Ladies and gentlemen, thank you for standing by. And welcome to the Himax Technologies Fourth Quarter and Full Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session.

[Operator Instructions] Please be advised today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker, Maili Bergman, Managing Director of MZ Group. Please go ahead..

Thank you so much. Welcome everyone to Himax’s fourth quarter 2019 earnings call. Joining us from the Company are Mr. Jordan Wu, President and Chief Executive Officer; and Ms. Jackie Chang, Chief Financial Officer. After the Company’s prepared comments, we have allocated time for questions in a Q&A session.

If you have not yet received a copy of today’s results release, please email HIMX@mzgroup.us or 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 results to differ materially from those described in this conference call.

Factors that could cause actual events or results to differ materially from those described in this conference call include, but are not limited to, general business and economic conditions, the state of the semiconductor industry; market acceptance and competitiveness of the driver and non-driver products developed by Himax; demand for end-use application products; the uncertainty of continued success in technological innovations; as well as other operational and market challenges and other risks described from time to time in the Company’s SEC filings, including those risks identified in the section entitled Risk Factors in its Form 20-F for the year ended December 31, 2018 filed with the SEC in March, 2019.

Except for the Company’s full year of 2018 results, which were provided in the Company’s 20-F and filed with the SEC on March 28 - 2019, 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 will now turn the call over to Ms. Jackie Chang, CFO of Himax. The floor is yours, Jackie..

Thank you, Maili. And thank you everybody for joining us. In today’s call, we will first review the Himax consolidated financial performance for the fourth quarter, followed by the first quarter 2020 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 exclude share-based compensation and acquisition-related charges. We pre-announced preliminary key financial results for the fourth quarter on January 7, 2020 as the revenues, gross margin and EPS of the quarter all exceeded our guidance issued on November 7, 2019.

Revenues and gross margin were in line with the pre-announced results, while EPS were at the high end of the range. For the fourth quarter, we recorded net revenues of $174.9 million, an increase of 6.5% sequentially and a decrease of 8.4% compared to the same period last year. Revenues were better than our guidance of flat quarter-over-quarter.

Both display driver and non-driver businesses contributed to the better-than-guided sales. Gross margin was 20.6%, exceeding the prior guidance of a slight increase compared to third quarter’s 19.5%.

A more favorable product mix among small display products, improved WLO factory utilization and higher than expected engineering fees from new project engagements enhanced the gross margin for the fourth quarter.

IFRS profit per diluted ADS was $0.006, exceeding our guidance of a loss of $0.003 to $0.045 [ph] Stronger sales and improved gross margin both contributed to the better than expected earnings. In addition, we booked a revaluation gain of $3.8 million from an investment we made in an AI startup during November 2017.

The revaluation gain was not included in the November guidance. Non-IFRS profit per diluted ADS was $0.009, exceeding our guidance of a loss of $0.027 to $0.042. Revenue from large display drivers was $57.9 million, up 15.6% sequentially, and down 22.0% year-over-year.

The sequential growth was driven by Chinese panel customers’ ramping of new LCD fabs and their building of inventories in anticipation of growing demand and price hike in 2020. The revenue was, however, lower than the level of the last quarter of 2018 when the production outputs of panel makers reached the peak.

Since then, they have cut back their production every quarter to address the overall weak TV demand and industry-wide oversupply. Large panel driver ICs accounted for 33.1% of our total revenues for the quarter, compared to 30.5% in the third quarter and 38.9% a year ago.

Revenue for small and medium-sized display drivers was $81.1 million, up 5.1% sequentially and up 1.6% year-over-year. The segment accounted for 46.4% of total sales for the quarter, compared to 46.9% in the third quarter and 41.8% a year ago.

The sales growth, both sequentially and year-over-year, was primarily driven by higher automotive and tablet sales, offset by a decrease in TDDI sales for smartphone, although the decrease was less than previously expected. Sales into smartphones were down 22.5% sequentially and down 14.3% year-over-year.

Both the sequential and year-over-year declines were caused mainly by lower TDDI shipments However, on a full-year basis, our 2019 TDDI shipments were close to double compared to the prior year, as our fulfillment was capped during 2018 due to capacity constraint.

Starting 4Q ‘19, our business started to see a major turnaround thanks to our penetration into more tier-1 smartphone OEMs, the industry’s rapid roll-out of TDDI in mid to low-end smartphones and our aggressive move to develop new foundry for TDDI. Jordan will elaborate on this in a few moments.

