Himax Technologies Inc (HIMX) Q1 2023 Earnings Call Transcript

Himax Technologies Inc (NASDAQ:HIMX) Q1 2023 Earnings Call dated May. 11, 2023.

Corporate Participants:

Mark Schwalenberg — Investor Relations

Eric Li — Chief IR/PR Officer

Jordan Wu — President and Chief Executive Officer

Analysts:

Jerry Su — Credit Suisse — Analyst

Presentation:

Operator

Hello, ladies and gentlemen. Welcome to the Himax Technologies, Inc First Quarter 2023 Earnings Conference Call. [ Operator Instructions ] As a remainder, this conference call is being recorded.

I would now like to hand the conference over to your host, Mr. Mark Schwalenberg from MZ Group.

Mark Schwalenberg — Investor Relations

Welcome everyone to Himax’s first quarter 2023 earnings call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer; Ms. Jessica Pan, Chief Financial Officer; and Mr. Eric Li, Chief IR/ PR Officer. After the company’s prepared comments, we have allocated time for questions in a Q&A session. If you’ve not yet received a copy of today’s results release, please e-mail himx@mzgroup.us access the press release on financial portals or download a copy from Himax’s website at www.himax.com.tw.

Before we begin the formal remarks, I’d 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 that involve a number of risks and uncertainties that could cause actual events or risks to differ materially from those described in this conference call. Unless the factors can be found in the company’s SEC filings, Form 20-F for the year ended December 31, 2022, in the section entitled Risk Factors as may be amended.

Except for the company’s full-year of 2022 financials, which were provided in the company’s 20-F and filed with the SEC on April 6, 2023, 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 an independent auditor to which we subject our annual consolidated financial statements and may vary materially from the audited, consolidated financial information for the same period. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

I would now like to turn the call over to Mr. Eric Li. Eric, the floor is yours.

Eric Li — Chief IR/PR Officer

Thank you Mark, and thank you everyone for joining us. My name is Eric Li, Chief IR, PR office Himax. On today’s call, I will first review the Himax consolidated financial performance for the first quarter 2023,followed by our second quarter outlook. Jordan, will then give an update on the status of our business, after which we will take questions. We will review our financials on both IFRS and non-IFRS basis. The non-IFRS financials is good shares based compensation, acquisition related charges and the cash at work. Despite the challenges of ongoing macro headwinds and the seasonal effect first quarter revenues and EPS both beat our guidance. Higher gross margin, what we seeing the guidance range, we issued on February 9, 2023. First quarter revenue registered $244.2 million, a decrease of 6.9% sequentially by marked better than our guidance of a decrease of 12% to 17% sequentially. The better than guided sales were attributable to increased order momentum, particularly in the large display driver IC business and the smartphone and the tablet TDDI segments. As well as our continuous effort to deeply inventory.

IFRS gross margin came in at 28.1% a decrease by 30.5% last quarter. But we are seeing the guidance range of 28% to 30%. Gross margin was impacted by several factors. First, and the primarily we incurred the high cost of our assets inventories that were thought during a period when foundry and the backend prices pick. Second, we had to Write-down on certain unsold inventories due to market price declines. Finally, there was price erosion. A requisite part of ongoing inventory of loading process. Yes. IFRS profit per diluted ADS was $8.5, surpassing our guidance of $0.35 to $0.07. No IFRS profit per diluted ADS was $11.5, beating our guidance of $0.65 to $0.10. Revenue from large display driver was $53 million or an increase of 21.8% sequentially and the substantially above our prior guidance of up high single digit from last quarter.

Monitor IC sales grew remarkably at the expected. Increasing by a decent double digit quarter-over-quarter. This increase, the momentum is primarily due to leading customers starting to replenish chip. Following several quarters of the channel inventory reduction. Notebook sales were also a better than guided due to demand from chip replenishment. We saw strong sequential growth of TDIC sales stemming from increasing order from customers preparing for our company in China shopping festivals. Large panel driver IC sales, accounted for 21.7% of total revenues for this quarter compared to 16.6% last quarter and 26.8% a year ago.

