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Julia Chao: Ladies and gentlemen, good afternoon. This is Julia Chao from AUO's IR department. On behalf of the company, I would like to welcome you to participate in our 2025 Fourth Quarter Financial Results Conference. I have four executives joining us: Paul Peng, our Chairman and Group CEO; Frank Ko, our President and Group COO; James Chen, our Senior VP of Display Strategy Business Group; and David Chang, our CFO. The format of today's meeting is this. First of all, our CFO will go over our 2025 fourth quarter financial results and provide you with the outlook for Q1 2026. Then our Chairman and President will share with you our business updates and our outlook. Then we will proceed to questions and answers. We have collected questions from analysts previously. We will address these questions in the first part of the Q&A session. After that, if you still have more questions, we will open the floor for you to post more questions. So that is the agenda for today. Now before I turn over to David, I would like to remind you that all forward-looking statements contain risks and uncertainties. Please also spend some time to read the safe harbor notice on Slide #2. David, please.
Po-Yi Chang: Ladies and gentlemen, good afternoon. I would like to go over our financial highlights for the fourth quarter and also provide you with an outlook for Q1 of 2026. First, let's look at the income statement. Our Q4 revenue reached TWD 70.1 billion, which was roughly flat compared to the previous quarter. Thanks to the depreciation of the NTD against the dollar, we saw about a 3% positive impact. For display, due to the traditional off-season, shipment volume dropped, but our revenue only slipped by about 4%, which was less than the usual dip in Q4. As for Mobility Solutions, strong demand in Mainland China's automotive market and better product mix pushed the revenue up by about 9%. For our Vertical Solutions, since some industrial and commercial display customers pull in orders earlier this year, they experienced inventory adjustments in Q4. So our revenue dipped slightly by 2%. Again, it was less than the usual Q4 drop. Overall, all three business pillars performed in line with our expectations for the quarter. Moving on to our gross profit expenses. Q4 gross margin rose to 10.7%, up by 1.1% from last quarter besides the favorable exchange rate. Better product mix in display and a higher share from Mobility Solutions helped boost our margins. Both Q-on-Q and Y-o-Y wise, AUO's gross margin kept improving showing our transformation strategy is starting to pay off. Q4 OpEx ratio went up to 13.4%, up by 1.2% Q-o-Q. This is mainly because Q4 is the peak season for securing automotive orders. So we spent more on upfront project costs, plus with better overall profitability in 2025, we increased employee compensation, which pushed up expenses. The expense ratio was 13.4%, which was slightly higher than expected. We will keep tight control going forward. Our short-term goal is to bring down to 11% to 12% and midterm target is 10%. Q4's OP margin was negative 2.7%, about the same as last quarter with an OP loss of TWD 1.9 billion. Non-op income was about TWD 4.8 billion, mainly from the disposal of our Hsinchu plant, which we've completed the ownership transfer. So after related costs, we recognized a net profit of TWD 4.7 billion. Our net profit was TWD 2.88 billion, and EPS was TWD 0.38. For the entire year of 2025, EPS was TWD 0.9. Now let's look at the full year results. 2025 revenue was TWD 281.4 billion, roughly flat from last year, but the revenue structure changed. The combined share from higher-margin Mobility and Vertical Solutions rose from 38% in 2024 to 43% in 2025. Meanwhile, display share dropped from 56% to 52% during the same period. This optimization in our business mix drove up our gross margin. In 2025, net profit attributable to owner of the company was about TWD 6.8 billion with EPS at TWD 0.9. Now let's look at the balance sheet. Q4's cash and cash equivalent was TWD 55.6 billion, about the same as last quarter, which is a healthy level. I'll explain the cash flow in more detail on the next page. Short- and long-term loans dropped to TWD 109.1 billion, and the gearing ratio fell 6.5 percentage points to 32.6%. With our transformation strategy, capital investment is coming down and shifting to asset-light investments. More stable operating and free cash flow in addition to funds from selling the Hsinchu Plant will help us reduce debt and interest expenses, further optimizing our financial structure. Inventory at the end of Q4 was TWD 36.2 billion with inventory turnover at 52 days, both at the same as last quarter, still at a reasonable and healthy level. For cash flow, Q4 operating activities brought in about TWD 2.9 billion. Depreciation and amortization for the quarter was TWD 7.6 billion. Investment activities brought in about TWD 3.3 billion, including TWD 3.8 billion in CapEx and TWD 6.8 billion from selling the Xsinchu L3C Plant. Financing activities saw a cash outflow of TWD 9.2 billion, mainly using the asset sale proceeds to pay down TWD 8.7 billion in loans, optimizing our financial structure and lower interest expenses. This slide shows the revenue breakdown for our three main business pillars. Display was hit by the off-season and weaker demand for consumer products. So its share dropped by 2 percentage points from last quarter to 50%. Mobility Solutions benefited from Mainland China's automotive market peak and better product mix. So its share grew by 2 percentage points to 29%. Vertical Solutions stayed at 17%, basically flattish from last quarter. Now I'd like to share our outlook for Q1 2026. For Mobility Solutions, due to fewer working days and seasonal factors, we expect revenue to drop by a high single-digit percentage points compared to Q4. For Vertical Solutions, based on our current business situation, we expect revenue to be flat or slightly down from Q4. Lastly, for display, Q1 is usually the off-season, while some customers are starting to stock up for upcoming sports events. Fewer working days and memory shortages mean that we expect display revenue to drop compared to Q4. This concludes my presentation. Thank you.