The fourth quarter sales of traditional DDICs declined by 20.2% sequentially but increased 14.3% from last year. Display drivers for tablet and other consumer products were up 26.5% sequentially, better than our prior guidance of a 20% increase. This was due to customers’ inventory replenishment and strong demands from certain brand customers.

The fourth quarter sales of tablet and consumer products were also up by 25.8% year-over-year. Our driver IC revenue for the automotive application was up 23.2% sequentially, better than our guidance of more than 15% increase. It was up 1.9% from the same period last year.

Revenues from our non-driver businesses were $35.9 million, down 3% sequentially and 2.6% year-over-year. Non-driver products accounted for 20.5% of total revenues, as compared to 22.6% in the third quarter of 2019 and 19.3% a year ago.

Gross margin for the fourth quarter was 20.6%, up 110 basis points sequentially but down 370 basis points from the same period last year. Gross margin outperformed our prior expectation of a slight increase compared to the 19.5% of the third quarter.

A more favorable product mix among small and medium-sized display driver products, improved WLO factory utilization and higher engineering fees from project engagements were the factors behind the sequential increase.

Increased shipments of the WLO product to an anchor customer led to higher capacity utilization of our WLO fabs and therefore better gross margin compared to the same period last year. The year-over-year decline was largely due to smartphone TDDI ASP erosion arisen from increased competition as well as more TDDI shipments for lower end market.

Moreover, our large panel driver IC businesses faced headwinds during 2019 when the cost of our COF packaging material went up for capacity shortage and the display industry suffered from a severe capacity oversupply.

Our IFRS operating expenses were $37.4 million in the fourth quarter, down 5.6% from the preceding quarter and down 8.8% from a year ago. The sequential decrease was caused by decreased salary and R&D expenses. The year-over-year decrease was also a result of decreased salary and R&D expenses, offset by the increase of depreciation expense.

Non-IFRS operating expenses for the fourth quarter were $36.8 million, down 6.2% from the previous quarter and down 9.5% from the same quarter in 2018. IFRS operating margin for the fourth quarter was minus 0.8%, up from minus 4.7% in the prior quarter and down from 2.8% in the same period last year.

The sequential improvement was primarily a result of higher sales, better gross margin and lower operating expenses. The year-over-year decline was a result of lower sales and gross margin, offset by lower operating expenses.

Fourth quarter non-IFRS operating loss was $0.7 million, or minus 0.4% of sales, versus non-IFRS operating loss of $7.3 million, or minus 4.4% of sales last quarter, and down from 3% for the same period last year. The sequential improvement and year-over-year declines were for the same reasons stated above.

IFRS profit for the fourth quarter was $1million, or $0.006 per diluted ADS, compared to loss of $7.2 million, or $0.042 per diluted ADS, in the previous quarter and IFRS profit of $8.5 million, or $0.049 per diluted ADS, a year ago. IFRS earnings per diluted ADS exceeded prior guidance of a per diluted ADS loss of around $0.003 to $0.045.

The better than expected earnings were due to stronger sales, improved gross margin, lower operating expenses and a revaluation gain of $3.8 million, or $0.022 per diluted ADS, from a previous investment in an AI startup made during November of 2017.

This was the second revaluation gain we booked for the same investment with the first such gain of $2.9 million, or $0.017 per diluted ADS, booked in the same period last year. The year-over-year decline was a result of lower sales and gross margin, offset by lower operating expenses.

Excluding the revaluation gain, our IFRS loss for the quarter was $2.7 million, or $0.016 per diluted ADS, compared to loss of $7.2 million, or $0.042 per diluted ADS, in the previous quarter and profit of $5.6 million, or $0.032 per diluted ADS from the same period last year.

Fourth quarter non-IFRS profit was $1.5 million, or $0.009 per diluted ADS, compared to non-IFRS loss of $6.9 million, or $0.04 per diluted ADS last quarter and non-IFRS profit of $8.7 million, or $0.005 per diluted ADS for the same period last year.

Non-IFRS earnings per diluted ADS exceeded prior guidance of a loss per diluted ADS of around $0.0027 to $0.042. The better than expected earnings were due to the reasons mentioned above.

Excluding the revaluation gain, our non-IFRS loss for the quarter was $2.2 million, or $0.013 per diluted ADS, compared to non-IFRS loss of $6.9 million, or $0.04 per diluted ADS last quarter and profit of $5.8 million, or $0.033 cents per diluted ADS for the same period last year Now let’s have a quick overview on the 2019 full year financial performance.