Moving onto our small and medium sized display driver segment revenue was $154.7 million, a decrease of 12.8% sequentially. Yet ahead of our guidance due to increasing shipments of smartphone and tablet especially TDDI products to global leading brands after the Lunar New Year holidays. Q1 automotive driver sales decreased mid teens quarter-over-quarter guided. Automotive TDDI IC sales were better than expected due to customers moderated inventory reduction majors. For automotive TDDI despite the widespread adoption of our products in the EV sales and especially declined as panel houses cut back their IT purchases while experiencing sudden order suspension from their EV customers.

The underlying cost thus abated EV price compensation, which had led major Chinese automakers to drastically cut production and enforced stringent cost control majors. Yes, automotive driver business Steel represented the largest revenue contributor for us with 30% of total sales in the first quarter. We remain optimistic about our automotive DTIC growth to potential in the coming years, we have secured about around sorry around 300 design wins a number, which is still growing as we speak, which put us significantly ahead of our peers. At this moment, only one third of the acquired the design wins have commenced the production indicating in numbers upside potential in the coming years. The remaining design wins to enter mass production. Small and medium sized driver IC segment accounted for 63.3% of total sales for the quarter compared to 67.6% in the previous quarter and 62.6% a year ago.

First quarter non-driver sales also exceeded guidance, with revenue of $36.5 million down 11.8% from a quarter ago. Our key comp business was up single digit in the first quarter markedly surpassing the guidance of mid-teens got decline. Bolstered by decent shipment of automotive Tcon as well as better than expected shipment of lost sight that display Tcon. Tcon business represented over 9% of our total sales in the first quarter. It’s worth highlighting that our automotive local team in Tcon technology was the recently awarded gold medal award at Touch Taiwan 2023. Another illustration of our leading position in cutting edge technology for automotive display. Jordan will elaborate on this level.

For automotive Tcon backed by strong order pipeline, we anticipate business momentum to assess the rate with rapid expanding design wins across the board. Now, driver products in Q1 accounted for 15% of total revenues compared to 15.8% in the previous quarter and the 10.6% a year ago. Our IFRS operating expenses for the first quarter, were $51 million, the decline of 2.9% from the previous quarter and down 1% from a year ago. Amid the prevailing macro economic headwinds, we continued to tighten already spent control. Non-IFRS operating expenses were $44.5 million for the first quarter, down 2.5% from the preceding quarter and up 1.1% from a year ago.

First quarter IFRS operating income was $17.6 million or 7.2% of sales versus 10.5% of sales in the last quarter and the 34.5% of sales from a year ago. Non-IFRS operating income was $24.2 million or 9.9% of sales compared to 13.1% last quarter and the 36.3% same quarter last year. IFRS after tax profit was $14.9 million or $8.5 per diluted ADS compared to $42.2 million or $24.1 per diluted ADS last quarter. First quarter non-IFRS after tax profit was $20.1 million or $11.5 per diluted ADS compared to $47.7 million or $27.3 in the previous quarter.

Turning to the balance sheet, we had $223.8 million of cash, cash equivalents and other financial assets as of March 31, 2023, compared to $447.1 million at the same time last year and the $229.9 million a quarter ago. The decrease in cash was a result of cash outflow from investing activities, which was mainly used to make final payments for major AMOLED capacity agreement for smartphone that we had signed in 2021. Offset by $66.4 million of operating cash inflow in the first quarter. We had a $45 million of long-term unsecured long first off end of this quarter, up end of first quarter of which $6 million was current portion. The $335.2 million[indecipherable] higher than $253.1 million a year ago were markedly lower than $317.9 million last quarter. Accounts receivable at the end of March 2023 was $252.2 million or down from $261.1 million last quarter in the down from $442.2 million a year ago. DSO was 93 days at the quarter end as compared to 96 days a year ago and the 79 days, the last quarter.

First quarter capital expenditure was $2.8 million versus $2.3 million last quarter and $3.6 million a year ago. The first quarter capex was mainly for our IC design business. Just prior to today’s call, we announced an annual cash dividend of $0.48 per ADS. Totaling approximately $83.7 million and the payable on July 12, 2023. The payout ratio is 35.4%. We have decided on the relatedly low payout ratio in light of prevailing macroeconomic uncertainty. We are grateful for the continued support of our shareholders, but we continue to ask it, our business objectives and the strike to deliver sustainable long-term growth, while maintaining a healthy balance sheet. As of March 31, 2023 Himax has a $174.4 million ADS outstanding, unchanged from last quarter. On a fully diluted basis. total number of ADS outstanding for the first quarter was $174.8 million.

