Himax Technologies, Inc. (NASDAQ:HIMX) Q4 2025 Earnings Call Transcript

Himax Technologies, Inc. (NASDAQ:HIMX) Q4 2025 Earnings Call Transcript February 12, 2026

Himax Technologies, Inc. misses on earnings expectations. Reported EPS is $0.036 EPS, expectations were $0.04.

Operator: Hello, ladies and gentlemen. Welcome to Himax Technologies, Inc. Fourth Quarter and Fiscal Year 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I will now turn the conference over to Karen Tiao, Head of IR/PR at Himax. Ms. Tiao, please go ahead. Everyone.

Karen Tiao: My name is Karen Tiao, Head of IR/PR at Himax. Joining me today are Jordan Wu, President and Chief Executive Officer, and Jessica Pan, Chief Financial Officer. After the company’s prepared comments, we have allocated time for questions in the Q&A section. If you have not yet received a copy of today’s results release, please email hx_ir@himax.com.tw or himx@mzgroup.us, or download a copy from the Himax website. Before we begin the formal remarks, I would like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements. They involve a number of risks and uncertainties

Karen Tiao: only

Karen Tiao: for those described in this conference call. A list of risk factors can be found in the company’s latest SEC filings, Form 20-F, in the section entitled “Risk Factors,” as may be amended

Karen Tiao: Except for

Karen Tiao: the company’s full year 2024 financials, which were provided in the company’s 20-F and filed with the SEC on 04/02/2025. The financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFRS accounting. Such financial information is generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and external audits by independent auditors, through which we subject our annual compiled consolidated financial statements, and may vary materially from the audited consolidated financial information for the same period.

Karen Tiao: On today’s call,

Karen Tiao: I will first review Himax’s consolidated financial performance for the fourth quarter and full year 2025, followed by our first quarter 2026 outlook. Jordan will then give an update on the status of our business, after which we will take questions. You can submit your questions online through the webcast or by phone. We will review our financials on an IFRS basis. We are pleased to report that our Q4 profit was at the high end of the projected range issued on 11/06/2025, while sales and gross margin were both in line with the guidance. Fourth quarter revenue registered $203,100,000, representing a sequential increase of 2%, better than our flat quarter-over-quarter guidance. Gross margin was 30.4%, in line with our guidance of flat to slightly up from 30.2% in the previous quarter.

Q4 profit per diluted ADS was $0.036, at the high end of the guidance range of $0.02 to $0.04. Revenue from large display driver came in at $21,700,000, representing an increase of 14.2% from the previous quarter, outperforming our guidance range of a single-digit increase sequentially. This was primarily due to the rush order for both the TV and notebook IC legacy products from panel makers.

Karen Tiao: Customers’ restocking of

Karen Tiao: TV and monitor IC products, along with new notebook TDDI projects entering mass production during the quarter, contributed to the sequential increase. Large panel driver IC accounted for 10.7% of total revenue for the quarter compared to 9.5% last quarter and 10.5% a year ago. Revenue from the small and medium-sized display driver segment totaled $139,100,000, reflecting a slight decline of 1.3% sequentially. Q4 automotive driver sales, including both the traditional DDIC and TDDI, increased approximately 10% quarter over quarter, largely driven by widespread adoption of our market-leading within TCP technology among major customers across all continents. Despite softness in the global automotive market, our automotive driver IC sales for the full year 2025 grew single digit year over year, outpacing the broader market.

Meanwhile, revenues for both smartphone and tablet IC segments declined quarter over quarter, as customers pulled forward purchases in prior quarters.

Karen Tiao: Let’s

Karen Tiao: small and medium-sized display driver IC segment accounted for 68.5% of total sales for the quarter compared to 67.8% in the previous quarter and 70.3% a year ago. Q4 non-driver sales reached $42,300,000, a 7.9% increase from the previous quarter, primarily attributable to increased ASIC TCON shipments to a leading projector customer, along with robust TCON demand for automotive application. TCON, Himax continued to hold on to its undisputed leadership position with a dominant market share in automotive TCON.

Karen Tiao: TCON business

Karen Tiao: accounted for over 10% of total sales, with notable contributions from automotive TCON. Also during the quarter, our automotive OLED on-cell touch IC entered mass production with a leading brand, marking another milestone and strengthening the foundation for future growth. Non-driver products accounted for 20.8% of total revenue, as compared to 19.7% in the previous quarter and 19.2% a year ago. Fourth quarter operating expenses were $54,900,000, a decrease of 9.6% from the previous quarter but an increase of 11.6% compared to the same period last year. The sequential decrease was mainly attributed to a reduction in the annual employee bonuses and the depreciation of the NT dollar against the US dollar, partially offset by an increase in payroll expenses.

As part of our standard company practice, annual cash and RSU bonuses are granted at the end of September each year, leading to higher IFRS operating expenses in Q3 than in other quarters. The year-over-year increase was primarily driven by the increase in tape-out expenses. Salary expenses and appreciation of the NT dollar against the US dollar were also behind the year-over-year increase. Amid the ongoing macroeconomic challenges, we continue to emphasize strict budget and expense controls.