Julia Chao: Thank you, David. Next, our Chairman will have a business update and share with you our business outlook and strategy.
Shuang Peng: Ladies and gentlemen, good afternoon. It is such a happy occasion that we get to meet with you face-to-face. Q4, as our CFO said, our revenue was a bit better than expected. There were a few reasons for this, including stronger customer demand and favorable NTD, our Q4 revenue was about the same as Q3, and we posted OP loss. However, thanks to non-op income from disposal of a facility, our net profit for Q4 was TWD 2.88 billion. Let me sum up 2025. With issues like tariffs, NTD appreciation and capital market competition in Mainland China, it was a year with a hot start, but a cool finish. Originally, we expected steady growth each quarter, but the second half didn't go as planned. So our total revenue for 2025 was TWD 281.4 billion, up by 0.4% from 2024. Thanks to structural changes, our gross margin improved by 2.9 percentage points, showing better profitability during our transformation. As a result, in 2025, we successfully turned losses into profits. Our overall financial structure remains solid. In Q4, inventory was TWD 36.2 billion with 52 days of inventory turnover, and our gearing ratio dropped to 32.6%, much lower than last quarter. So we are in a healthy position. For 2026, we are cautiously optimistic about the market. However, there are still lots of uncertainties. including memory shortages and price hikes, ongoing tariff discussions and geopolitical tensions. These are things that we need to watch out for. But we still believe our revenue stands a chance to gradually increase this year. Starting from July last year, we've been telling everyone that our company will be operating based on three main pillars. The first in the middle is display, which has been our biggest investment and asset for almost 30 years. Going forward, we hope display will generate profits and cash flow to support the growth of our mobility and vertical solution businesses. The second pillar is vertical solutions, mainly led by ADP, focusing on smart retail, smart health care, smart education and enterprise solutions. In addition to our commercial and industrial displays. Today, our ADP President, Tina Wu, is here. Tina, please say hi to everyone. Tina took the helm at ADP last year. We are expecting solid growth for ADP ahead. The third pillar is Mobility Solutions. With BHTC joining us, we've moved up to not just Tier 1, but also made big progress in smart pockets, which will be a major focus for us going forward. We believe AMSC and Vertical solutions together will be key growth engines for AUO going forward. We will show you that the revenue and gross margin for each of these three pillars separately going forward. Starting from this year, each pillar will be measured on its own performance. The idea is for each business to focus on its own strengths and advantages, but also create synergy as a group. So we are hoping to maximize our overall results. We will use these financial numbers to keep ourselves accountable and share them with all the investors at the same time. As David just shared with you, for the past three years, we have seen that there are three pillars involved in terms of revenue. Our goal is that by 2030, Mobility and Vertical Solutions together to make up 70% of our revenue. These two pillars have shown steady growth and stable margins, unlike the more drastic ups and downs of the display business. So we are hoping to focus more on improving profitability of our entire company. Last year, our gross margin rose by 2.9%. That's real progress and shows that our efforts are paying off. Next, I want to talk to you about micro LED. Most of the products you see on site today are micro LED displays. For example, the screens here are projections, but if they were switched to micro LED, you wouldn't have any visibility issues. The brightness and color of micro LED displays are excellent, and the images are super clear. Please check out our products on site later if you have time. Before I begin, I would like to introduce the products that our executives are holding, these watches are made of our company's micro LED displays. Even from a distance, you can still see that they are very -- they really demonstrate clarity. Micro LED offers excellent visual effects, including brightness, color and wide viewing angles, which is why it's chosen for premium wearable devices. The commercialization of the smartwatch proves that AUO's micro LED technology is already in progress, not just a concept, not just in exploratory stage. Since 2018, we've showcased micro LED applications in wearables, large TVs, automotive displays and transparent screens, among others. Moreover, AUO has started volume production in all of these areas. Why are we so confident? Our confidence comes from years of technical accumulation. We can produce not only standard shapes, but also free form, flexible and even stretchable displays, which are all in mass production. There are three key factors. First, we master critical processes and technologies. Second, we support various scenarios and sizes. Thirdly, and most importantly, we have built a complete ecosystem. Therefore, we have advanced from the first generation to Gen 4.5 facilities. This progress brings greater generation power and significantly reduced costs. As a result, it has enabled wider applications. Micro LED also plays an important role in AI systems. Speaking of AI, AUO has