Now turning to our second quarter 2023 guidance, we expect the second quarter revenue to be in the range of flat to down 9% sequentially. IFRS gross margin is expected to be around 20% to 21% depending on the final product mix. The second quarter IFRS profit attributable to shareholders is estimated to be in the range of minus $2.9 to $2.6 cents per basic ADS. Now, IFRS profit attributable to shareholders is expected to be in the range of [Technical Issues] per fully diluted ADS. I will now turn the call over to Jonathan to discuss our Q2 outlook. Jordan the floor is yours.

Jordan Wu — President and Chief Executive Officer

Thank you Eric. So consumer consumption coupled with recession fears continue to present challenges to market demand as amplify uncertainties throughout the tech world. The semiconductor industry appears to have come to a consensus to some degree, we say, expectation, so inventory attrition were extend longer than previously projected. The display market and Brian, remain cautious towards their panel procurements. While panel makers implement stringent upward controls a rigorous procurement scrutiny. Amidst ongoing macroeconomic uncertainty, our visibility remains limited as panel customers continue to shorten the duration of their forecasts. However, our inventory has been reduced to a comfortable level after several quarters of aggressive destock it. Well, current inventory level is still somehow somewhat above the historical norm. The good news is that the remaining stocks are comprised of IC products, which had a solid customer design base long expected lifetimes.

Moreover, after quarters of Write-downs. The book costs of the stocks at least equal to and in many cases much lower than the prevailing market prices. In light of the better than expected inventory outflow we stand-by our expectation that inventory will revert to historical levels no latera than the third or fourth quarter of this year. In an effort to improve our cost structure for new waiver starts and maintain competitiveness. We have strategically terminated certain high cost foundry capacity agreements recently prior to their expiration dates. This, however, has resulted in a significant one time early termination expense incurred in the second quarter and hit our Q2 gross margin.

In fact this is the predominant factor for the second quarter, gross margin contraction on-top of the price pressure incurred from stock destocking. Termination of the above mentioned capacity agreements is a crucial operational strategy for us followed by making initial term sacrifice can help us achieve more than gains [indecipherable] terminated contracts. Our new waiver stores will not be subject to minimum fulfillment requirements and fixed contractual prices set at the time of severe industry capacity shortage. This also gives us the ability to diversify suppliers. Given the significant contract termination expense Q2, were the trial of our gross margin we sequential expansion expected throughout the second half of 2023. As an important side note, we’ve retained necessary capacity to support the growth of our AMOLED business, which will be a major growth driver in the coming years. That’s all that displays gain traction in a wide range of modification. Next on to the Q2 sales guidance. Sudden demand drop-in automotive business is among the main reason causing the sequential sales decline. As we have talked about previously, automotive has been our largest business contributor for many quarters. Accounting for over 30% of total sales. It’s far going to contribution than our peers. The solid decline in the automotive demand, therefore, has a heavier impact on our total sales. Automotive sales are being firstly impacted by recent price turbulence in Chinese EV market as we reported earlier. However, we view the current setback as a temporary and short-term phenomenon. Our outlook for the automotive business remains positive. Given the mega-trend of increasing quality and certification of displays in the vehicles. Backed by our disputed leading market-share as well as new design-win pipelines. This is particularly true for automotive activity where we have already achieved a global market-share leadership position. Our TDDI sales are already on-track to resume rapid growth momentum. And we remain confident in its potential to be a primary driving force for our long-term business growth.

Last but not least, we remain committed to our strategy of expanding in high value added areas, including TDDI and Tcon for automotive OLED and AI. Core secular trends of growth remain intact. In some of these areas, we have already achieved a leading market position. [indecipherable]much higher content value but also establishes higher barriers of entry for latecomers. With that said, we are going through the challenging second quarter in terms of both sales and gross margin, but believe this will be a short-term phenomenon with the rebound on the corner starting in the second quarter–in the second-half. Excuse me. I will now begin with an update on the large panel driver IC business. Our second quarter 2023 large display drive IC revenue is projected to be down double digits sequentially. We expect TDIC business to decline, double digit quarter-over quarter as customers have pulled forward demand in preparation for the upcoming seasonal shopping sales. Replenishing of chips over the past two quarters. Most IC sales in the second-quarter are said to decline single-digits sequentially. Following the strong order replenished, replenishment, we saw last quarter. Well, notebook driver segment is expected to slightly decline. Turning to the small and medium-sized IC business, we expect Q2 revenue for this segment to be down single-digits sequentially.