Karen Tiao: Fourth quarter operating profit,

Karen Tiao: was $6,800,000, representing an operating margin of 3.4% compared to negative 0.3% in the previous quarter and 9.7% for the same period last year. The sequential increase was the result of the increased revenue and higher gross margin as well as the lower operating expenses. The year-over-year decline reflected the lower sales and gross margin, coupled with higher operating expenses. Q4 after-tax profit was $6,300,000, or $0.036 per diluted ADS, compared to $1,100,000 or $0.006 per diluted ADS last quarter and down from $24,600,000 or $0.14 in the same period last year. Now let us quickly review the financial performance for the full year 2025. 2025 was a challenging year for the global economy, shaped by tariffs and geopolitical uncertainty, and the customers generally maintained a conservative and late order strategy with a lean inventory level.

While consumer electronics demand remains soft, automotive and AI-related applications where Himax has strong exposure proved resilient. Despite disciplined expense control,

Karen Tiao: our full year 2025 operating expenses increased by 1.1% as we successfully invested in select non-display

Karen Tiao: IC areas with compelling long-term growth potential, some of which are poised to ramp meaningfully starting in 2027.

Karen Tiao: Refreshed market conditions

Karen Tiao: our 2025 full year revenue totaled $832,200,000, a decline of 8.2% compared to 2024.

Karen Tiao: Revenue from large

Karen Tiao: panel display driver IC totaled $90,700,000 in 2025, a decrease of 28% year over year and representing 10.9% of total sales as compared to 13.9% in 2024. Small and medium-sized driver sales totaled $575,100,000, reflecting a decrease of 8% year over year and accounting for 69.1% of our total revenue, as compared to 59% in 2024. Non-driver product sales totaled $156,400,000, an increase of 7% year over year and representing 20% of our total versus 17.1% a year ago.

Karen Tiao: Gross margin

Karen Tiao: in 2025 was 30.6%, slightly up from 30.5% in 2024. Operating expenses in 2025 were $210,200,000, a slight increase of 1.1% from 2024, primarily due to the increase in tape-out and salary expenses as well as the appreciation of the NT dollar against the US dollar in 2025, partially offset by the lower employee bonus compensation compared to last year. 2025 operating income was $44,100,000, or 5.3% of sales, as compared to $68,200,000, or 7.5% of sales in 2024. Our net profit for 2025 was $43,900,000, or $0.25 per diluted ADS, a decline from $79,800,000 or $0.46 per diluted ADS in 2024. Turning to the balance sheet. We had $286,200,000 of cash, cash equivalents, and other financial assets as of 12/31/2025. This compared to $224,600,000 at the same time last year, and $278,200,000 a quarter ago.

Q4 operating cash inflow was $15,800,000 compared to an inflow of $6,700,000 in the prior quarter. We had $28,500,000 in long-term unsecured loan, with $6,000,000 representing the current portion at the end of 2025. Our year-end inventory was $152,700,000, an increase from $137,400,000 last quarter, but lower than $158,700,000 a year ago. Accounts receivable at the end of December 2025 was $200,900,000, little change from last quarter, but down from $236,068,000 a year ago. DSO was 88 days at the quarter end as compared to 87 days last quarter and 96 days a year ago.

Karen Tiao: Fourth quarter capital expenditure

Karen Tiao: was $4,000,000 versus $6,300,000 last quarter and $3,200,000 a year ago. Fourth quarter CapEx was mainly for R&D related equipment for our IC design business. Total capital expenditure for 2025 was $20,100,000 as compared to $13,100,000 in 2024. The increase was primarily due to the construction in progress for the new preschool near our China headquarters built for employee children, with completion expected by 2026. As of 12/31/2025, Himax had 174,400,000 ADS outstanding, little change from last quarter, and on a fully diluted basis.

Karen Tiao: The

Karen Tiao: total number of ADS outstanding for the

Karen Tiao: Now turning to our first quarter 2026 guidance.

Karen Tiao: We expect Q1 revenues to decline 2% to 6% sequentially. Gross margin is expected to be flat to slightly down, depending on product mix. Q1 profit attributable to the shareholder is estimated to be in the range of $0.02 to $0.04 per fully diluted ADS. I will now turn the call over to Jordan Wu to discuss our Q1 2026 outlook. Jordan, the floor is yours.

Jordan Wu: Thank you, Karen. Overall, market conditions remain under pressure from ongoing macroeconomic uncertainty. Recent shocks, price increases in memory further weighed on the market sentiment for electronic products. However, compared with consumer products, the automotive segment, which accounts for over half of Himax’s total sales, is more immune to memory price fluctuations. That said, our visibility for the whole year outlook of the automotive sector remains limited amid the backdrop of uncertain government policy and consumer sentiment. However, we expect the first quarter to be the trough of the year with sales rebounding in the second quarter and business momentum continuing to improve into the second half, supported by lean customer inventory levels and new projects for automotive customers scheduled to enter mass production later in the year.