four main arrows or strategies, which I will explain in detail. First of all, we have products and smart services in place. For example, smart cockpits, ADP smart displays, AET, intelligent manufacturing and circular economy carbon management. These make up part of our AI portfolio and services. AET and Smart Manufacturing, which operates under the name of ADT in Mainland China. It has become an expert in circular economy and carbon management and AET was selected as an ESCO partner by the Ministry of Economic Affairs. In Mainland China, its revenue has doubled in recent years. It has also gained strategic investment from strategic investors for the first time last year. This shows that investors have recognized the value of our smart manufacturing services. The second strategy or arrow is our cloud AI and infrastructure. The third strategy focuses on Edge AI, specifically human AI interaction and physical AI, which are closely linked to our product applications and smart services. The first arrow is our smart products and services. The second arrow is Edge AI and then Cloud AI infrastructure as well as Physical AI. Each pillar has its own application scope. Next, I will explain how we apply AI beyond products and services, including three more technical areas. First, micro LED for CPO and optical communication, especially in AI data centers, where energy efficiency is crucial and computing capabilities are also vital with energy efficiency taking an important -- increasingly important crucial role. Optical transmission is replacing copper and our micro LED CPO will be vital for short distance transmission in AI server racks. In AI data centers, if we cannot reduce power usage, energy demands of data centers will become extremely high. So the shift from copper to optics means that our micro LED CPO technology will play a very important role. And our micro LED CPO features high bandwidth and low power consumption. As data center architectures undergo systematic transformation, this technology allows us to control power and heat dissipation more effectively. Micro LED CPO plays a crucial role in enabling sustainable development in the environment. The opportunity is the shift from copper to optical transmission. The system consists of optical communication modules positioned alongside the AI chip, including transmitters, receivers and ASICs. For AUO, we have invested in Ennostar, a company specializing in micro LED and its subsidiary, Tyntek, which focuses on photonics for the receiving end. AUO is capable of integrating the entire optical communication modules system. In the future, these optical communication modules will inevitably transition to glass-based production, an area where we have a cumulative 30 years of expertise. Combined with our advanced mass transfer capabilities for micro LED, we are confident in our ability to lead in this field. In fact, we have already produced demo samples and are currently discussing commercialization with our customers. The second difficult area is low earth orbit satellite, LEOs. Without connectivity, intelligence cannot be achieved in mobile applications. Satellite signals are essential for smart mobility, and we provide the receiving terminals. Given that our satellite antennas are thin, lightweight and transparent, they are ideal for mobile platforms for mobility vehicles. This time, at CES, we showcased a satellite antenna integrated into the sunroof of a vehicle. The antenna combines glass RDL and RFIC into a single unit. Despite this integration, the antenna remains extremely thin, lightweight and transparent, allowing for excellent signal penetration. As a result, it ensures reliable signal reception even while the vehicle is in motion. More importantly, it is thin and transparent. It's designed -- this kind of design means that low power consumption and no need for extra cooling is possible. The final strategy is the AR glasses. We focus on waveguide technology, not on computing power. As we have accumulated rich experience in waveguide technology, it is crucial for the last mile of AI visual output. We also play a key role in AI glasses, enabling lightweight and comfortable AI eyewear for long-term use. Our technology combined with the light engine makes extended wear possible without adding too much weight. So in summary, AUO's four AI strategies include three product areas and service. We believe that AUO plays a crucial role in these areas, having invested years in R&D and actively discussing various levels of implementation with our customers. Many of the showcased items on site are already in projects or entering volume production such as micro LED for smart watches and micro LED applications outside of vehicles. So we take this opportunity to explain face-to-face to you our progress and plans. For a more hands-on experience, please visit our live demo area. For example, the micro LED tree here combines various micro LED possibilities at CES. For example, people ask if it could be purchased immediately because these applications are mature and ready for the market. So this concludes my report. Hoping that this has given you a better understanding of AUO's past, present and future. If you have any questions, we can discuss later. As we are going to enter into the spring festival in just a few days, I hope to take this opportunity to also wish you a happy and prosperous Year of the Horse. Next, I would like to turn over to Frank to provide you with more details on our three business pillars.