However, there are indications of business momentum recovery for smartphone and tablet in the second quarter, particularly in TDDI products. Both are projected to increase mid-teens sequentially fueled by resumed customer orders following several quarters of downturn. Importantly, our inventory depletion for smartphones and TTDI is progressing nicely and improving as we speak. As such, we have initiated newer stuff for late products which will enjoy better margins starting Q2. Automotive IC sales are anticipated to be down, low teens sequentially. A result of weakening demand in China, which is prompting automotive panel houses to implement cost reduction measures and to recalibrate inventory levels. Having said that, our position as the market-share leader in both TDIC and TVDX for automotive remains intact. Looking at the long longer term perspective. Where only moderate growth is anticipated for automotive DDIC. Our TDDI business is projected to be spent is below 50. Backed by the first expanding TDDI adoption for new-generation vehicles and are dominating a new project design with status. Himax also continues to lead the industry with the launch of the OTT or last display, last push display driver integration automotive display solution.

Specifically designs for the next-generation extra large automotive displays typically 13 inches or larger. Our cutting edge LTDI tecchnology enable’s ultra-high resolution displays and high-precision touch sensitivity catering to the growing demand for large synergies in intuitive ub car experiences. We are scheduled to start mass production this quarter, which is well-ahead of the competition. Currently, we are working on several design calibrations for some of the [indecipherable] automotive vehicles with major panel makers. As we have repeatedly said before, the trend for automotive interiors continues to evolve towards more stylish and diverse designs as preform curvature with ever-improving image quality. Made possible with panels equipped with advanced technologies. Himax is the front-runner in automotive display IC market offering a comprehensive product portfolio covering the entire spectrum of specifications and technologies to address very design these, including traditional DDIC, TDDI, the whole team in Tcon the OTTI and then all that. We are encouraged by our progress having expanding design win coverage across panel makers and engaging more [indecipherable] and OEMs to incorporate new technologies into their new vehicle models.

This implies we not only have been able to reinforce much higher content value over per panel basis, but we also enjoy better profit margin. We are committed that the automotive driver business will continue to be our primary sales contributor to moving forward. Last, one update on AMOLED. Himax offers both DVIC and Tcon for AMOLED display and has commenced production for tablet and automotive applications jointly with global leading panel makers. For automotive AMOLED display we continue to see robust design activities as well as increasing product awards. project awards with conventional car makers and EV led this across different continents. Additionally, we continue to queue-up for a AMOLED driver IC development strategically partnering with major Korean and Chinese panel makers of various applications, covering smartphone, notebook and TV. For smartphone AMOLED display driver. we already have secured meaningful capacity and expect to commence production toward the end of 2023. Our AMOLED business including display driver and Tcon is slated for strong growth in the next few years. Now let me share some of the progress we’ve made on the non-driver IC businesses. Starting with an update on timing controller, we anticipate Q2 Tcon sales to decrease by low-teens sequentially hampered by decreased demand for [indecipherable] and AMOLED displays for tablet. On a positive note, we continue to solidify our leadership in the automotive Tcon market. Particularly in local teaming technology. As Eric mentioned earlier Himax Automotive local team in Tcon was awarded the go panel award by Touch Taiwan 2023. Another great recognition by the industry after our years of strenuous work on these high entry barrier technology. Let me take the circuits to elaborate award-winning lower team in Tcon. The adoption of the whole team in Tcon now only dramatically improved contrast ratio of the display. But also provides enhanced power efficiency both of which are crucial especially for EV displays. Our industry leading the Tcon offerings support super high frame rate and a wide range of resolutions from full HD up to 8K. Additionally Tcon are paired this solution can even accommodate up to 16K resolution. We see rapidly increasing adoption by all leading panel makers Tier 1s and carmakers starting from premium new car models and in some cases extending to advanced models. Tremendous progress has been made with numerous projects was already. Similar to that of TDDI for automotive, only a small number of design awards of automotive Tcon have commenced mass production last year. We therefore expect a strong growth trajectory for automotive Tcon starting 2023 in the coming years. Switching gears to the wide sized smart image sensing total solution which incorporates Himax propreitory ultra-low power AI processor always on CMOS image sensor and CNN based AI algorithm. We continue to support the mass production of sales notebook, along with other endpoint AI applications such as video conference device. Shield bike parking [indecipherable] among others. We are unwavering in our commitment towards WiseEye as we look to proliferate our industry leading ultra-low power AI solution by fostering innovation in a broad spectrum of an endpoint AI applications across the globe.