In addition, continued growth in our non-driver IC businesses, particularly TCON and the WiseEye AI, should provide incremental support. In the automotive display IC business, we remain optimistic about our long-term business outlook.

Jordan Wu: Back

Jordan Wu: by our leading new technology offerings and strong design win pipeline. In DDIC and TDDI, we have already secured hundreds of design wins, commanding 40% market share in automotive DDIC

Jordan Wu: and over half

Jordan Wu: in the global TDDI market, and a substantial lead over competitors. Concurrently, Himax has also established strong technology leadership in all emerging automotive display areas, including automotive TCON with advanced local dimming functionality, LTDI for large size automotive displays, advanced TCON solutions for advanced head-up displays, automotive OLED panels, and micro-LED technology.

Jordan Wu: The growing number of customers

Jordan Wu: are accelerating the adoption of these advanced display technologies in new vehicle models, driving new growth momentum for Himax’s automotive display IC business in the years ahead. The automotive market still offers significant asset potential driven by rapid innovation and ongoing advancements.

Jordan Wu: In

Jordan Wu: smart cabin, this refers to more visible, vivid, intuitive, immersive displays such as head-up display, curved display, large size SUV or windshield, micro-LED for both interior and exterior of the vehicle.

Jordan Wu: And

Jordan Wu: despite the economic uncertainty, beyond our main business of display IC solutions, we continue to expand into areas such as ultra-low-power AI for endpoint devices, front video cross-cycle display, and waveguide for AR glasses, and WLO for co-packaged optics. All these technologies are seeing exciting ideas.

Jordan Wu: Driven

Jordan Wu: by the recent

Jordan Wu: breakout

Jordan Wu: of AI. As adoption continues to broaden, some of these technologies have already begun translating into real-world applications, with more expected to follow suit in the near future. We expect these initiatives to become new meaningful growth drivers, while also improving our product mix and overall profitability. Some of these advanced technological capabilities were showcased through multiple live demonstrations at CES earlier this year. First, on ultra-low-power AI, we are differentiated in the market, offering total solutions that integrate in-house AI processor, CMOS image sensor, and algorithm, helping customers streamline development and accelerate time to market. Himax’s industry-leading WiseEye AI features industry-leading ultra-low-power design with power consumption at just single-digit milliwatt levels, combined with the compact form factor, on-device AI inference, and 24/7 always-on image and voice sensing.

WiseEye is empowering battery-powered endpoint devices across a wide range of new AI applications.

Jordan Wu: For use cases requiring

Jordan Wu: real-time voice and vision sensing, WiseEye also serves as an ideal perceptual front end for large tandem with LLMs to enhance the device’s ability to perceive and understand real-world context and deliver more intelligent responses and low-latency human-machine interaction. This is reflected in applications such as kiosk buttons for AI PCs and environmental awareness and sensing in smart glasses.

Jordan Wu: At CES this year,

Jordan Wu: Himax showcased a broad portfolio of WiseEye-powered endpoint applications, including smart home, security and surveillance, automotive, smart city, access control, AI PC, and smart glasses. One notable example in the field of security applications is the newly introduced WiseGuard solution, a significant technological innovation for next-generation security applications. WiseGuard features

Jordan Wu: high

Jordan Wu: accuracy AI sensing even in low-luminance

Jordan Wu: device.

Jordan Wu: Proactive key events

Jordan Wu: capture, all while consuming nearly milliwatt-level power, thereby extending battery life for end devices. I will elaborate on this later. All these demonstrations reinforce WiseEye’s growing relevance across multiple end markets. After many years of R&D and promotion, we see very strong growth

Jordan Wu: although WiseEye business,

Jordan Wu: starting from this year.

Jordan Wu: Turning to smart glasses,

Jordan Wu: one of our prime strategic focus areas, we are uniquely positioned as one of the few companies with both microdisplay and low-power AI capabilities, both critical for the success of AR glasses. With the advancement of AI, the smart glasses market is undergoing a strong resurgence, creating significant new opportunities for WiseEye AI and LCoS micro

Jordan Wu: displays. Smart glasses

Jordan Wu: developers can leverage

Jordan Wu: WiseEye’s ultra-low-power AI capabilities

Jordan Wu: to enhance device interactivity, supporting both outward-facing environmental awareness and object recognition as well as inward-facing

Jordan Wu: ID authentication. It allows smart glasses to simultaneously

Jordan Wu: understand user intent and external surroundings, delivering a more natural and seamless human-machine interaction experience. The microdisplay, Himax’s latest proprietary front-illuminated LCoS display, achieves an optimal balance among size, weight, power consumption, resolution, and cost, while meeting the stringent optical performance requirements of next-generation see-through AR smart glasses.

Jordan Wu: Solution is

Jordan Wu: a four-color microdisplay, which can be configured for a high-brightness, low-power, green-only mode, and switched back, upon command from the central processor, seamlessly covering both indoor and outdoor instances.

Jordan Wu: Himax is working closely with multiple waveguide partners across China, Europe, Israel,

Jordan Wu: Japan, Taiwan, and the US on the integration into complete display systems for AR glasses, with several joint achievements demonstrated at CES.

