tony Zhang from CLSA. Recently, I can see that your company has cooperation with different subsidiaries in terms of equity, for example, the vehicle business. So now regarding investment strategy. So in which areas will you cooperate with external parties? Are you going to bring in new investors? And which new business development will you aim at? So what is the outlook and plan, please?

Right. In my results presentation just now, basically, I had already given clear explanation on this point. So for vehicles, we would bring in many ecosystem, supply chain working partners. Now our present, we would like to make our company more open, and then we hope to achieve win-win with more synergy in ecosystem development. So in the past, we did not this kind of equity or shareholding change, for example, M&A or spin-off or collaboration. -- did very little in the past but in the future, we'll do more of this. We think that in this front, we cannot only rely on our self-fitting the battle. We have to work with ecosystem so as to achieve further development. Then we can -- each party can capitalize on its own strength, that is a better method. Well, I also explained about some new technologies. You will notice that technologies are developed jointly by us and our partners. That would be better.

All right. Next question, the gentleman over there on the first row.

My name is [indiscernible]. So I want to talk about optics plus AI. That slide with components. So you have a saying that optics and AI in combined, this is the future era. So now we are in the perceptual dimension. And just now, you also said that in the future, you will gradually extend from physical world to transmission, transmit processing and even intelligent agent. So my question is for Sunny Optical, in the future, regarding value layout, how is your plan employment? And for the long cycle, in which areas will you focus more on in your development?

This is a very good question. So this is also an important issue in our long-term strategic plan and consideration. Internally, we have gone through a lot of discussion and consideration. So now what we have described includes things that we have considered. So how should we explain in easier terms I think I can talk about the change process of our thinking and also our collaboration plan. We work on mass production optical products, I think you have much understanding. In the past, you saw our large-scale production highly efficient production and automated production, large-scale production. So many of our technologies are developed towards this direction each First of all, we'll continue to insist on this direction because it doesn't only bring us cash flow. It is also a fundamental support for our long-term development. However, with the AI era, we know that between optics and AI that can be favorable combination for joint development. Then, of course, we have to give deeper thoughts to this matter. So regarding mass production, precise, large-scale production, we will turn it to production and system solutions. Both will coexist. So a few years ago, we started to make this point already. So that means we want to develop toward system solutions. And the core is software and algorithm. What is the difference with other people, software and algorithm, this is the problem that we need to solve. So we focus on optic reception, optic solutions. Regarding software and hardware, our core modules and optical instruments, but they can be strongly connected with our algorithm and other capabilities. So we can enhance its efficiency and also it can achieve low latency. A few years ago, I already said that our Micro core image detection, AI software is even faster in recognizing image than many internationally acclaimed AI professors. And I asked how come that's the case. and that professor said that this is definitely possible because you are using hardware and optical parameters. So efficiency can be enhanced. So your algorithm speed is faster than mine. So this is definitely possible. So optical front and hardware and the we are software algorithm combined, then I think we have the advantages comparing with the pure software. So in the future -- in future, optical perception intelligence system, I think this will play a very important role. That's the first point. Secondly, we are working on uptake hardware and core components. So that means we use the optical method to reach evolution. Many technologies are actually common. In the future, the algorithm will be multidimensional, information collection. Now we are RTP. And then I think you know future evolution and future -- in the future physical information and then spectral information and so on. So in the future, will be a perception intelligent agent on multi dimensions. I think that is our broad development direction. In the future, our glasses and our personal assistance will be equipped with these. And then the second area if you refer to the slide after perception transmission well, if you talk about these technologies, perception transmission seems to be separate. However, many fundamental technologies are the same. We are talking about the optic glass functionality. We always consider different light sources and also optoelectronic conversion. So basically, when it comes to transmission, storage, computing, these are all related. And we have to make use of the unique characteristics of optics to do the work. So in the future, in the area of optics technology, we will achieve more breakthrough and we'll do more research so that in the future, in the AI era. our capability and technology can meet the huge needs. So these are our 2 directions. One is the perception intelligent agents. Second, on the foundation of optics, we will expand lay out the fundamental pathway so that in the future, in the AI era, we will process strong optical fundamental capabilities will become a optical perception intelligent agent company.

Okay. Next question, please, the lady on the second row.

I'm Bernstein, Alex. My question is about AI optic communication. In the future, will your products be within traditional optic modules or it will be a CPU packaging technology Well, the direction is definitely the latter one. And it's possible that in the former one, there might be some connection, but we will definitely develop towards the latter direction because if I still focus on the former one, then it is not that meaningful? Okay, in the PPT, so you listed out some processes. So in which area are you going to increase volume? Is it about coating or the micro lens? So have you said strategies to build research institutes or is it true that your products are already in late-stage research? And then next year, the year after next year, there will be commercialization?

I don't know how to differentiate the stage. Definitely, we are not in planning stage. We are not in the planning stage because as I said earlier, we already have colleagues doing the advanced work. Because it was still -- it was early back then. Now there are more and more opportunities. So people come and ask whether we can do this and that. In last year, no one asked these questions. So people still have a lot of doubts. So what is the value behind. People still have those, but this year, it seems that the situation is different. But the technology is different. There are some investor companies which are very good. Their products are already used very widely. So we have to seize the path in which we are more competent in. We should not do things that we are not strong in. If you talk about opiate modules right now, the light is very small. The light is very small engine. The others are points. So we will connect this with optoelectronic conversion. So you just talked about optic fiber, matrix and so on, those are our major directions. I believe actually, in 27, 2028, there will be a lot of new things coming out. Of course, we have to work with our clients. So we do have internal plans and schedule but I think it is not the right time to disclose it yet.

My next question is about handsets. Overseas handset customers this year may enjoy a big increase in revenue. Is it true that it is related to North America variable aperture or that there is some progress with Korean customers?

Well, I did not mention the North American customers and Korean customers, definitely, it is a big customer overseas. And there is some certainty in the growth. You cannot say more because otherwise, if I give too much details, I will be fined.

Okay. The lady on the fourth row. Because of time, this will be our last question.

I'm an Wen Hanjing from CICC. Because of time limit, I will ask a more detailed question. This year, we can see that storage has caused impact to consumer electronics. For high-end camera this year, there won't be a big threat to the business. And this year, regarding handsets, regarding pressure phase, if you do a breakdown in different price range, what do you think?

Okay, handsets, correct? You want me to talk about handset. Okay. For handsets, you are worried about sales decline. But as I already said just now, we will not suffer from a decline. Of course, we have to work hard, and we will be able to achieve our established plan and targets Well, just now the question, one question was about overseas clients. I won't talk about it for our Chinese clients. They did not all decline. There are companies which enjoyed very good growth. And for that company, we also have very good business relationship. So with the growth, we also will enjoy growth together. This is a very important point. And such growth is high end as well. You know about that customer. There is this only clients for Chinese brand that is growing. At the end of last year, their plan was 50% growth. And in the first half of this year, they will still have some new plants coming out. So under these circumstances, it is not easy to achieve a high growth. So there will still be growth. And then for a storage issue, some people are of the view that in the second half of the year, it will be alleviated, especially starting from Q4. But the point is for new storage solutions, are there any other new storage solutions that will come out. But I think that things will not happen all of a sudden. In Q4 last year, all of a sudden, they realized that, that was not enough. That's not possible. So I think the type situation has been there already. And in the future, I think there would be some alleviation. So for handsets, we do admit that this year, this business is not good. And in fact, the situation is very painful. Many people have the to other business or industries.

Okay. So I think we have taken a lot of time already. Okay. So we will conclude our presentation here. Thank you for your participation. Goodbye.