Fu-Jen Ko: Thank you, Paul. Dear investors, partners and journalists, good afternoon. As Paul just explained, he talked about AUO's overall business strategy and our focus in the AI ecosystem. Now I will walk you through the status of our three main pillars as well as our short, mid- and long-term outlook and growth targets. Now let me first spend a bit of time on our display business outlook and strategy. Our core business, as you know, is LCD panels. Besides TVs and IT products for leading global clients, we're also providing more high-quality panels. And as Paul mentioned, advanced display technologies. These support our two new pillars, Mobility Solutions and Vertical Solutions, which are at the heart of our shift towards solution-based displays. On this slide, you can see our focused product directions. However, to start off, let me talk about the industry from a supply and demand perspective. This year, from the supply side, we think the panel industry will keep producing rationally based on demand through 2025 and 2026. So supply should stay pretty stable. On the demand side, 2026 TV demand is being driven by sports events. In Q1, we've already seen brands ramping up their orders, which has pushed up prices a bit. This year, we've also seen a memory material shortage, which could push brands to plan and promote bigger TV sets. Therefore, average TV sizes are likely to keep growing. For IT products, there is a new wave of replacement after the pandemic, plus Windows 10 reaching end of life, which will drive replacement demand. But the industry is a bit worried about rising memory and other component prices as well as material shortage of memories, which could impact IT demand. In this situation, we are staying focused on using our core technologies and key capacity to meet customer demand as the market changes. For high-end products like the mini LED, et cetera, we've always been very strong. Now the industry is focusing more on energy-saving displays. We're actually the first in the world to use LTPS for 1 Hertz panels, which is a big deal for AI PCs, AI notebooks, which need more efficient components. This is a major advantage for AUO. We're also adding value with system integration in our display business like privacy protection and touch integration. These are well established with our clients. We've been increasing the share of our products with our clients, boosting our overall value. That's the direction for our core display business. As for the growth engine micro LED for the display segment, Paul has already explained it very well, so I won't go into details. But I would like to add that micro LED isn't just a growth driver for consumer displays. It's also moving into mobility and verticals, powering smart cockpits in vehicles and new immersive AI applications in vertical markets. So under this trend of micro LED plus AI, AUO is in a great position. To sum up, Q1 is usually a slower season for panels. Even though clients are stocking up for sports events, few working days and supply chain challenges remain that our display revenue will likely drop from last quarter. For the entire year, we will keep focusing on profitability and stable cash flow. Now let me update you on Mobility Solutions. The biggest thing from last quarter to this quarter is AMSC. You will start hearing more about our new company, AMSC, AUO Mobility Solutions Corp. It was set up on January 1st. It combines BHTC and AUO's Mobility's business into one company. The main goal is to deepen post-merger integration and synergy while focusing on the future of our mobility business. AMSC made its debut at CES this January, showing the world our positioning and product focuses. Our growth focus is built on three core strengths: Display HMI, automotive computing and smart vehicle connectivity, making AMSC a future partner for automakers and automotive OEMs in smart cockpit solutions. The slide shows what we presented at CES. On the left is a smart dashboard, combining CID, cluster and passenger information display into a seamless interface. This shows our real integration capabilities after the acquisition of BHTC. At the same time, we showcased our domain controller, zonal control, which enables AI services like real-time diagnosis and smart air conditioning, one of BHTC's strength. In the middle of the slide, here, it displays a transparent micro LED with automotive AI computing to power an immersive interactive car window. We also demonstrated features like voice, gesture, street view tagging and AI interaction, demonstrating all kinds of future mobility services. With AI in the air, we are creating the best possible user experience. Just imagine as self-driving becomes common and robotaxi services grow, what will people do in the cars? Besides moving from point A to point B, there will be more in-car services. That's where our mobility service displays comes in. We are offering the best solution for these scenarios. On the top right, as Paul mentioned, to make sure that we can provide global services, we need seamless worldwide communication for mobility providers. That means we have to connect from the cloud to the car. Therefore, we showcased a glass substrate-based satellite antenna developed with a partner from design, manufacturing to integration with the sunroof, the demonstration showed carmakers that we have a complete setup. Of course, at CES, besides showing of AMSC's offerings, we also brought micro LED applications into all kinds of different fields. At the bottom of the slide, on the left, there is a 42-inch AI interactive translation system. So you can see those transparent displays next to the tree. We demonstrated AI applications alongside micro LED technology at CES. Basically, we took the smart interactive window idea from the slide and put it into retail and business settings for AI interaction. For example, at customs or hotels, when you need to communicate in different languages, if someone doesn't speak English, you can use this AI real-time translation technology. At CES, we showed this by letting customers from different automotive OEMs, how they could order in their own language, and they found it super useful. On the lower right, we showcased a 64-inch transparent micro LED display. It can be set up at a stadium, transparent stadium window. So spectators could interact and see information about players and the game in real