Jordan Wu: Before turning to our segment outlook, I would like to highlight our progress

Jordan Wu: in CPO. Himax continues to make solid progress in collaboration with our strategic partner, ForeSee. Our main goal for 2026 is to

Jordan Wu: complete

Jordan Wu: mass production readiness with just small quantity shipment for the year. In addition, we are actively advancing multiple future generations of high-speed optical technologies and advanced CPO architectures.

Jordan Wu: These efforts

Jordan Wu: are

Jordan Wu: focused on high

Jordan Wu: fiber channel density and more sophisticated optical designs to support the increasingly demanding requirements.

Jordan Wu: Specifically,

Jordan Wu: in collaboration with a leading global customer and partner, Himax and ForeSee are finalizing the manufacturing process of a state-of-the-art design supporting 6.4T transmission bandwidth.

Jordan Wu: We

Jordan Wu: expect strong

Jordan Wu: positioning for the AI data center market with the biggest volume potential while demanding the highest transmission bandwidth.

Jordan Wu: Recently, ForeSee successfully completed an equity rights issue

Jordan Wu: of NT$3,160,000,000 to fund equipment purchases and prepare for CPO mass production.

Jordan Wu: Himax

Jordan Wu: participated in the share subscription, demonstrating our continuous support for our partner and further strengthening the collaboration between the two companies.

Jordan Wu: Himax expects

Jordan Wu: CPO to become an important contributor to both revenue and profitability over the next few years.

Jordan Wu: With that, I will now begin with an update on the large panel driver IC business.

Jordan Wu: In Q1, large display driver IC sales are expected to increase single digit sequentially, mainly driven by continued replenishment of TV IC products from Chinese panel customers, carrying over from Q4 last year. Looking ahead, our focus in the notebook market is on premium models

Jordan Wu: featuring

Jordan Wu: OLED displays and touch functionality.

Jordan Wu: This trend is

Jordan Wu: being reinforced by recent rising memory prices, which have put pressure on lower-end notebook models and further accelerated the shift towards higher-end devices. Himax offers a full spectrum of IC solutions for both LCD and OLED notebooks, including DDIC, TCON, touch controllers, and TDDI.

Jordan Wu: This broad product coverage allows us to address diverse panel architectures

Jordan Wu: and system designs while increasing our content per device. During the first quarter, we began mass production of our touch IC for OLED notebooks with a leading notebook vendor, marking a milestone for another key application for our OLED on-cell touch technology beyond automotive.

Jordan Wu: By leveraging proven touch integration capabilities,

Jordan Wu: from automotive applications and extending them into consumer electronics, we are creating new growth opportunities in premium

Jordan Wu: OLED,

Jordan Wu: IT devices.

Jordan Wu: TCON solutions are a key pillar of our notebook display IC portfolio, playing a critical role in image enhancement and system-level integration, strengthening our ability to provide customers with a comprehensive one-stop solution.

Jordan Wu: We continue to expand our notebook TCON portfolio to address diverse customer design requirements and cost considerations. Our solutions

Jordan Wu: support

Jordan Wu: a wide range of panel resolutions, refresh rates, and gaming-oriented applications, while delivering high value-added features with a strong focus on power efficiency, which is becoming increasingly important

Jordan Wu: for

Jordan Wu: thin and light notebooks.

Jordan Wu: Turning to the

Jordan Wu: small and medium-sized display driver IC business.

Jordan Wu: In Q1, small and medium-sized display driver IC business

Jordan Wu: is expected to decline single digit from last quarter.

Jordan Wu: Q1 automotive driver IC sales, including TDDI

Jordan Wu: and traditional DDIC,

Jordan Wu: are set to decline

Jordan Wu: quarter over quarter, following two consecutive quarters of order replenishment.

Jordan Wu: This decrease also reflects typical seasonal softness related to the Lunar New Year holidays, along with the tapering effect

Jordan Wu: of automotive subsidy programs

Jordan Wu: in major markets such as China and the EU. That said, our long-term competitive position remains solid,

Jordan Wu: supported

Jordan Wu: by hundreds of design wins already secured across TDDI, DDIC, TCON, and an expanding OLED portfolio. In addition, our diversified foundry footprint enables supplier feasibility and allows us to better navigate shifts in customer demand. We continue to lead the global automotive display market with a 40% share in DDIC, over half in TDDI, and even higher market share in normal dimming

Jordan Wu: TCON. Himax also continues to lead

Jordan Wu: in automotive display IC innovation by pioneering solutions across a wide range of panel types while addressing diverse design needs and cost considerations. For example, in ultra-large touch displays, we introduced the industry’s first LTDI solution back in 2023,

Jordan Wu: which

Jordan Wu: has already been mass produced in several vehicle models. Design activity continues to expand across continents, and after several years of sustained effort, we expect meaningful revenue contributions starting this year. For smaller displays with form factor and budget constraints,

Jordan Wu: we provide

Jordan Wu: single-chip solutions that combine TDDI and local dimming TCON, an attractive choice for customers as it can significantly reduce cost

Jordan Wu: and improve

Jordan Wu: power efficiency.

