In our leadership position, as well as investing in new businesses to capture new market opportunities. During this period, we have continued the organizational transformation project, focusing on enhancing our organizational structure and improving operational efficiency. Going forward, we strive to establish a more efficient and agile structure to achieve our mission and to establish a solid foundation for long-term sustainable growth. For the second quarter, healthy improvements have been shown across all four business segments, and all segment revenues reported year-on-year growth. Optics business continued its fast growth trend. Revenue grew significantly by 43.1% year-on-year to RMB 380 million, accounting for about 9% of the group's total revenue, up from 7% in Q1. Gross margin continued to increase to 13.8% on the back of improved ASP and yields.
Acoustics Business showed a strong recovery in Q2, with revenue up by 34.2% Q-on-Q and 7.9% year-on-year respectively to RMB 1.91 billion. Acoustics Segment blended ASP in Q2 maintained a year-on-year growth with a healthy gross margin of 26.4%. For Electromagnetic Drives and Precision Mechanics business, the Q2 combined revenue has increased by 11.4% year-on-year on the back of shipment volume growth, with blended gross margin stood at 22.8%. Haptics Business continued its solid growth trend in shipment volume, with penetration rate increased further into mid and lower tier smartphone markets. For Precision Mechanics business, gross margin improved compared to Q1 on the back of higher capacity utilization rate. MEMS Segment revenue grew by 14.5% to RMB 259 million, with a healthy growth in shipment volume.
During Q2, net operating cash inflow amounted to RMB 1.46 billion, with CapEx of RMB 2.32 billion. Out of the total CapEx, 70% are for production equipment and around 50% of which are for optics business. Net gearing stood at a healthy level of 10.4% with a cash position of RMB 5.09 billion as at end of June. The Board of Directors has declared an interim dividend of HKD 0.10 per share to be paid in cash on 25th September. Amid the uncertain global economic outlook, the group will remain prudent in financial management and strong in cash position to continue investing in technology roadmap across various business segments so as to create long-term value for our shareholders. We will look at the performance for each business segment.
During Q2 2020, revenue from Optics business grew significantly by 55.4% Q-on-Q and 43.1% year-on-year, respectively, to RMB 380 million, and gross margin further increased to 13.8% from 9.8% in the previous quarter, demonstrating our improved profitability. For the first half of 2020, Optics revenue grew close to 50% to RMB 625 million. As shown in the graph, both ASP and shipment volume have exhibited remarkable increase due to improved capacity utilization rate and higher percentage of high spec plastic lens in the overall product portfolio. In Q2, shipment volume and ASP of plastic lens have increased to 102 million units and RMB 3.74 respectively, resulting in a higher gross margin.
We're making good progress to improve our gross margin, with certain projects achieving higher than 35% gross margin currently. With a systematic approach utilizing simulation and data modeling, we're confident to improve production efficiency and yield in order to bring the gross margin of our projects to be best in line in the industry over time. Steady progress has been made in new product development, including telezoom, wide-angle, small head, main camera, and TOF. Our proprietary WLG hybrid lens, exhibiting a superior optical performance in light intake and image resolution, has been considered by the market to be one of the major future directions in optics upgrade. Compared to plastic lens with the same number of lenses, our hybrid lens could reduce the thickness by 10%, increase light intake by 15%, and increase resolution by 5%-8%. We're proactively promoting our WLG hybrid lens products via two main approaches.
First is the platform approach to provide fully compatible products for replacing traditional plastic lens. We target to have shipment in the second half of this year. The second approach is to produce customized hybrid lens with high specs and high resolution, targeting to complete specification by this year with mass production next year. We're making steady progress in WLG lens production and target to produce 30 million pieces of WLG glass lenses for 2020. Camera module business as a strategic business position for us is important to promote optics lens business and provide a holistic optical solution to our customers with vertical integration of lens modules and algorithm going forward. Acoustics segment exhibited a considerable recovery in Q2.
Q2 revenue from acoustics business significantly increased 34% Q-on-Q and 7.9% year-on-year respectively to RMB 1.91 billion. Our acoustics blended ASP maintained a year-on-year growth due to changes in product portfolio. Q2 gross margin of acoustics business remained at a healthy level of 26.4%, demonstrating a stable profitability. Overall, due to adverse impact from Q1, in the first half of 2020, revenue and gross profit margin declined by 8.7% and 3.8 percentage points year-on-year to RMB 3.33 billion and 26.3% respectively. Stereo acoustics has been widely adopted by high-tier models this year, with further penetration expected to take place to mid and low-tier models next year. This will allow stereo acoustics to become a new standard feature for smartphones and provide greater market opportunities to our Acoustic segment.
The penetration of SLS platform in terms of our total shipment volume of Android models has maintained at a high level of 70%, with a higher proportion of classical SLS version in total shipment volume. We expect ASP for Android acoustics products to stabilize. The upgraded classical SLS speaker box with diaphragm vibration amplitude of ±0.75 millimeters is scheduled for mass production and begin shipment by the second half of 2020. As a global leader in miniaturized acoustics technology, we will continue to invest in our proprietary SLS product platform and bring advanced acoustic experience to end consumers. During Q2 2020, the combined revenue from electromagnetic drives and precision mechanics segments has increased by 11.4% year-on-year. Meanwhile, the blended gross margin lowered by 4.1 percentage points to 22.8% due to higher sales contribution from precision mechanics, changing the revenue breakdown of this segment.