Revenues totaled $671.8 million in 2019, a 7.2% decline over 2018. Revenue from large panel display drivers totaled $237.3 million, a decrease of 8.9% year-over-year, representing 35.3% of our total revenues, as compared to 36.0% in 2018.

Small and medium-sized driver sales totaled $307.4 million, a decrease of 5.6% year-over-year, representing 45.8% of our total revenues, as compared to 45% in 2018. Non-driver products sales totaled $127.1 million, a decrease of 7.5% year-over-year, representing 18.9% of our total sales, as compared to 19% a year ago.

Gross margin in 2019 was 20.5%, down from 23.3% in 2018. The year-over-year decline can largely be attributed to smartphone TDDI ASP erosion due to increased competition and significantly more shipments of TDDI for lower end market. Moreover, our large panel driver IC business was impacted by industry-wide TV panel oversupply and high material cost.

On the positive side, more WLO shipments in 2019 led to improved capacity utilization of our WLO fabs and therefore better gross margin. IFRS operating expenses were $156.2 million, down $9.3 million, or 5.6%, compared to last year.

The decrease was primarily the result of lower salary, R&D expenses and share-based compensation, despite higher depreciation expenses out of our new building. As highlighted earlier, we did not issue RSUs in 2019 like we did in previous years but granted stock options to employees instead.

The fourth quarter stock option related compensation expense was $0.33 million. IFRS operating loss was $18.3 million, a decline of $21.7 million from 2018, due to lower sales and lower gross margin, offset by lower operating expenses. For the same reason non-IFRS operating loss was $16.4 million, a decrease of $25.4 million from 2018.

Our IFRS loss for the year was $13.6 million, or $0.079 per diluted ADS, versus a profit of $8.6 million or $0.05 [ph] per diluted ADS. Non-IFRS loss for 2019 was $12.1 million, or $0.07 [ph] per diluted ADS, down $25 million year-over-year.

Turning to the balance sheet, we had $112.1 million of cash, cash equivalents and other financial assets as of the end of December 2019, compared to $117.7 million at the same time last year and $128 million a quarter ago. We made an operating cash inflow of $23.4 million during the fourth quarter.

The cash position was however reduced from the last quarter because we repaid $33.4 million of unsecured borrowings and made a CapEx of $2.7 million during the quarter. On top of the cash position, restricted cash was $164 million at the end of the quarter, the same as the preceding quarter and a year ago.

The restricted cash is mainly used to guarantee the secured short-term borrowing for the same amount. We had $57.3 million of unsecured short-term loan at the end of Q4, substantially lower than the $90.6 million a quarter ago.

Our year-end inventories as of December 31, 2019 were $143.8 million, down from $167.6 million last quarter and $162.6 million a year ago. Account receivables at the end of December 2019 were $164.9 million, up from $157.3 million last quarter but down from $189.3 million a year ago.

DSO was 90 days at the year end, as compared to 95 days a year ago and 86 days at the end of the last quarter. As highlighted in the last earnings calls, in response to capacity shortage of foundry and certain packaging material, we had to keep the inventory level higher than usual in 2018.

Given the unfavorable market conditions and easing of foundry capacity in 2019, we have started to control our inventory level since the first quarter of 2019. We believe inventory has reached a healthy level and given the prevailing uncertain market conditions, we will monitor our inventory situation carefully.

Net cash inflow from operating activities for the fourth quarter was $23.4 million as compared to an inflow of $2.3 million for the same period last year and an inflow of $24 million last quarter. Cash inflow from operations in 2019 was $7.7 million as compared to $4 million in 2018.

Fourth quarter capital expenditures amounted to $2.7 million, versus $5.2 million a year ago and $31.2 million last quarter. The vast majority of the third quarter CapEx was for the purchase of land, the construction of a new building and WLO capacity expansion.

The investment project has been concluded with the final payment of $1.5 million made in the fourth quarter. The investment in design tools and R&D related equipment for our traditional IC design business was $1.2 million in Q4 versus $2 million in Q3.

Total capital expenditure for the year was $45.9 million, of which $7.3 million was design tools and R&D related equipment. In comparison, the CapEx for 2018 was $49.7 million, of which $7.6 million was for design tools and R&D related equipment. As of December 31, 2019, Himax had 172.2 million ADS outstanding, no change from last quarter.

On a fully diluted basis, the total number of ADS outstanding is 172.6 million. Historically, due to the Lunar New Year holidays, the first quarter has seasonally been the slowest period of the year in terms of sales, often down by more than 10% sequentially.