Jordan Wu: Looking ahead,

Jordan Wu: OLED panel adoption in automotive displays is expected to accelerate, creating an opportunity for Himax to further strengthen our leadership in the automotive display market. Our ASIC OLED driver and TCON solutions have already been mass production for a few years, and we now offer new standardized products to support broader and more scalable deployment. At the same time, we continue to collaborate with leading panel makers for new custom ASICs to meet diverse customer requirements.

Jordan Wu: Together, these efforts position Himax to capture

Jordan Wu: increasing semiconductor content as premium automotive display technologies evolve from LCD to OLED.

Jordan Wu: Complementing our OLED portfolio,

Jordan Wu: for automotive applications, we are also a leader in advanced OLED touch ICs, featuring industry-leading signal-to-noise ratio performance

Jordan Wu: that ensures

Jordan Wu: reliable operation even under challenging conditions, such as gloves or moist finger use.

Jordan Wu: Our OLED touch ICs

Jordan Wu: entered mass production in 2024 and continue to see a growing design pipeline globally, many of which are scheduled to enter mass production in the coming quarters.

Jordan Wu: Moving to smartphone IC sales, we expect Q1 smartphone

Jordan Wu: revenue, covering both LCD and OLED products,

Jordan Wu: to increase quarter over quarter, testing OLED solutions with mass production with a leading panel maker for leading smartphone brands’ mainstream models.

Jordan Wu: For tablet ICs, joint sales,

Jordan Wu: are also expected to grow sequentially,

Jordan Wu: driven by

Jordan Wu: the commencement of IC shipments for customers’ new premium OLED tablet. Moving forward, we are advancing new technologies that enable value-added features such as active stylus, ultra-slim bezel design, higher frame rate, and power-saving architectures, positioning Himax to capture more semiconductor content in next-generation premium tablets, which reinforces our competitive edge.

Jordan Wu: I would like to now turn to our non-driver IC business updates,

Jordan Wu: where we expect Q1 revenue to decrease single digit

Jordan Wu: sequentially. For the update on our TCON business,

Jordan Wu: we anticipate Q1 TCON sales to decline by a single digit quarter over quarter,

Jordan Wu: primarily due to the absence

Jordan Wu: of ASIC TCON shipments to a leading projector customer that occurred in the prior quarter. The sequential decline also reflects a moderation in automotive TCON shipments following several quarters of solid growth, which we view as normal seasonality rather than a change in underlying demand. For the full year 2025, our automotive TCON sales still grew approximately 50% year over year, backed by hundreds of secured design wins. This momentum provides a strong foundation for subsequent growth. TCON for monitor,

Jordan Wu: notebook,

Jordan Wu: and TV products

Jordan Wu: is expected to increase sequentially, primarily as a result of customers

Jordan Wu: replenishing

Jordan Wu: inventory for high-end products. Meanwhile, head-up displays, or HUD, are poised to become a central element of next generation

Jordan Wu: smart cockpit,

Jordan Wu: a trend clearly highlighted at CES where numerous panel makers and automakers, with our IC solutions, showcased their latest trendy and innovative HUD concepts. HUD for automotive is rapidly evolving from simple text and symbols to high brightness, high contrast, AI-enriched visuals integrated into automotive displays. This shift is driving demand for sophisticated TCON solutions in the area where Himax is in a leadership position in automotive display TCON solutions.

Jordan Wu: To address this trend,

Jordan Wu: we introduced a multifunctional

Jordan Wu: TCON featuring

Jordan Wu: the industry’s first full-area selectable local dimming capability, combined with Himax’s

Jordan Wu: marquee

Jordan Wu: on-screen display technologies, offering the flexibility to meet diverse design and cost requirements while simplifying overall system integration. This new TCON continues to deliver exceptional contrast performance, effectively eliminating the so-called postcard effect in SUVs.

Jordan Wu: The common issue caused by light leakage

Jordan Wu: in conventional TFT-LCD panels.

Jordan Wu: Our industry-leading OSD function

Jordan Wu: is also integrated, ensuring that critical safety information remains visible

Jordan Wu: even

Jordan Wu: when the main system is powered down, thereby enhancing overall driving safety.

Jordan Wu: The new type TCON solution

Jordan Wu: supports a broad range of HUD architectures, including windshield HUD, augmented reality HUD, and panoramic

Jordan Wu: HUD. Multiple customer projects are already underway

Jordan Wu: with tier-1s, panel makers, and projector players, reflecting strong market recognition of our vast HUD technology. HUD TCON technology product. Switching gears to the WiseEye product line, a cutting-edge ultra-low-power AI sensing turnkey solution targeting

Jordan Wu: endpoint

Jordan Wu: device markets.