time. They could even place bets or buy snacks right there. These are all examples of how micro LED and AI can be used in new smart retail and service scenarios. The hands-on experience at CES garnered us a lot of accolades from the visitors. People were saying that we were the must-see booth. We couldn't bring everything back to show you here, but we did bring the brightest one. This micro LED tree, it is very gorgeous, isn't it? If you have any new ideas, let's brainstorm together, micro LED is ready, including all the AI solutions that people need. Now back to AMSC's outlook and strategy. Let me break down the numbers. In 2025, AMSC's total revenue is up by 17% from 2024. That's actually higher than the high single-digit growth we predicted in July. The main reason is the benefits from our BHTC acquisition. We are integrating faster with BHTC and seeing more results. We've also landed more big orders for display HMI from major clients in Europe and the U.S. In addition to these markets, we are also doing pretty well in Mainland China and emerging markets in 2025. Looking ahead to 2026, the global automotive market should be about the same as last year, about 90 million vehicles. At the same time, the number and size of displays in each car will keep growing. But honestly, the growth is starting to level off. Therefore, AMSC has to be ready to keep creating more value and push for double-digit CAGR growth. This slide shows AMSC's core business. AUO used to be a Tier 2 panel supplier. But after two years of integration, our core business is now what you see here, Display HMI, which means cockpit HMI with all kinds of display technologies like LCD, micro LED and mini LED and more integration of mechanical parts allow us to offer high-quality custom design and manufacturing for international automotive OEMs, which is a big reason for why we acquired BHTC in the first place. The results speak for themselves. By combining the strengths of both companies, AMSC team landed several major deals last year. These deals were what AUO couldn't have won alone, especially in North America, we've done really well. That's why we talked about expanding production in Mexico last quarter. It's all because of these new orders. Speaking of our core business Display HMI, I would like to explain how AMSC is getting ready to keep adding value to our offerings. Our goal for AMSC is to combine innovative display technology from LCD to micro LED and keep pushing forward. By integrating our SI capabilities and system capabilities plus computing and wireless connectivity, we're always making our products better. Of course, the market is giving us strong impetus too. At this year's CES, you can already see how the trend of so-called Physical AI is becoming a big deal, especially in V2X. In the past, people talked about software-defined vehicles. But today, it's all about AI-defined cars. So AMSC is basically offering a hardware solution for AI-defined vehicles. With this kind of product value increases, we can expect the value of AMSC's products to jump from just the value of a regular panel to a smart cockpit solution worth more than 10x as much. Now how does this strategy show up in our revenue? Let me give you a reference point. If you look at the AMSC's revenue in 2025, more than 40% is already from display HMI. Thanks to the new orders we've been getting over the past few years, the proportion of new orders is even higher, especially from the Display HMI segment. So we are seeing this value increase and the share will keep growing. Also, the smart cockpit solution, we've been working on for years is shipping this year. The unit we show at the event here is going to be adopted by a commercial automotive OEM in Taiwan in Q2 and more partners will join in the second half of the year. Our strategy is to use this commercial technology platform to get certified, prove our solution works and then expand overseas. At the same time, we will work on entering the much bigger passenger car market at the same time. Talking about the short term. In Q1 this year, because of fewer working days and seasonal effects, revenue from Mobility Solutions will drop compared to last quarter by a high single-digit percentage points. However, looking ahead to 2026, since we've been getting new orders every year, way above the year's revenue, we estimate that Mobility Solutions will still achieve a low teens annual growth rate in U.S. dollars. Next, I would like to explain our outlook and strategy for Vertical Solutions. In 2025, our Vertical Solutions revenue grew by 9% compared to the previous year, which is lower than the high teens growth we anticipated back in July. The main reason is that the energy business was affected by policy and demand was really weak in the second half of the year. So the annual revenue dropped by more than 40%. However, if we exclude the impact from the Energy segment, the Vertical Solution BG's revenue actually increased by 21% compared to 2024, mainly thanks to the growth in smart retail and the inclusion in AD Link's revenue starting from Q3 last year. So our core business focuses on display-centric solutions led by ADP, while solar and smart manufacturing are grouped under green solutions, including AET and ADT technology service in Mainland China. Over the past few years, we've integrated new ventures and acquisitions. ADP has been transforming into an international solution provider, focusing on vertical fields like retail, health care, education and enterprise services. Let's look at the past quarter. Last December, our health care team of ADP joined the Taiwan Healthcare ESMO Expo. The slide here shows on the top left, ADP leveraged 3D display technology combined with partners to launch a 3D microscopic surgery imaging solution, which works with surgical robots like da Vinci. On the right, we teamed up with AD Link and a medical startup to create a navigation-guided ultrasound system. It leverages ADP's core imaging and visual strength plus Edge AI computing technology from AD Link to help doctors enlighten their workload during surgery. The solution has garnered a lot of attention at the expo. Down below, you can see our most popular product at the event. It is an AI-powered diagnostic solution for traditional Chinese medicine, including pulse diagnosis as well as tongue recognition. They basically digitize the classic diagnostic methods of