At this time, however, based on our current pipeline, we are experiencing strong sales in the first quarter, brushing aside the seasonal factor. Jordan will elaborate later. However, the coronavirus outbreak currently taking place in China and all over the world does represent a major uncertainty to our operations, especially for the short term.

We are working extremely closely with both our customers and suppliers in our joint efforts to mitigate the risks.

We have started to see some downward adjustments of Q1 forecast over the past week or two, mainly from certain China-based customers for small-sized display drivers and CMOS image sensors who are still scrambling to restore their operations into order. Our Q1 guidance below has taken into account those downward adjustments.

In comparison, we are seeing relatively little impact of forecast from large display customers who are demanding that our supply be uninterrupted by the incident. With vast majority of operations located outside of China, our suppliers are largely unaffected by the coronavirus outbreak.

The focus there is primarily the logistics management including the customs operations in various ports in China. It is worth pointing out that, we have very little short-term exposure, on both customer and supplier sides and in terms of our own operations, to Wuhan and the Hubei Province, the epicenter of the outbreak.

The situation is still evolving. On top of the downward adjustments of forecast we have seen, we have deliberately widened and reduced the low end of this quarter’s guidance to reflect the risk associated with the coronavirus outbreak.

For the first quarter, we expect revenue to increase between 1% and 10% sequentially, an increase of 8.2% to 17.8% on a year-over-year basis. Gross margin is expected to increase by 1% to 2% sequentially, depending on our final product mix.

IFRS profit attributable to shareholders are expected to be in the range of around minus $0.005 to positive $0.018 per fully diluted ADS. Non-IFRS profit attributable to shareholders are expected to be in the range of minus $0.002 to positive $0.021 per fully diluted ADS. I will now turn the floor over to Jordan, the CEO of the company..

those with industry-leading expertise in facial recognition algorithm and those offering application processors with strong AI capability. We have started design-in projects with several smart door lock end customers.

Separately, as we previously mentioned, we are working with partners who wish to take advantage of our 3D sensing know-how to achieve efficiency improvement and cost reduction in traditional manufacturing. One market opportunity we are pursuing is shoe factory automation.

I am pleased to report that prototypes of 3D sensing enabled automatic robotic cementing system are available now for production optimization testing. Next on WiseEye, our AI-based ultra-low power smart sensing solution. The demand for battery-powered smart device with AI intelligent sensing is rapidly growing.

Our total solution is built on Emza’s unique AI-based algorithm, on top of Himax’s proprietary computer vision processor and CMOS image sensor, all equipped with ultra-low power design. Currently laptop is the market of focus.

Himax WiseEye 2.0 NB solution provides a laptop-ready 3-in-1 RGB/IR/AI solution, respecting privacy while enhancing security for notebook users. At the CES 2020, a number of notebook OEMs and ODMs demonstrated our WiseEye NB solution in their next generation premium notebooks with positive feedback.

In addition to notebook, we have also made progress in the displays and IoT markets. Innolux, one of the world's leading manufacturers of TFT-LCD displays, has integrated the Himax-Emza WiseEye solution into displays to enable consumer privacy protection in real time.

Also, Chicony, one of the largest ODMs in the world, and Emza jointly announced a reference design of the world’s first battery-powered human sensing solution for IoT in December 2019. Both Innolux and Chicony showcased their products at the CES.

Previously we mentioned that, in addition to total solution, Himax is also able to offer ultra-low power smart sensing on the basis of individual parts so as to address the market’s different needs and maximize the potential opportunities for Himax. I will elaborate on this in the CMOS image sensor discussion below.

On CMOS image sensor business update. CMOS image sensor is another critical part of the WiseEye 2.0 NB solution.

To support the lean camera design and high-quality image needed for thin bezel laptops, we have made a 2-in-1 sensor that offers the duo capabilities of high quality HD image capturing and ultra-low-power, low resolution visual sensing in one single sensor, the industry’s first with the innovative design.

With this sensor, laptop makers can simplify their next generation product design and save costs by eliminating the need for an additional camera to provide context awareness for a better user experience. Our sensor has also incorporated an RGB-IR design to enable Windows Hello facial recognition.

This new 2-in-1 CMOS sensor is currently available for our partners/customers.

In addition, we recently announced the commercial availability of an industry-first ultra-low power and low latency, backside-illuminated CMOS image sensor solution with autonomous modes of operations for always-on, intelligent visual sensing applications such as human presence detection and tracking, gaze detection, behavioral analysis, and pose estimation for growing markets such as smart home, smart building, healthcare, smartphone and AR/VR devices.

