HIMX

Industry Environment & Strategic Positioning

• Surging AI demand has created widespread capacity constraints across mature process nodes in the semiconductor supply chain, which will keep the supply environment challenging in the near term. Himex is expanding its supply chain footprint across Asia to secure required capacity and working with customers on incremental pricing adjustments to pass along higher production costs.
• Automotive display IC is identified as a core secular growth market, driven by increasing numbers of displays per vehicle (now averaging over three and rising), larger higher-resolution displays, new form factors, and the shift from LCD to OLED for premium models. Platform standardization across vehicle models favors Himex's broad validated technology portfolio, increasing customer stickiness and content per vehicle.

Automotive Business Progress

• Himex holds leading positions in automotive DDIC, TDDI, and T-Con, with a full portfolio of next-generation technologies including LTDI for ultra-large displays, T-Con for head-up displays (HUD), OLED driver and touch ICs, and physical button solutions for safety compliance. Ultra-large display platforms using Himex's LTDI and T-Con solutions require 4+ chips (sometimes more than 10) per panel, significantly increasing content value per vehicle.
• Himex has an early leadership position in automotive OLED displays through long-term collaborations with leading Korean and Chinese panel makers, with numerous development programs already in place for future growth. The company's new TED embedded driver IC solution is already being adopted across automotive, robotics, and industrial applications.

• For Q3 2026, management expects total revenue to increase 7% to 11% sequentially, with gross margin expected to hit ~34% depending on product mix. Profit attributable to shareholders is forecast to be 8.0 to 10.0 cents per fully diluted ADS.
• The Q3 guidance already accounts for an estimated ~$13 million 2026 annual employee bonus, $11.7 million of which will be immediately vested and expensed in Q3, for a total Q3 bonus-related expense of ~$11.8 million. The guidance does not include the expected $23-$24 million pre-tax gain from the pending divestiture of an equity method investment, which is expected to close in Q4 2026.
• Large display driver IC sales are expected to decline by a single-digit percentage sequentially, while automotive driver IC sales are projected to grow solid double-digit quarter-over-quarter. Full-year 2026 automotive driver IC sales are expected to grow double-digit year-over-year, with strong growth continuing into 2027.
• Non-driver product revenue is expected to grow low double-digit sequentially in Q3, with automotive T-Con sales projected to grow 12% quarter-over-quarter (double-digit growth for the automotive sub-segment).
• Management expects robust overall sales growth and continued gross margin expansion for 2027. Non-driver revenue is expected to outgrow driver IC revenue, reaching ~30% of total revenue (up from ~20% currently), led by strong automotive growth and contributions from new products including WiSight AI sensing and smart glasses components. CPO revenue will grow very significantly in 2027 from a low 2026 base, and will make a meaningful non-negligible contribution to top and bottom line results starting 2027.

Himex Technologies reported Q2 2026 total consolidated revenue of $227.4 million, a 14.2% sequential increase and 5.9% year-over-year increase that beat the prior guidance range of 10-13% growth, driven by stronger-than-expected automotive IC sales.

1. Large Display Driver IC: Revenue of $19.2 million, a 21.0% sequential decrease, driven by panel makers pulling forward high-end TV IC inventory purchases in prior quarters. The segment contributed 8.4% of total Q2 revenue, down from 12.2% last quarter and 11.6% year-over-year.
2. Small and Medium-sized Display Driver IC: Revenue of $162.3 million, a 19.6% sequential increase. The automotive IC sub-segment (including traditional DDIC and TDDI) grew double-digit quarter-over-quarter, driven by customer inventory replenishment and new project ramps, and represented over 50% of total company revenue as the largest revenue contributor. Tablet IC sales grew sequentially from early customer pull-in demand, while smartphone IC sales fell sequentially after Q1 initial OLED IC shipments for a leading brand. This segment contributed 71.4% of total Q2 revenue, up from 68.2% last quarter and 67.3% year-over-year.
3. Non-Driver Products: Revenue of $45.9 million, a 17.7% sequential increase, driven by robust automotive T-Con demand across a broad customer base. Automotive T-Con accounted for more than half of the segment's revenue, and T-Con business overall makes up over 10% of total company revenue. This segment contributed 20.2% of total Q2 revenue, flat from 19.6% last quarter and down from 21.1% year-over-year.

• Ongoing industry-wide semiconductor capacity constraints driven by AI demand have tightened supply for the mature process nodes Himex uses, and foundries have announced further price hikes for 2027, creating ongoing cost and supply management challenges.
• The CPO/co-packaged optics market has a complicated ecosystem, and mass production timing and volume are uncertain, making it impossible to quantify 2027 CPO revenue contributions precisely at this stage.
• Smart glasses product adoption and volume depend on customer product launches and market acceptance, so 2027 revenue contribution cannot yet be quantified, with momentum still building in the design pipeline.
• The pending divestiture gain from the equity method investment is subject to customary closing conditions and regulatory approval, so final timing and amount may vary.
• Actual annual employee bonus amounts and expense recognition may differ from current estimates, depending on Q4 performance and final board approval.

Q: Can you clarify what "meaningful" 2027 CPO revenue means, and share your overall 2027 business outlook? / A: Himex does not provide formal guidance beyond one quarter, but expects robust 2027 sales growth and continued gross margin improvement, excluding uncertain CPO contributions. Non-driver revenue will approach 30% of total revenue (up from ~20% now), driven by strong automotive growth and new product lines like WiSight sensing. Automotive sales will continue double-digit growth even with flattish global vehicle shipments, as increasing displays per vehicle and higher IC content per display drive growth. CPO will see very significant 2027 growth from a low base, and a meaningful contribution means it will not be a negligible addition to financials, but exact quantification will have to wait until customer validation and mass production timelines are confirmed.

Q: How does Himex view CPO competition, and what are your key advantages over peers? / A: Himex and its partner 4C use a fiber-based optical solution, while most other competitors use traditional molded glass technology, and Himex's technology is more mature than peer offerings, in the company's view. Management's current focus is on completing customer validation and achieving successful mass production rather than worrying about competition, and notes the CPO market is large enough to support multiple successful players.

Q: What are the biggest current bottlenecks for CPO mass production, and how long will it take to resolve them? / A: The entire CPO ecosystem is complex, and Himex's focus is on ensuring it is not the bottleneck itself, from both a technology and capacity standpoint. Validation of Himex's optical solution, followed by broader ecosystem validation across packaging, assembly, and end customer server platforms, is expected to be completed by the end of 2026, with no clear timeline for broader ecosystem bottlenecks available at this stage.

Q: What is your expectation for smart glasses revenue in 2027, will it be large next year? / A: Mass production of micro-display components for smart glasses is still a multi-quarter out, but WiSight AI sensing products will be a meaningful 2027 smart glasses story. While one leading global brand has already launched a WiSight-powered product, promotion is just getting started so volume demand is not yet clear. There is strong design pipeline momentum including projects from major hyperscalers entering the smart glasses market, but it is still too early to quantify 2027 revenue, with clearer guidance expected in 2-3 quarters.