traditional Chinese medicine. The system is already being used in leading medical institutions, including China Medical University, Taipei City Hospital and Maran TCM clinics worldwide. ADP has now become a key driver of smart TCM in Taiwan. Looking ahead, our Vertical Solution BG is leaning into ESG opportunities and implementing Edge AI for future growth opportunities. For energy saving solutions, AUO has partnered with E Ink. We are showcasing the aecoPost product here on site. And we're also displaying our own cholesteric LCD HiRaso, which are perfect for outdoor wide temperature e-paper displays. It makes ADP a provider of energy-saving display solutions for all environments from outdoors to indoors. This year, our cholesteric LCD displays HiRaso and ESLs as well as price tags are being used by McDonald's in New Taipei City for improving energy efficiency and sustainability. As for AI empowerment, ADP's investment -- AUO's investment in AD Link is a key focus for the future. We are already collaborating with AD Link in entertainment and health care, and this will be a major growth driver from 2026. Looking at Q1, Vertical Solutions revenue should stay flat or dip slightly. For the entire year of 2026, smart vertical, including AD Link and Green Solutions will grow. And the overall Vertical Solutions revenue in U.S. dollars could reach 20% annual growth. Lastly, to sum up, looking ahead at 2026, the display industry will see a healthier supply and demand balance. We are focused on improving profitability and cash flow. For AMSC, we will keep pushing for new business growth and gaining new project awards. This year's revenue in U.S. dollars is anticipated to grow by low teens. Our goal for the next few years is to maintain double-digit annual compound growth. For Vertical Solutions, the target is over 20% annual growth in USD terms this year and to keep up double-digit CAGR in the coming years. Of course, there are lots of uncertainties this year. So our team will closely monitor developments and opportunities. This year marks AUO's 30th anniversary. The management team is committed to steady operations and building a sustainable, profitable business structure for AUO's future growth. We hope that this framework and greater group synergy will help AUO open new tracks for competitiveness and lay out the next growth engine for the next 30 years. Thank you.
Julia Chao: Thank you, Paul and Frank, for your sharing. Now we will address the questions that we collected from analysts before the meeting. The first question is financial related. Could you provide an update on 2026 depreciation and CapEx? Will there be a significant decrease in CapEx and depreciation in the coming years? David, would you please?
Po-Yi Chang: Okay. I'll take this one. For AUO, the depreciation in 2025 was TWD 29.8 billion, about the same as what we estimated last time. We expect that depreciation and amortization in 2026 to be around TWD 28 billion. As for CapEx, it was TWD 18.2 billion in 2025. And currently, we estimate 2026 CapEx will not exceed TWD 20 billion. Moving forward, the company will focus our CapEx resources on Mobility, Vertical Solutions and micro LED development for panels. As we mentioned last time, our CapEx strategy is shifting from heavy capital investment to a more asset-light approach. So in the mid- to long term, both CapEx and depreciation should gradually decrease year-by-year. Thank you.
Julia Chao: Thank you, David. The next question is about display market updates and outlook. What are the TV monitor notebook end market demand in Q4? And what is our view for Q1? Moreover, will memory price increases and shortages affect end market demand? James, would you please?
Chien-Pin Chen: Good afternoon. In Q4, which was the peak promotion season, TV set sell-through was in line with anticipation. In terms of quantity, there was a slight decline of about 2% to 3%. Thanks to strong sales of large size like 85-inch and above TVs in North America, sales grew by around 32%. In Mainland China, although the government trading schemes effect weakened a little bit and the numbers dropped slightly. The average TV size purchase has increased to over 68-inch and even 85- or 100-inch models are selling really well. Therefore, overall, TV shipment area in Q4 was up slightly by single digit and inventory levels were pretty healthy. In the first quarter, we are seeing two big sports events coming up, the Milan Winter Olympics and the World Cup in the U.S., Canada and Mexico around June and July. Because of that, customers are already stocking up early. So Q1 supply is a bit tight. That's also pushing TV panel prices higher. With these events, we expect that TV sales to pick up in the first half of the year. For TVC outlook for the first half of this year looks pretty positive. Now on the IT side, Q4 last year performed better than expected. The pause in device upgrades of Windows 10 triggered a wave of replacements. And we also saw some memory shortages in Q4. So customers pulling orders and stocked up early. Overall, notebook shipments in Q4 grew about 8% Y-o-Y. Looking at Q1, memory shortages and price hikes are still an issue. Even CPUs are starting to get tight. The main challenge this quarter is whether customers can get all the parts they needed -- they need, and if production schedules can go smoothly as they plan. As customers are already reacting to the rising memory and CPU prices, laptop prices are being adjusted at the end market with 10% to 30% increase in end prices currently. We are keeping a close eye on whether this will impact demand going forward. Since the price rise is pretty significant, we will keep working closely with our customers to manage supply and demand. Hopefully, even with tight memory supply in Q1 and Q2, we can still deliver good results. Thank you.
Julia Chao: Thank you, James. We will now open the floor to take questions. [Operator Instructions]
Unknown Analyst: I am Dana from UBS. I have two questions. First, regarding AI. You mentioned that some products are already in mass production and some services are being offered. How do you see the overall AI revenue contribution or growth target going forward? Secondly, there's a lot of discussion about advanced packaging. What is the company's view on the future trends for fan-out PLP, RDL or glass core substrate? And what role does AUO see yourselves playing in the industry?
