Himax Technologies, Inc. (NASDAQ:HIMX) Q4 2023 Earnings Call Transcript

Furthermore, our touch controller supports multi-finger capacitive touch is compatible with multiple OLED panel types and has the capability to cascade multiple chips in support of larger than 20 inch displays. With project awards from leading AMOLED panel manufacturers, our automotive AMOLED touch controller is poised to commence mass production in the upcoming quarters. We continue to strive forward. We continue to strive towards providing the most extensive array of automotive display solutions in the market. This commitment involves fostering robust partnerships with panel makers, Tier-1 suppliers, and car manufacturers across the globe ensuring comprehensive solutions that cater to a wide spectrum of customer preferences and industry requirements.

In terms of our smartphone and tablet product lines, we continue to see lackluster demand in the market. On a positive note, our inventory has substantially rebalanced to a satisfactory level. With the destocking process nearly complete, we placed wafer starts for select products starting in Q2 last year. Concurrently, we are diligently working on improving our cost structure through supplier diversification and strategic alliances, thereby positioning ourselves for an anticipated resurgence in demand. Next for an update on our AMOLED business. As I mentioned earlier, we are actively venturing into AMOLED market by forging strategic partnerships with leading panel manufacturers in Korea and China, spanning a diverse range of applications: including automotive, tablet, notebook and smartphones.

As I just covered, we have made great progress in automotive, tablet and notebook markets where we offer comprehensive solutions covering DDIC, Tcon and touch controller. Mass production for most of these new solutions is expected to commence in the second-half of 2024. In the smartphone AMOLED display driver segment, however, the prevailing slowdown in smartphone market demand has led to adjustments to our initial timeline. Nevertheless, collaborations with customers in Korea and China are ongoing with verification and partnership projects underway, I would like to now turn to our non-driver IC business update. First for an update on our Tcon business. We expect Q1 Tcon sales to increase by single-digit sequentially, driven by increasing Tcon shipments for automotive displays and OLED displays for tablets.

Despite subdued end market demand, we are actively developing next generation Tcon IC for OLED tablets, notebooks, and automotive applications. The initiative aims to broaden and diversify our product offerings, while also positioning ourselves to capitalize on a market resurgence. Thanks to our cutting edge local dimming technology, Himax is the industry leader in automotive Tcon with an unchallenged leading position of over 100 design-wins projects under our belt. At CES 2024, we unveiled our latest local dimming Tcon, which features advanced image enhancement with wide color spectrum ensuring exceptional visual quality that supports resolutions of up to 12Kx1K, and exceptional dynamic contrast enhancement tailored to real time display content, all while adhering to power efficiency and stringent automotive safety standards.

The rapid increase in customer adoption reflects the growing traction and trust in our solutions. We expect a decent growth trajectory for the local dimming Tcon over the next few years. Switching gears to the WiseEye Smart Image Sensing total solution, a cutting edge endpoint AI integration featuring Himax’s ultra-low power AI processor, always on CMOS image sensor, and advanced CNN-based AI algorithm. During CES this year, we highlighted a range of application demonstrations, which have swiftly gained adoption across various domains, featuring our industry leading ultralow power and potent AI capabilities. We achieved noteworthy progress with customers, particularly in implementing WiseEye in smart door locks. The collaboration with the China smart door lock leader, DESMAN, marks a groundbreaking feature advancement in the door lock industry as our ultralow power WiseEye AI, with remarkably low power consumption of just 1 milliwatt, enables the world’s first smart door lock featuring uninterrupted surveillance with 24/7 real time sentry monitoring, while at the same time significantly extending battery life.

We also showcased an adoption of WiseEye in a capsule endoscope, a highly encouraging advancement in the medical area. Our WiseEye AI solution empowers tiny pill-sized capsule endoscopes, which are easy to swallow, facilitating smooth medical examination processes. The device consumes minimal power to sustain continuous image capture and transmission for up to 12 hours. This creates significantly simplified medical process, which compared — when compared to conventional procedures, which often involves the use of invasive endoscope tubes. We are excited about the potential for this transformative development for the healthcare industry and expect to commence production with the customer in 2025. Turning to an update on WiseEye2, our new generation AI processor.

We are honored to report that WiseEye2 was awarded the 2023 Best AI Product Award by EE Awards Asia, further elevating Himax’s WiseEye AI prominence in industry. WiseEye2 is pioneering a new standard in endpoint AI benchmarks, earning recognition for its outstanding AI inference capability, industry leading ultra-low power efficiency, and advanced security features. In the realm of context aware AI, WiseEye2 facilitates high precision detection with features such as face mesh, facial landmark, hand gesture and human pose and skeleton, which expands the intuitive, user friendly scope of interactive applications in real life, all achieved with minimal power consumption. Moreover, WiseEye2 streamlines the system integration with a rich set of peripheral interfaces, effectively lowering the system costs for edge application — appliances by eliminating the need for costly, power-hungry discrete MCUs otherwise required to process various sensor data.

Additionally, WiseEye2 boasts versatile sensor fusion capabilities encompassing image, video, audio, vibration, and thermal inputs. This enables sophisticated, integral and highly accurate detection with low latency, especially suitable in anomaly detection with timely warnings, making it an ideal solution for a range of industrial applications, notably in automated and unmanned factories. Alongside our ongoing collaboration with end customers, significant progress is being made in partnerships with major CPU and AP SOC players in preparation for their next generation smart notebooks, AI PCs, surveillance applications, and a host of other endpoint AI applications. We will provide more details as they come about. Concurrently, to meet various application requirements and context — and extend market reach we are in collaborations with numerous ecosystem partners and system integration companies offering hands on development tools and rigorous AI models to streamline customer development efforts and reduce cost for their AI product introduction.