Jordan Wu: As AI advances

Jordan Wu: at an unprecedented pace, WiseEye stands out

Jordan Wu: with context-aware on-device AI inference

Jordan Wu: that combines

Jordan Wu: industry-leading power efficiency, consuming only a few milliwatts,

Jordan Wu: with a compact form factor and robust industrial-grade security,

Jordan Wu: and pretrained low-code/no-code AI algorithms, enabling easy deployment across a broad spectrum of applications. This powerful combination unlocks advanced AI capabilities in endpoint devices that were once limited by power and size constraints. This is driving innovative new product concepts across a broad range of applications

Jordan Wu: from notebooks, surveillance,

Jordan Wu: and access control to smart home, smart retail, and more recently, smart glasses, which the industry widely expects to become the next breakout market.

Jordan Wu: Starting with notebooks,

Jordan Wu: WiseEye human presence detection is seeing expanding adoption among leading global brands,

Jordan Wu: driven by its ultra-low power consumption, instant

Jordan Wu: responsiveness, and privacy-centric

Jordan Wu: design.

Jordan Wu: We are aligned with the industry’s move towards always-aware AI-driven PCs.

Jordan Wu: Building on this foundation,

Jordan Wu: additional feature enhancements are being developed to address more complex real-world scenarios while preserving exceptional power efficiency and improving user convenience. One example is gesture recognition that emulates C4 inputs, enabling users to scroll pages without touching the keyboard.

Jordan Wu: Another advanced feature currently under development

Jordan Wu: for next-generation laptops is a voice-activated keyword spotting function.

Jordan Wu: Here,

Jordan Wu: WiseEye acts as an ultra-low-power front end that continuously monitors

Jordan Wu: audio and performs

Jordan Wu: wake word detection, activating the main CPU only when the designated trigger phrase is recognized.

Jordan Wu: This advanced feature

Jordan Wu: enables continuous audio monitoring even in noisy environments while maintaining minimal impact on overall system power consumption.

Jordan Wu: In the surveillance domain, at the recent CES, we introduced our latest

Jordan Wu: WiseGuard endpoint AI solutions, highlighting the versatile deployment of WiseEye AI in security applications.

Jordan Wu: WiseGuard is a turnkey solution

Jordan Wu: capable of accurately detecting and tracking multiple individuals, including their presence, location, and movement. Its proactive and continuous sensing capability enables security systems to anticipate and capture important events in advance,

Jordan Wu: providing more forward-looking protection than traditional reactive security solutions. WiseGuard performs always-on sensing and AI processing at single-digit milliwatt

Jordan Wu: levels, enabling up to five years of battery life and reliable low-maintenance operation in compact battery-powered devices. At the same time, detection at distances

Jordan Wu: of up to 10 meters and under extreme low-light environments. Immediately after its debut, WiseGuard has attracted strong market interest, driven by its competitive advantages for scalable smart home and security systems.

Jordan Wu: Meanwhile, from a module perspective,

Jordan Wu: WiseEye technology is seeing expanding adoption across a wide range of domains,

Jordan Wu: including leading brands’ upcoming smart home applications and various surveillance applications. Notably, our PalmVein module has had a strong design pipeline covering smart access, workforce management, smart door locks, and more recently, computer monitor and automotive applications. In the domain of AR and AI glasses, WiseEye delivers fast responsiveness for a wide range of AI functions while maintaining exceptional power efficiency. It enables intelligent context-aware vision sensing in next-generation wearables and smart glasses through both outward- and inward-facing capabilities. Our sensing supports environmental awareness, object recognition, and spatial mapping. For inward sensing, it enables iris authentication and tracks eye movements, gaze direction, and pupil dynamics for natural, intuitive human-machine interaction.

WiseEye is gaining strong traction in smart glasses with a growing number of design-in engagements underway among global tech leaders, solution-type providers, and smart device specialists. Certain advanced smart glasses are poised to enter mass production later this year. For WiseEye in the smart glasses market, that concludes my report

Jordan Wu: for this quarter. Thank you for your interest in Himax. We appreciate you joining today’s call and are now ready to take questions. Yes. Thank you, Jordan. And ladies and gentlemen, we will now open for questions. If you would like to ask a question, please press the star key and number one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, you may press the star key and number two to cancel the question. In addition to submitting questions via phone, you may also submit your question through the webcast system, where the checkbox is available on the right-hand side of the screen.

Thank you. To ask a question, you may press the star key and number one on your telephone keypad or submit your questions through the webcast system. Thank you. If you would like to ask a question, please press the star key and number one on your telephone keypad. Thank you.

Q&A Session

Operator: Now, we will have our first question.

Operator: Thank you for the question from Morgan Stanley. Go ahead, please.

Karen Tiao: Yeah. Thank you, Jordan and Karen, for taking my question, and congrats on the great results. Yeah. So my first question is on first quarter gross margin. May I know why the margin would be flat to down quarter over quarter? And in first quarter, is it because of product mix or are we seeing elevated pressure coming from like the increasing material cost and also the offset cost. Thank you. And I have a follow-up.

Operator: Thank you, Tiffany.

Jordan Wu: Actually, we are only guiding for a flat to slight decline only, so

Jordan Wu: we are not seeing material change

Jordan Wu: from the

Jordan Wu: gross margin of last quarter.

Jordan Wu: And the difference is really the product mix

Jordan Wu: change.

Jordan Wu: We are seeing, proportion-wise, slightly less auto shipment in Q1 compared to last quarter.