Furthermore, we remain dedicated to post three development in the domains of energy efficient AI processors and AI image sensors for endpoint AI applications to maintain our top ranked status in the space. The home surveillance application such as doorbell, door lock and and security camera showcases another successful deployment of ultralow power WiseEye technology. WiseEye offers embedded context aware AI that accurately identifies humans to reduce excessive false triggers avoiding unnecessary SLC processing and leading to efficient power usage for the services for the surveillance system. This facilitates the transition of conventional surveillance systems from wired to battery powered watch broadening real time adoption. Furthermore, WiseEye features ultralow power pre-roll AI to enable always so full color negative time image recording before a classified event. Resulting in a complete video stream and preold clips of what happened before the said event. This also illustrates another significant improvement compared to existing surveillance solutions. In March this year, at ISC West leading security industry trade show.

Himax joining forces with various ecosystem partners and customers to undertake broad array of battery operated homes surveillance devices like WiseEye technology. The adoption of WiseEye in surveillance areas is quickly proliferating and we are seeing more active design activities and broad increase after the event. Moreover for the upcoming China shopping festivals, Himax is teaming up with a leading door lock vendor in China, specializing in smart home and security to debut as smart door lock solution with advanced security and low power consumption. This is yet another confirmation of the WiseEye technology in the rapidly emerging endpoint ultralow power image AI era.

Now next for an update of our next generation W2 AI processor, which builds upon our industry leading W 1 processor and performs contextual awareness, AI, particularly in detecting user engagement levels based on more subtle presence or movements. The W 2 designs with advanced computing computer vision engines that can recognize images over a longer distance and machine has accuracy, speed, power efficiency and influence the performance. Based on superb AI processing capabilities, W2 can enable more comprehensive and detailed types of objects detection, such as facial landmark, head landmark and body skeleton to perceive complex human body [indecipherable] enabling high precision AI detection for a wide range of applications and used cases in real life. It has gained significant traction for next generation smart notebook targeting to hit the market study for 2024. While we are making solid design progress, we believe top brands. Within the top brands is CPU and FPSOC partners to join to the Oracle the Richmond [indecipherable] of notebooks. The press of business activities is also expanding with ILT players specializing in various domains to meet different demands. That were previously unknown to us. We are thrilled to be at the forefront of this innovative developments that lie ahead in the near future. Supported by fast expanding customer adoption from various domains. We are committed to the development of the ways by product line, while leverage in broad because as the partners to capture the vast endpoint opportunities. We believe our WiFi product line will be a significant long-term growth driver for us.

Lastly, for an update on our optical already product lines including WO 3D sensing and there course. Himax is one of the few companies in the technology industry with a wide array of optical related product lines that play the vital role in emerging technologies, development and realization of the metaverse. Our technology leadership and manufacturing expertise evidenced by the qualities of [indecipherable] customers going Engineering Projects. We continue to work on strengthening our [indecipherable] technology suite, while collaborating with global technology leaders in this space. Now quickly review some of our recent progress. First on 3D sensing. Our 3D sensing control. On 3D sensing control, we are delighted to share that we will commence the production of WLO technology to one leading North American customer for their next-generation VR devices starting Q2 this year. Our WLO technology is deployed empower VR devices with 3D perception sensing for precise controller free just to share recognition. Separately, we are expanding our 3D processor offerings to offer time-of-flight or COR ToF 3D in addition to socialized 3D decoder. Well, we are already a market-leader with a proven track-record in mass production. These will enable us to meet the diverse use case of 3D sensing were ToF is more effective for long-range 3D perception whilst sociate sales in high-precision 3D detection for shorter distance. All our 3D processes are equipped with advanced infusion sensor fusion offering, industry-leading fastest response rates, clearly [indecipherable] that makes our processes effective fit for high-precision special reality applications. Last on LCoS. We are delighted to announce that we will unveil our state of the art color sequential from the LCoS technology and the display which 2023 AOA. One of the world’s most renowned display industry symposiums and trade shows. Our proprietary LCoS offers unrivaled performance and functionality featuring lightweight and compact form factor, with a total volume, that includes the nomination upticks and the LCoS panel of around 0.5 CC. As far as high illumination efficiency delivering brightness of up to 100K units. These outstanding characteristics make it the perfect panel display solution to meet the stringent specifications of the most advanced AR glasses deploy into the exit pupil expansion size that support greater 50 degrees feel of view. We are honored to be invited to give a Deep Dive presentation of our color sequential from the LCoS technology to industry experts at the symposium.