Unknown Executive: Thanks, Dana, for the questions. Actually, besides just selling display panels, most of our other products already have AI applications built in different -- just to different degrees. So if you look at Vertical Solutions and Mobility Solutions, those definitely include AI. However, if it's just a stand-alone panel, then no, because that's not a system. Another key reason that our gross margin has improved is not just our product mix and transformation, but also our leadership in AI applications at our facilities. Since 2015, we've been driving smart manufacturing. And over the years, we've seen significant reductions in labor, utilities and other indirect costs. This has helped us stay competitive in large-scale manufacturing. At the same time, we have also spun off this expertise into two services companies, both of which are growing nicely. One is AET, which is focused on circular economy and water management and is quite established in Taiwan. The other is ADT technology service in Mainland China, which turns our hardware expertise into selling know-how in Mainland China. As I shared with you earlier, we've been attracting international strategic investors who see our growth potential and are willing to invest. So while I cannot give you an exact AI revenue number, basically, except for standalone panel sales, you will see AI in almost all of our hardware and services. As for glass core, Frank, about the Fan-out PLP process and the potential and development path of using glass substrates for advanced packaging, including RDL and TGV glass core VIH formation for AUO also, we've previously shared that AUO has been building up a broad set of technical capabilities and preparations in this area. We've conducted fundamental studies on technologies such as RDL and glass core structures. We've also been working closely with advanced packaging companies, customers and partners in optical communication-related fields. These collaborations include joint development efforts, technical exchanges and even co-defining the next wave of products and future directions. So our thinking is that these processes require heterogeneous integration, especially in optical communications, like Paul just mentioned with CPO. This is where it really comes together. When AUO started developing micro LED processes, we built up integrated manufacturing. Because of our micro LED strategy, our core strength in optoelectronics have grown, which is crucial for the next wave of CPO technology. Our main idea isn't just to do the process. We want to create system-level modular products. For example, CPO is more of a module product, not just RDL for packaging. Therefore, things like glass antennas or CPOs are about using RDL and glass core processes to make meaningful products, especially for new solutions needed in AI and LEO satellites.
Julia Chao: Are there any other questions from the audience? Okay. We'll address Derek's questions first and go to Brett later.
Hong Ji Yang: Everyone Derek from Morgan Stanley. I have two questions. First, about our mid- to long-term margin trends. Since display business still has some ups and downs, but the swings are smaller than in the past decade. The other two business segments are more stable and their share is increasing. For example, by 2030, when your pure panel business is down to 30% as a share of your revenue, what do you think the company's overall gross margin will look like? Second, regarding AI applications, if we narrow it down to the three products of the four arrows -- of the four strategies that Paul mentioned earlier, micro LED, CPO, LEO satellite antennas and AR glasses waveguides, what's their current revenue contribution, and what do you expect in 5 years from now?
Unknown Executive: Thanks, Derek, for the questions. On that chart I showed earlier, Vertical Solutions plus Mobility Solutions are anticipated to make up over 70% by 2030. For Display, direct sales to external customers will be about 30%. But we also expect another 10% to 20% of our revenue to come from internal customers. This means that display will help drive growth in the other two segments. So if you add them all up, Display could account for around 40% to 50% of our total revenue. However, as our external sales drop, we will focus more on profitability rather than volume since we won't be chasing big volumes anymore. Instead, we will work on growing the other two segments. Of course, we hope profit growth will accelerate. As for the 2030 gross margin, it's very hard to give a long-term number now. But looking at our transformation over the past few years, our margin improvement is speeding up. Last year, our net profit was in the positive range, though some of that was from non-op income. In the future, we aim for positive profits from our operations, and we hope our past capital investments to generate strong cash flow. When it comes to free cash flow, we also want to give back to our long-term shareholders. This will create a positive cycle for the company's operations. That's why we are focusing more on profitability instead of revenue growth. Revenue may not grow super fast, but profit growth should look -- should pick up speed. As for the other three AI-related products, CPO is still in the development stage. Currently, the industry expects CPO for optical communications to mature in 2 or 3 years. So it is not contributing to our revenue yet, but we are already involved in industry alliances and leveraging our group strength to play a key role in the future. And we are also creating synergies across the organization. For the transparent antenna, this is the first time that we showcased it, and it's already impressed a lot of automotive OEMs. They think it's the right solution, so commercialization should speed up. We have been developing satellite antennas for a long time. Therefore, we have the process and mass production capabilities. As for waveguide application in AR glasses, we've already been working on nanoimprint technology for a while, and it's pretty mature. We're working with customers on different projects. And within the next 2 to 3 years, these should start contributing to revenue. The key is what we are -- is that we are well positioned in AI and future growth areas. And we should be able to keep up with the trends and bring in more new businesses. And these new revenues should come with stable or even strong margins. So this should be able to boost our margins.
