Financial Performance - Fourth quarter revenue was $203.1 million, a sequential increase of 2.0% quarter-over-quarter, with gross margin at 30.4%, consistent with guidance [4][5] - Full year 2025 revenue totaled $832.2 million, a decline of 8.2% compared to 2024, with operating income at $44.1 million or 5.3% of sales [11][13] - Q4 profit per diluted ADS was $0.036, at the high end of the guidance range of $0.02-$0.04 [5] Business Segment Performance - Revenue from large display driver IC was $21.7 million, a sequential increase, accounting for 10.7% of total revenue [5][6] - Small and medium-sized display driver revenue totaled $139.1 million, reflecting a slight decline of 1.3% sequentially, while automotive driver sales increased approximately 10% quarter-over-quarter [6][7] - Non-driver sales reached $42.3 million, a 7.9% increase from the previous quarter, with T-CON business accounting for over 10% of total sales [8] Market Performance - Automotive driver sales showed resilience despite softness in global automotive markets, with full-year growth outpacing the broader market [6][11] - The small and medium-sized display driver IC segment accounted for 68.5% of total sales for the quarter, down from 70.8% in the previous quarter [7] Company Strategy and Industry Competition - The company is focusing on expanding into ultra-low power AI for endpoint devices and smart glasses, leveraging advancements in AI technology [21][25] - Himax aims to capture increasing semiconductor content as automotive display technologies evolve from LCD to OLED, with a strong design win pipeline [35][36] Management Commentary on Operating Environment and Future Outlook - Management noted ongoing macroeconomic uncertainty and price increases in memory affecting market sentiment, but expects sales to rebound in the second quarter [19][20] - The automotive display IC business is projected to remain strong, supported by new technology offerings and a robust design win pipeline [20][21] Other Important Information - Operating expenses for Q4 were $54.9 million, a decrease of 9.6% from the previous quarter, attributed to reduced annual bonuses and currency depreciation [9] - The company had $286.2 million in cash and cash equivalents as of December 31, 2025, an increase from the previous year [14] Q&A Session Summary Question: First quarter gross margin outlook - Management indicated that gross margin is expected to be flat to slightly down due to product mix changes and ongoing material cost pressures [47][48] Question: CPO revenue guidance for 2026 and 2027 - Management stated that revenue contribution from CPO will be limited in 2026 due to validation processes, with potential meaningful contributions starting in 2027 [52][54] Question: OLED sales expectations - Management noted that OLED sales are expected to grow significantly in 2027, with automotive and IT OLED products enjoying better margins compared to smartphone OLEDs [60][63]

Investment Rating - Industry view is cautious [1] Core Insights - The report highlights a cautious outlook for the semiconductor industry, particularly in the context of AI and memory sectors, with a focus on potential recovery in the second half of 2025 impacted by tariff costs [7] - Long-term demand drivers include the reacceleration of AI semiconductor demand due to generative AI, which is expected to proliferate across various verticals outside the semiconductor industry [7] - The report indicates that the global semiconductor revenue peaked in the third quarter of 2024, with a forecasted decline in semiconductor exports from Korea since February 2025 [12][19] Summary by Sections Semiconductor Market Dynamics - The cyclical downturn is characterized by a shift from euphoria to pessimism, as indicated by the SOX Index performance [8] - Historical data shows that declines in semiconductor inventory days have historically signaled positive stock price appreciation [41] - The report notes that the domestic GPU supply chain may face dilution due to shipments of NVIDIA B30, impacting inferencing AI demand [7] Memory and Logic Cycles - Memory stock prices are seen as leading indicators for logic semiconductors, with the report suggesting that memory share price peaks lead logic semis [42][43] - The report forecasts a significant increase in HBM (High Bandwidth Memory) market size, projecting it to reach US$64 billion by 2027, with a CAGR of 107% from 2023 to 2027 [67] AI and Technology Trends - The report emphasizes the shift in value from hardware to application in the AI investment stack, indicating a growing focus on software and application development [73] - It is projected that local GPU revenue in China could grow to RMB 287 billion by 2027, driven by advancements in local manufacturing capabilities [90]