Additionally, one-to-one meetings, we speak through the all major tech names i.e. AR goggles have also been lined up. We will provide updates on our progress for this exciting new technology as they come about. We remain steadfast to strengthening our optical related technology suite and [indecipherable] partnerships with the world’s leading technology companies deeply committed investing in these developments. At the metaverse, the immersive technologies continues to develop. We believe that Himax is well-positioned to capitalize on it’s growth with years associated development, a unique product portfolio production history, and key partnerships. For non-driver IC business, we expect revenue to remain flattish sequentially in the second quarter. That concludes my report for this quarter. Thank you for your interest in Himax. We appreciate you joining today’s call. And we are now ready to take questions.

Questions and Answers:

Operator

Thank you.[Operator instructions] Our first question comes from Jerry Su with Credit Suisse. You may proceed.

Jerry Su — Credit Suisse — Analyst

Thanks for taking my question. Just want to follow-up on your previous comment about the second quarter guidance, which show the gross margin that was impacted by the termination of the US wafer contracts. Can you give us an idea of what is the impact on the margin. How much of, I know that you said you are recognizing the second quarter. That’s the first question. And secondly, if I look at your large-sized driver IC outlook, these things like that you are a little bit different from the industry because I look at the panel makers or backend or your driver IC peers all are expecting a sequential growth, can you give us an idea of what is the discrepancy between your guidance versus the industry trend. Thank you.

Jordan Wu — President and Chief Executive Officer

Thank you, Jerry. On the first question, our last quarter, gross margin was above 28%, which is above 28%, and for this quarter, we are. Guiding 22%. I thought we are closing to 21%, if we take the midpoint about 20.5%, so there is a differential of about 7%. So the impact of — from the the termination of long-term contract, the impact is, we said in the prepared remarks the predominant factor that means far greater than half. Right. That means far greater than half meaning we said 30% differential of with hub difference actually came from this termination. Meaning, without the termination, our margin would have been much closer to that of the the previous quarter of 28.2% I think. Now. The remaining difference. I think come primarily from the fact that our, in the second-quarter, the automotive business was was hit by what we describe as sudden global turbulence in the, especially the EV market in China. Which actually is related to your second question, right. So because our automotive market exposure is far greater than both our peers at 30% to fall in 25% historically over the last, I don’t know-how many quarters many quarters already.

So the impact, especially TDI which is [indecipherable] of growth every single quarter, but I mean, I expect it to be in Q2 we are now seeing some sequential decline, which we believe will be a short-term surprise and we emphasizing our prepared remarks that growth will resume probably strongly in the second-half for the automotive business especially where we are very, very confident that this temporary the setback will be a short-term phenomenon. So because the waiting of our sales coming from automotive is still high for high mix and there is a short-term, how we call market turbulence in our automotive market so that is why we are probably harder hit than our peers during the second quarter. So I think that covers both part of the first question as as well as the second question. Is part of the difference primarily come from automotive. We said earlier in our prepared remarks, actually if you look at our smartphone, tablet, they will be actually growing. And non-driver will be flattish to certain small growth, that’s how we expect in others. So I think automotive is the main difference. But again I think [indecipherable] applications for display. We are happy we are betting big on automotive because long-term, I’m talking about next several years. Automotive is still on-track to outgrow the rest in our view. And so having such high exposure to automotive require — is actually negative news for Q2. I think looking for is going to be very good news, especially given our dominant position in new project design wins covering both TVDI [indecipherable] and Tcon where I mentioned in my prepared remarks of the [indecipherable] design-win process for TVDI value projects on the above 100 [indecipherable] is going to mass production on the rest where sub market production over the next or two years. Even more so, a lot more so for inventory come, which is a very high value and high margin and it has appears to be to becoming of major trend becoming trend before automotive makers and panel makers to adopt the our Tcon which is right now, still the only choice in the industry. So probably mass production in 2023 probably small portion. I think we expect very strong growth of in Tcon going-forward. So again the difference in Q2 comfortable. But we are quite positive on local long-term.