Julia Chao: Brad from BoA, please.
Brad Lin: I have two questions. First, about this year's outlook. We've seen TV demand is better than expected lately, especially with all the sports events driving restocking. Paul mentioned earlier that you expect TV growth this year. But does that already factor in the possibility that TV demand might soften in the second half? In addition, besides the memory price hikes possibly affecting demand, gold prices have been very volatile and mature foundry prices are also rising. If driver ICs face similar issues, should you stay optimistic about the second half margin because of mix improvement or be more cautiously optimistic? That is my first question. Sorry, that was a bit long. Can I go on? Okay. My second question is about CPO with micro LED. We know that CPO is a big trend, but most current solutions use indium phosphide or gallium arsenide lasers. How does your micro LED solution compares to laser-based ones? And how is your engagement and validation with optical communications and AI system companies since they need to get involved early. That's all from me.
Unknown Executive: Thank you, Brad, for the questions. Frank already covered the full year outlook in his remarks. So all the factors have already been factored in, including TV price adjustments. For IT, we are being very cautious about memory shortages, which could dent demand, and rising memory prices will also take a toll on the industry. It's not just about memory, PC boards and metals are also getting more expensive, which will push up costs and eventually push up end prices. We are watching closely to see if this will impact end demand, and we're being very cautious. Overall, we still expect growth each quarter. In addition to display, our mobility and vertical solutions are both expected to see double-digit revenue growth this year, as Frank stated in his remarks. So we are confident about sequential growth. But we are tracking all these external factors weekly and adjusting as needed because rising material costs will squeeze profits. And if we can't absorb them, we will have to pass them on. As for micro LED versus laser, micro LED is more for short distances like rack-to-rack or server-to-server connections and lasers are used for longer transmission. The applications are different. However, right now, VCSELs are more mature. But for massive data transmission, server-to-server and rack-to-rack and where power consumption is extremely huge. That's why everyone is pushing for optical communications to move into this space. Even though the distance isn't as long, it's enough for data centers. That's why there is so much focus on optical communications and micro LED playing a key role. Plus with FAU, fiber assembly units, you can boost bandwidth and lower power consumption for data center links under tens of meters.
Unknown Analyst: Becky from Yuanta Securities. Thank your for taking my question about Mobility Solutions. The management had a pretty positive outlook. Could you share more details about important new projects this year and next and their contributions? Secondly, for verticals like retail, education, enterprise, health care, et cetera, which end market is growing fastest?
Fu-Jen Ko: Thank you for your questions. For the first question, the most representative Mobility Solution projects last year and this. As we mentioned, every year in the past few years, the new projects that we secured, projects that will contribute to AMSC's future revenue to our three years down the road have always been much larger than the same year's revenue. This is a key reason that we can keep forecasting double-digit growth. Last year's big highlight was getting a manufacturing base in North America or more specifically Mexico post the BHTC acquisition. While we are working on the integration of the two companies, we are integrating AUO Display expertise with BHTC's mechanical control technology, allowing us to partner with automobile OEMs to submit strong proposals. There's a big trend here. Two years ago, everybody talked about digitalizing the cockpit, removing all the knobs and buttons and going for full touch. That boosted our panel value, and we benefited. However, safety concerns remained. Leading governments to require physical controls again. Therefore, combining physical controls with displays is now a very important core capability of AMSC, and it's driving momentum in our proposals to automotive OEMs, especially with our North America and Mexico operations. Thanks to USMCA tariffs, our North American orders last year were multiple times more than the previous year. That is a product trend plus a tariff-driven result. As for verticals like health care, retail, enterprise and smart manufacturing, which one is growing fastest? I can provide you a reference point based on industry data. Smart retail is leading the pack with annual growth rates over 20%. ADP has invested actively in this area, not just with industrial panels for kiosks and post systems, but also with ESG solutions. Products like aecoPost, EcoTech and Edge AI solutions are key to tapping into smart retail's 20% plus annual growth. These are also crucial for AI adoption, as Paul mentioned earlier. The second fastest-growing vertical is digital transformation in smart manufacturing, which is what our two new companies, AET and ADT focused on. Globally, companies need to balance their digital and AI adoption with ESG considerations. Our solutions aren't just in Mainland China or Taiwan. Actually, we've seen great results in Southeast Asia, too. For example, ADP and AET helped Taiwanese partners with digital ESG transformation in Vietnam. So this is the two growth drivers that I would like to share with you.
Julia Chao: Thank you, Frank. In the interest of time, our investor conference concludes here. However, ours SOPs, including transparent micro LED smart cockpit, cholesteric LCD HiRaso and the aecoPost e-paper signage at the entrance will stay on site for a while. Feel free to check them out and our staff will be there to explain to you. If you have any other questions, please feel free to contact us after the event. Thank you all for your participation. We'll see you online next quarter. Thank you.