Jordan Wu: And you pointed out about the material price increase, which is obviously a factor, and it has been a factor for, like,

Jordan Wu: a pretty long time, as we all know. As we know, gold prices have been increasing over the years, and now on top of that, we are seeing foundry capacity tightening and ASPs appear to be rising.

Jordan Wu: And

Jordan Wu: for that reason, we, I mean, with our foundry vendors, we are in discussion with them

Jordan Wu: on how to get our

Jordan Wu: delivery support, while in the meantime hoping for a

Jordan Wu: manageable price increase.

Jordan Wu: From that. And at the same time, we are also

Jordan Wu: in active discussion with our customers

Jordan Wu: about the possibility for a product price increase to reflect our cost. So both are ongoing. We do not have any conclusion yet, but I think

Jordan Wu: you know,

Jordan Wu: so far this is all pretty recent, and so far, we are seeing our customers

Jordan Wu: all kind of recognize the fact that, as we all know, memory demand

Jordan Wu: squeezes out the

Jordan Wu: supply of other types of ICs, and therefore demand appears to be rising for other kinds of non-memory IC products because our supply is being squeezed, and prices are rising. So again, we are in discussion with both our customer side and vendor side. That does not really quite, that is not really quite a factor for our Q1 gross margin guidance. If anything, I think that is going to become a factor starting from Q2 and onward. Well, thank you for your question.

Karen Tiao: Alright. Very clear. Thank you. So my second question would be regarding CPO. Could you give us more details or maybe some guidance for the CPO revenue in maybe 2026 and 2027? As I think investors are very excited about the momentum and progress in this area. Thank you.

Operator: Thank you. Actually, we are also online getting a few questions regarding CPO. So I will try to kind of address them together. Again, we said that in last quarter’s earnings call, and I am going to repeat that now: the main goal of 2026 for us and also for our partner, ForeSee, is to complete the validation

Jordan Wu: of both our Gen 1 and Gen 2 products with

Jordan Wu: partners. So with the validation being the target, the revenue contribution will be limited for 2026 because we will be talking about sample shipments

Jordan Wu: only. Notably, while I am commenting on 2027,

Jordan Wu: in close collaboration with

Jordan Wu: our

Jordan Wu: anchor customer and partner, we are close

Jordan Wu: to finalizing the Gen 2 product, which targets

Jordan Wu: production readiness,

Jordan Wu: targeting bandwidth of greater than 6.4T. For this Gen 2 product, we can potentially see meaningful top and bottom line contribution starting from 2027, even before the official MP gets started.

Jordan Wu: The reason why I emphasize this is because

Jordan Wu: when and how this CPO product will start mass production is really a call

Jordan Wu: which can only be made by the customer. We do not really know. And a reminder that it is actually a complex and lengthy ecosystem

Jordan Wu: run by our customer. Right? So

Jordan Wu: it is not a matter of when we are proven to be ready,

Jordan Wu: the customer can just click a button and then go into full-volume production. It is not going to happen that way. So we do not

Jordan Wu: have full visibility on exactly when and how the mass production ramp will take place. Our

Jordan Wu: current view is that

Jordan Wu: it is likely to be 2027 or 2028. We do not know. However, even before the official ramp, official MP—let’s say it is 2027 or 2028—because prior to the official MP, there will be further sample shipments for various purposes, with a certain quantity, which will be greater than 2026. So even before the official MP gets started, just from pre-MP shipments, based on internal count, the contribution can be already pretty meaningful for Himax in terms of our total revenue and also for our total profit. Right? So I guess that addresses your issue about 2027. And again, I want to emphasize,

Jordan Wu: this

Jordan Wu: product targeting 6.4–6.5T bandwidth spec

Jordan Wu: is

Jordan Wu: done in close collaboration with our anchor customer and partner. It is not that we are closing our doors and trying to think of a product and push it to the customer. No. From the beginning to now, it has been a joint development

Jordan Wu: by our direct customer, direct partner ForeSee, and

Jordan Wu: Himax, and the so-called 6.4T transmission product spec targets the AI data center market with the biggest volume potential while demanding the highest transmission bandwidth—meaning you are talking about the GPU market,

Jordan Wu: which

Jordan Wu: requires a very high

Jordan Wu: transmission rate.

Jordan Wu: So I guess that, Tiffany,

Jordan Wu: kind of addresses your question directly. And also, people ask about

Jordan Wu: what is the volume potential or revenue potential

Jordan Wu: when it starts MP. For this, I will kind of repeat what I mentioned earlier

Jordan Wu: in our earlier

Jordan Wu: session: even in what I call early stage of mass production—meaning far from reaching full penetration, full deployment, and so on and so forth—in early stage mass production,

Jordan Wu: for Himax,

Jordan Wu: we will be talking about hundreds of millions of dollars of sales. So it is going to be very, very significant, based on what the customer is telling us, based on how we price it, and based on our internal calculation. And I am still holding the same view now. The good news is we do have existing WLO capacity to support and manage a pretty big volume of production for that kind of scale—hundreds of millions of dollars of annual sales. Okay. So I guess that kind of summarizes my answer for all questions related to CPO right now.