Jerry Su — Credit Suisse — Analyst

All right. Thank you. I think my previous question regarding the revenue trend for this quarter was mainly loss at drive IC because I think you guided that the [indecipherable was declined double-digit quarter-over quarter, but we look at the guidance from the panel makers or your peers. Apparently, that they’re guiding for some sort of growth by for [indecipherable], so my question was actually more related to this front. And then, then the other one, automotive, just a follow-up, can you elaborate a little bit about what is your end-customer mix, automotive, is it more Chinese customers or is a more global customers. Thank you.

Jordan Wu — President and Chief Executive Officer

You mean end customer.

Jerry Su — Credit Suisse — Analyst

Yes, end customer panel end customers, if possible. Thank you.

Jordan Wu — President and Chief Executive Officer

Okay, okay, I’ll probably give you overview of the customer-base. Now, on the first question, I apologize for misunderstanding your question. Yes, our — we guided for some decline for loss panel where you see certain of our peers have for large panel. Whereas some of our peers have guided for an upside. I think these costs primarily from TV, the difference for TV. I think TV for most of our peers including Himax is the largest sector by far. In the last display space. Now, yes we do see recovery for TV market. And we have actually enjoy over the past few quarters, steady growth for TV driver. And also another good news is panel price through panel makers, various measures has been stabilized and even goes up a little bit going-forward, but In this quarter in particular we don’t get full benefit. Because of the difference in customer-base. Our customer base, our TV panels are supplied primarily by Chinese makers, largely by Chinese makers and followed by Taiwanese panel makers. Our customer base are much more exposed in China than in Taiwan where true for the reasons[indecipherable ] end customers panel allocation decision hopefully is a short-term decision but has swung from bigger focus on China to more focus on Taiwan. And so it’s really our end customers panel location that causes our primary different direction compared to our peers, because we are, our exposure is more towards Chinese panel makers, a lot more than Taiwanese panel makers.

While the current trend is, the short-term trend is for location to go to Taiwanese panel makers more. So I think that is that is the main reason. But we are discussing extensively with end customers with a very direct technical and business relationship which I think. Various measures on the way and Including our getting to more exposure to southern Taiwanese panel makers and also their longer-term strategy towards location among these two markets. So, hopefully we will be on-track study in the second half for TV panels market. As far as your second question is concerned about our customer-base for automotive. We saw muggy share every single customer, every single panel makers is our customer and in most cases we are, in many cases we are actually the predominant supplier some other cases we’re number one or number two suppliers. So I’m talking about every single panel makers and that is the easy question. Now with the panel makers that you have Tier 1 makers and ultimately to end user OEMs. We have also very comprehensive global reach. We realize brand OEMs. First, the number of brands are many and with a global diversification where you have North American brands, Korean brands, Japanese, European, Chinese, etc.

So we need to with our share, we need do cover them all. So there is no focus one way or the other as such for Himax. And [indecipherable] Tier 1s, they are European, Korean, Japanese, American and Chinese Tier 1s. There is some crossover European Tie 1 where in addition to European market we will also cover some Chinese market as well as Chinese Trier 1 we will cover some European market and it’s always but there is still this reach. Global diversification with a lot of global buyers on Tier 1 market. And as I said this year and we have implemented that quite successfully [indecipherable] is to cover them all and to try to get a leadership position. To the extent possible we — as many of them as possible. So we have major will engineering support offices, certainly in China, in Japan, in Korea and we have we engineer support even in Europe, and fewer in Germany and even in North-America. [indecipherable] but also in showing and thus shows like illustrates our efforts to cover truly to extend our global footprint, automotive market. I hope that answers your question.

Jerry Su — Credit Suisse — Analyst

Okay. Yes, yes, that’s very clear.

Jordan Wu — President and Chief Executive Officer

Thank you.

Operator

Thank you. And this concludes the Q&A session. I’d now like to turn the call-back over to CEO, Mr Jordan Wu for any closing closing remarks.

Jordan Wu — President and Chief Executive Officer

As a final note, Eric Li, our Chief IR, PR Officer will maintain investor marketing activities and continue to attend investor conferences. We’ll announce the details as they come about. Thank you and have a nice day.

Operator

[Operator Closing Remarks].