We are collaborating with leading partners within the ecosystem to reduce time to market for intelligent edge vision solutions. Notably, we are working closely with Google and have become the reference design for its world-leading TensorFlow Lite AI framework targeting low power edge devices.

For the traditional human vision segments, we see strong demand in notebooks, where we are one of the market leaders, and have experienced increased shipments for multimedia applications such as car recorders, surveillance, drones, home appliances, and consumer electronics, among others.

Additionally, we have seen increased shipments and new design-wins in the automotive segment covering before-market solutions such as surround view and rear-view camera. Lastly, on LCOS. We continue to focus on AR goggle devices and head-up-displays or HUD for automotive.

Many of our industry-leading customers have demonstrated their state-of-the-art products, including holographic HUD, AR glasses and LiDAR system, with Himax LCOS technology inside at the 2020 CES with positive market feedbacks.

Our technology leadership and proven manufacturing expertise have made us a preferred partner for customers in these emerging markets and their ongoing engineering projects in AR goggles and HUD for automotive applications. For non-driver IC business, we expect revenue to decrease by single digit sequentially in the first quarter.

Aside from the WLO sales which I just mentioned are expected to be down slightly, the CMOS image sensor sales for multimedia markets have been affected by the coronavirus incident as the operations of many of the customers here are still not back in order. That concludes my report for this quarter. Thank you for your interest in Himax.

We appreciate you joining today’s call and are now ready to take questions..

Thank you. [Operator Instructions] Our first question comes from Jaeson Schmidt with Lake Street. Your line is open..

Hey, guys. Thanks for taking my questions. I just want to start on the TDDI business. It sounds like you're seeing some nice traction given some pricing tailwinds this year.

But outside of that, do you think some of the strength is really being driven by overall market growth or share gains as well?.

Definitely, it is true that [ph] primarily with our share gains and market momentum, certainly 5G is going to help.

And certainly that took [ph] with the current the issue of capacity constraint and also unique position for having a mature and sizable and ready to offer capacity that all these factors combined I think is going to add to our strong momentum expected for this year for TDDI..

Okay. That's helpful.

And then just curious if you could comment your thoughts on what channel inventory looks like in the Chinese smartphone market?.

It's a tricky question.

If you're talking about smartphone right?. Am I correct..

Yes..

Okay. Again this is a tricky issue because the coronavirus situation I think is making things pretty blurry for us for the time being. Although I think things will get clarified soon. Having said that though, I mean, the situation is still evolving.

I think I would just like to you know probably further elaborate on your question, I think I mentioned earlier in my prepared remarks that we have taken into account or let me rephrase it, we have discounted already the impact coming out of the virus into our guidance, right.

And on top so, what we have seen with a copy in our guidance and on top of that we have further widened our guidance on the low end just in case because as I said earlier you know, its still evolving.

And so if you asked me so effectively how much impact the coronavirus is going to have on Q1 results, I would say [indiscernible] or even more [indiscernible] even more of our total sales and that is primarily coming from small panel in particular smartphone, sales of smartphone TV effect tech.

Now I'm sure you all - you are going to wonder why is smartphone and why not glass panel. I think long story short, it is primarily because as many of you know, the larger panel size the less likely the panel makers are going to outsource their module assembly to third parties and vice versa.

So in the case on TV it is highly unlikely, actually it is - we are not that at all that the panel makers are outsourcing their module assembly to outsiders, i.e., panel makers are making their modules themselves. And smartphone you know happens to be the smallest in size, in display – in display.

So it is the most likely that the module assembly is outsourced to third parties. Some of them are actually designated by end customers. Now it is a module say [ph] on the operation which purchase our ICs, not for inside.

So right now what we're seeing is that a lot of small players are specialty module assembly houses who are primarily focusing on smartphone for the reasons I mentioned earlier. They are business because they are smaller in size, they are businesses not entirely in order, right.

They are - some of them, even the boss or their employees or even back to the office because of all of this constraint created by the virus situation.

And also it is a lot more likely to – for some small - smaller module houses to react quickly to any or the changes because I see for small panel size accounts for a larger percentage of their total cost. So they are very sensitive to inventory cost. Large panel, especially very large TVs, IC account for a very small portion of their cost.

So they - the concern over there is that they need to make sure the IC does secure. Otherwise you know, if they could use or produce sale, which they are doing right now regardless of the virus situation you know, there will be a few shortage you know when they are ready to ship.

