So, we continue to see, as we scan the market, both ECARX, all of our markets, a very large and growing opportunity in our space. And carmakers are making fairly significant investments in these technologies. And I think we will continue to do as we go through future cycles. When we look at the ECARX capabilities, the number of unique capabilities that ECARX brings into the market and as we talk with new customers, I think the first one we would highlight very frequently, our full stack solution. So, as we look across our – us in a very tight partnership ecosystem, whether that’s through joint ventures or deep strategic collaborations, we are able to take a very unique self-developed full stack solution from the silicon all the way to the cloud services through the entire full stack of the system capabilities.
And that deep understanding helps us bring a very customized, unique solution built on platforms to each customer. And today, we operate with a very broad set of customers, those that are very cost conscious and extremely cost competitive to extremely premium brands throughout the customers that we talk about in these calls and having that capability and that wide breadth and build on platforms, I think is something very unique to ECARX. The second piece, I think, is speed. I mean we operate at an extremely rapid speed with scale and with high quality. We are able to deliver systems that drive safety, operate at an automotive capability into vehicles at a very rapid pace. We are a company that’s been operating only since 2017, and we have already got 6 million vehicles on the road, and that continues to grow quite substantially.
Last year, we saw a 30% growth in those number of vehicles. So, to be able to operate at that speed with the number of launches in our pipeline with the strong capability, I think is very impressive. And then you talk about scale. Again, 30% growth on a number of vehicles last year, a wide variety of brands and you see the capabilities we are bringing to the international market. These are big differentiators for ECARX as we are talking to our existing customers as well as new customers.
Megan Jin: Thanks and that was very clear. My second question is on the China’s market. I also noticed that there was the fast-growing trend to have more and more advanced features installed in the cheaper and cheaper models in China. And I am wondering how do we think about this trend and how that impacts our business? Especially, how do I think about the competition as we move into maybe more lower end of the product in the market?
Peter Cirino: I think we see the China market is a very dynamic market, right. This market evolved very quickly. Customers move very fast and react to the advancing trends in the industry. And ECARX is a company over our 7 years has done a fantastic job executing in that market, and we continue to do that. There are times we conceive – bring new technologies into a vehicle within less than 12 months. And I think this is something very unique that we can demonstrate that capability and do it with a high quality and at a global quality level certification, and this is something very special for ECARX. I think the market in China will continue to be very dynamic and diverse. For sure, there is a lot of pressure on cost. There is a lot of pressure on competition here, but ECARX has been very successful competing in that environment in our 6 years, 7 years of existence, I think we will continue to do very well in that environment.
Megan Jin: Got it. Thanks for taking my questions.
Operator: [Operator Instructions] And the next question comes from the line of Michelle Liu from HSBC. Your line is open. Please ask your question.
Michelle Liu: Thanks management for taking my questions. I have two, following the previous investors’ questions. And the first one is regarding the customer. Could you just roughly map out the models equipped with our smart hardware this year in both domestic market and in the global market? And what is the pipeline in the next few years as well?
Peter Cirino: Yes, for sure. I mean we don’t – in the environment we are in, I don’t think we always get hyper specific on launches that we see coming. But we have had a great ‘23, especially kind of capped off with the Volvo EX30 launch. I think we certainly talked about the Polestar launch inside of China. We will launch that vehicle at global scale as we go through 2024. We already talked about that. We will continue to see a broad set of launches. I think we have discussed two new customers. We will probably see at least one of them launch vehicles towards the end of this year, so we can start to get more specific on those platforms that are coming. I have mentioned earlier, we are having some great dialogue with some customers in Europe that I think could even produce launches as we go into 2025.
So, that shortening of the development cycle I will continue to see across the global market. And as I have said earlier, I think ECARX is executed extremely well in that tight launch window environment. So, I think we are excited to see that pressure come to the global markets. And you see that we can add a lot of value in our ability to deliver great solutions at automotive grade quality at a very, very fast and rapid pace.
Michelle Liu: Got it. Thanks. And the second one is regarding the cost. Obviously, we note that the computation environment is very fierce this year, and you touched on this in previous questions. And also, we see customers attaching more importance on the smart functions, including the digital cockpit and autonomous driving functions. But the willingness of the customers to pay for this kind of smart hardware or software is not that strong. So, last year, the OEMs, we mentioned in their earnings call that they are going to cut 50% of their smart hardware of the car. So, how do we project our trajectory of cost reduction as well as the overall smart hardware cost reduction in the coming years? Thanks.
Phil Zhou: Thank you. This is also a very good question. So, for cost, because ECARX provides our full stack solution covering computing platform, software and they will have software the ones that features to our customers. So, regarding the hardware solution, for sure, we will drive – and we are driving our cost down activities aggressively. So, there is always no boundary about the cost of optimization. So, we have a large scale. We have a lot of marketing power and we can work on the effective price negotiation with our suppliers. At the same time, as I mentioned earlier, we also put some protection costs into software products. All those activities can protect us from a faster cost challenge. With that, we are able to maintain relatively healthier cost structure in our hardware solution.
At the same time, right, we are investing heavily into our next-generation computing solutions as well. And with that, actually, we can build up our price premium. And we can launch those solutions firstly in the market. And all those time window can gain us a lot of pricing room for us to play. At the same time, our service revenue mix and the service margin mix also play a significant supply of our total business. So, as long as we can deliver our service to customer, winning a faster timeframe and we can satisfy our customer in terms of Peter of those features will comment. We still can make lots of profit from service revenue. So, again, with our software service and hardware portfolio play, at the same time, driving effective customer activity from our hardware, we have full confidence in delivering a balanced profitability in the coming year.
Peter Cirino: Yes. Maybe I would just add to that. I think you also see that in our OpEx results, especially in 2023. We have had this very significant growth in the top line revenue. We continue to invest in technology and produce a lot of launches through our pipeline, and we do that under a very tight cost control from an OpEx perspective in ‘23. And I think we will get better at that as the business continues to scale at ‘24. So, I think we see a lot of the activities that Phil mentioned on the gross margin line, but we also see that in the engineering and technology efficiencies and investments that we are making.
Phil Zhou: Yes. We drove lean operations in our business. And for operating expense, as Peter mentioned, it’s a very effective control. And from a year-over-year perspective, it’s a 17% decrease. And in parallel, we just redeployed our savings from the SG&A to our R&D and the global expansion. So, all those are the right approach to capture our future growth opportunity.
Michelle Liu: Got it. Thanks management. That’s very helpful. Thank you.
Operator: Thank you. There are no further questions at this time. And I would now like to hand the conference over to ECARX management team for any closing remarks.
Peter Cirino: Alright. Well, first of all, thank you everyone for the time and the questions today. I think ECARX, we have continued to execute quite well in an ever competitive environment, but we have done that for many years and continue to anticipate that we are actually well and have the right focus on the growth mindset, but also making the right investments in the business to drive the right behavior in terms of profitability expansion. So, I think we are looking forward to a very exciting 2024 with a number of new activities as we go forward in terms of new launches, new product they would use as well as new customers. So, thank you again for the time you spent with us today.
Phil Zhou: Thank you.
Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.