Operator: Thank you. Thank you.

Jordan Wu: If you would like to ask a question, you may press the star key and number one on your telephone keypad. Thank you.

Operator: I do have a question

Jordan Wu: from online inquiry: Our OLED sales is going to be huge in 2026. Is price at a price premium versus conventional panels? Actually, as we said in our prepared remarks, we started, for smartphone, shipping in mass production volume

Jordan Wu: actually a bit in last quarter and certainly this quarter.

Jordan Wu: But the sales contribution from the smartphone OLED for Himax,

Jordan Wu: and if you combine the smartphone OLED for Himax together with IT and automotive all this together,

Jordan Wu: our

Jordan Wu: expected sales contribution for 2026 is still less than 10% of our total sales. So I would say probably high single digits of contribution.

Jordan Wu: To the

Jordan Wu: ramp age, the real ramp age is going to be 2027.

Jordan Wu: In a minute, I will get back to your question about margin. For Himax,

Jordan Wu: the OLED products gross margin for smartphone is actually lower than our corporate average. So to be honest, we are not very, very keen. I mean, we recognize the fact that our peers are already ahead of us and probably shipping bigger volume than us. So it is already a very competitive market with low margin across the board. That is for smartphone. However, I would say something very different for automotive OLED and IT OLED. The ICs in these two areas are our focus area right now, and they both enjoy much better gross margin compared to our traditional LCD products. Also, on a per-panel basis, the IC content is materially higher

Jordan Wu: than LCD products. So I would probably describe our status separately for auto and IT. First on auto, we are in strategic partnership with top-tier Korean and Chinese panel makers, and this is a market which is now being

Jordan Wu: led by the very best, and we are the

Jordan Wu: prime IC partner for both Korean panel makers

Jordan Wu: and, I would say,

Jordan Wu: Chinese leaders. We expect to see breakout demand from 2027, mainly because it is actually now the Korean makers leading the charge in terms of aggressively promoting the OLED market, which up to now has been, bottom line, has suffered from two main factors. One is cost, and the other one is reliability. Through many years of effort across the ecosystem, the reliability has improved. So it is an issue of yesterday, no longer an issue. So the real issue is now cost. But Korean makers, they have a lot of legacy OLED capacity which can only do rigid displays. So they are taking advantage of those capacities which are fully depreciated, running with very good efficiency and so on and so forth, to

Jordan Wu: price their products aggressively,

Jordan Wu: to the extent that the OLED prices for automotive products in certain specs are already approaching the levels of LCD products already. And certainly, OLED enjoys better quality and lighter weight and so on—a few very good benefits. So when you start to see prices approaching those of LCD,

Jordan Wu: we are in the middle of very, very busy design activities with our panel makers and

Jordan Wu: tier-ones

Jordan Wu: at the moment, with a lot of design win projects going on, many of which are slated for mass production in 2027. So this year, while we do ship some volumes, we think, hopefully, 2027 volume will be much, much bigger than this year. For this, we offer our standard products including driver IC and timing controller to both leading panel customers for both TCON, timing controller, and driver IC. On top of that, we also offer discrete touch IC, where we are now leading the pack in performance compared to their old vendors. So we are winning a lot of new design projects right now for our touch controller, with mass production already taking place with a few

Jordan Wu: leading

Jordan Wu: international and Chinese names. So that is for

Karen Tiao: automotive.

Jordan Wu: For IT, slightly different story, but very similar timing—2027 is likely to be the breakout year. Now for IT, you need larger panel sizes. So you do require a Gen 8.5 or 8.6 to be mass producing IT products effectively. Korean panel makers led the charge a couple of years ago. They have completed their 8.5 Gen production line. But Chinese are catching up.

Jordan Wu: So

Jordan Wu: across the board, quite a few Chinese panel makers are starting mass production for their Gen 8.6 lines, all targeting IT products, mainly tablet and notebook. And, likewise, we are going through very, very busy design stages at a few such customers. The story here is that when you have new Gen 8.6 OLED lines coming into production around the same time—2027—it is likely to bring price pressure, and that certainly, for market demand from notebook makers, is good news. And, again,

Jordan Wu: you know,

Jordan Wu: OLED panels enjoy lighter weight, better contrast, better brightness, and good power consumption—benefits we all know. The major issue stopping OLED panels from high penetration is cost. The fact that quite a few Chinese Gen 8.6 lines are coming online starting 2027 is likely to trigger the demand. So, again, we are going through design stages right now. Any other question? Yes. Okay then. Thank you, Jordan. And we do not have further questions at the moment. We thank you for all your questions, and I will pass the call back to Jordan. Thank you. Thank you. As a final note, Karen Tiao, our Head of IR/PR, will maintain investor marketing activity and continue to attend investor conferences. We will announce the details as they come about. Thank you, and have a nice day. Yes. Thank you. And ladies and gentlemen, this concludes Fourth Quarter 2025 Earnings Conference. You may now disconnect. Thank you again. Goodbye.