So that's kind of - these plans why the smartphone is the most severely impacted.

And again, I think you know after this current trend above 10% or even more of the impact that we saw over the last two weeks also, out of the coronavirus situation we have given guidance and on top of that we are also widening our [indiscernible] just to accomplish for that.

Having said that though, we believe this is short term situation, although I don't have a crystal ball, so I don't know how long this so-called short term is going to last.

But I - we believe the market is still there, 5G is still going to take off and the smartphone you know again fuel our you know good part line, you know, our capacity, our capacity advantage, our design wins et cetera, et cetera. I think most likely we are going to see explosive growth in starting Q2. So that is already on couple of how we indicated.

[indiscernible] 20% sequentially increase for Q1 expected. I think lengthy answer to your question Jaeson..

No, that's very helpful, I appreciate that color. And then just last one for me and I'll jump back in the queue. You're expecting some pretty nice gross margin expansion here in Q1, sorry 22% at the midpoint of guidance.

Should we assume that that is the low watermark for the year? Do you still expect gross margin to expand as we progress throughout 2020?.

I certainly believe so. I still think it is so. We expect in 2020 that the gross margins will further improve because those are smartphones, small size, and although large space, foundry capacity of the above facing constraint. I mentioned again and again early in my prepared remarks.

So that is going to provide a good price support and those sorts specifically for example DDI [ph] new products, we're going to enjoy better ASP, loan drivers such as 818 [ph] for example you know where actually it's we’ve [indiscernible] but we do have some major - major market position in this region going to take off, right.

So again that is high ASP and high margin. So other non-driver product as well, going to enjoy ASP in margin. So I think we have a strong level of confidence that 2019 gross margins is extraordinarily - extraordinarily low and we certainly expect a good rebound from that in 2020..

All right. Thanks a lot guys..

Thank you, Jaeson..

Thank you. [Operator Instructions] Our next question comes from Sujeeva De Silva with Roth Capital. Your line is open..

Hi, Jordan. Hi, Jackie. Congratulations on the progress here. The TV design market, it seems like it's a tight supply and firm pricing.

How many quarters do you think that situation can persist before pricing competition resumes competitively?.

Well, I think right now what we're seeing is the customers and customers included are very anxious about capacity access. So – and like this is a very, very different situation from last year.

So you know I mean, very now we have do have this virus situation, but I think overall or again we believe the problematic side are not going to - there could be some small hail cut although, PDDI market share will continue to grow within a year. So we don't think - we think PDDI market is going to further grow this year.

And that is going to make the situation – tight this situation. A real issue for both our customers. So I think the price erosion that we saw last year is pretty unlikely to repeat this year..

Okay. That’s all for Jordan. And the on the large panel, clearly the China panel makers are gaining some share.

Can you give a sense of how much of the market is transitioning over and then how much is Himax’s share go to China’s panel makers?.

For our large display driver business, vast majority of our – I don’t have the effective breakdown right now. I mean, I would say probably [indiscernible] for large panel is coming from Chinese customers and by the way we are – I think we are number one or you know, eco number one in China with a pretty piece of market share.

And in terms of how much China is going to get from the Korean restructuring, I guess, its harder to predict this year, even I can give you [indiscernible] from 2019, I guess, 2018, if you look at the glass output, glass area output, glass output distribution, in 2018 Korea had also reached 2%, whereas China had 35%, right. So its 32 and 35 in 2018.

In 2019 the margin already widened to 28%, so these are 43% or 44%. And I think the trade [ph] is expected to continue to widened further for 2019. So I think it is safe to say that in 2019 China is going to commence half or more then half of the global glass output for large panel. So that’s pretty significant..

Yes. Okay, great. And then my last question is on driver and WOO [ph] with your lead customer here.

Is there an opportunity for content gain given competitor capacity or is that something where that stock expect to be phased out over time?.

I think I cannot elaborate too much on this, given the obvious reason.

I can only say that right now you know, we – how we provide this to our [indiscernible] customer, we are the sole source and also we are working on further projects, some of it or maybe you know, will be bigger in size compared to current project and I cannot indicate precisely exactly when the new process is going to start up.

I think don’t have to – update in your guides, in due course..

Understood. All right, thanks, Jordan..

Thank you, Sujeeva..

Thank you. And I am not showing any further questions at this time..

Any more questions from the floor? Without more questions, it’s a final note, Jackie our CFO, 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..

Ladies and gentlemen, this concludes today’s conference call. Thank you for participation. You may now disconnect.+.