For the first half of 2020, the revenue of this combined segment increased 9.7% year-on-year to RMB 3.42 billion, whereas blended margin declined by 6.3 percentage points to 23.2%. Our X-axis haptic motors have been widely adopted by Android flagship models and penetrated further into mid and low-tier smartphone markets. We see positive growth momentum in the Android haptics market as traditional motors and Z-axis haptics are being replaced by our x-axis haptic motors over time. At the same time, the gross margin of Android haptics has shown healthy increase on the back of improved production efficiency and scale. The group will gradually develop vertical integration capabilities to combine software and hardware solutions so as to provide consumers with better user experiences. Precision Mechanics business has been playing a strategic role to help the group better understand the smartphone upgrade trend.
In Q2, our Precision Mechanics business showed a sequential recovery compared to the previous quarter. Higher proportion of 5G smartphone metal casing projects further enhanced the shipment volume and ASP. Gross margin of the segment has improved compared to Q1. We have been ranked as the preferred supplier for our major Android customer and we're proactively expanding our customer base. We will also adjust the production capacity flexibly according to the market demand. Going forward, we will strive to outperform the first-tier peers to ensure satisfactory profitability for this segment on the back of improved capacity utilization rate and expanded customer base. During Q2, revenue from MEMS components grew steadily by 14.5% year-on-year. For the first half of 2020, revenue increased 20.4% to RMB 460 million, whereas gross margin declined by 7.3 percentage points to 16.2%.
The strong demand for MEMS microphones was fueled by the improvement of intelligent speech interaction in the past two years. Increasing the number of MEMS microphones installed per handset, alongside the popularity of wearable and smart home appliances, also helped to boost market expansion of the segment. Our high-end miniaturized microphone products with high signal-to-noise ratio and low energy consumption has gradually been adopted by laptop markets. To satisfy the market demand, we plan to expand our production capacity and increase our market share. We will also increase the proportion of in-house production of MEMS chips to further lower our production cost and improve gross margins. On sustainability and ESG, we have published our seventh sustainability report in May. We will continue to strive for best practice for ESG in the industry. We established sustainability working group, which reports to the board on a regular basis.
This helps to strengthen our governance structure to ensure continuous effort from the board level all the way to each level of the company, paving the way for realizing our ESG strategy and achieving sustainability goals. We aim to achieve best practices on ESG, which are highly recommended in the hardware industry. Our disclosure adheres to the top international standards. We have been part of the 30 constituent stocks of the Hang Seng Corporate Sustainability Index for seven consecutive years. In addition, we have been included as a constituent of the FTSE4Good Index series , which demonstrates broad recognition of the group's commitment to corporate social responsibility. This concludes the overview of our second quarter results. There are more supplementary information in the appendix section of the PPT for your reference. Our management, Mr. Pan and Richard, are both here to answer your questions. Thank you.
Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key.
We are limiting to two question at each time. Our first question comes from the line of Leping Huang from CICC. Please go ahead.
Thank you for taking my question. I have two questions. The first question is about the lens business. I remember in previous quarter you mentioned that you target 100 million unit a month shipment maybe by end of June or early July. Do you have any visibility on now on the shipment volume in third quarter? Based on that, what's your view? If you can reach higher volume, what's the profitability or what's the gross margin you reach? Especially I think you mentioned that you reached 60 million units shipment volume in June already. What's the gross margin in June? Thank you.
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Thank you for that question, Leping. When we talk about optics sales revenue, and when we looked at the sales we made to specific customer, we have to acknowledge that it's actually what we call a platform production approach. IE when we produced from our factory, the production lines can turn out the final products to different individual customers. Hence, for us is much more meaningful and relevant to look at what we call production statistics, IE production news or what we call production gross margins. basically in second quarter and for the rest of the year, the direction and what we have achieved has not differ to what we have set out from the previous quarters or from the beginning of the year. For the second quarter, when the CEO looked at the internal production gross margin number.
For the second quarter, we have achieved gross margins of 25.9% gross margins in terms of production gross margins. And the latest production gross margin for the month July for the past month, we have actually achieved 31% already. 31%. When we looked at [human targets and plans by end of third quarter, I think in the earlier targets we have said that 100 million per month. I think we are not far from that. I think between the third and the fourth quarter, we are going to deliver something in between 80 million-90 million per month. And with bearing in mind the production gross margin we already have achieved for july, , we think the gross margin of 40% by that time, of 80 million-90 million, something of 40% is highly achievable. For more information about what we are thinking for the rest of the year when we enhance our product portfolio, we believe a realistic range for our AAC sales of optic products will range from ASP revenue RMB 4-RMB 4.50. We believe that is the strategy of stabilizing a high production gross margin production yield and enhancement of costs. We strongly believe that by the year 2021, this year, we could see a longer-term target of 50% gross margin in this Optic business. So there is no change in terms of what we have said in the earlier guide of description of our business. [Non-English content]
Thank you very much.
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Please continue.
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As we have said earlier on in previous calls, we aimed to build up the hybrid lens momentum this year. In terms of stock building for WLG, the glass lenses, as of today, we have already built 2 million in stock. I think before, we have targets by the end of the year, something 30 million. Again, we are not far, but maybe we turned up a little bit short from that, something around 20 million by end of year. That would not affect the progress of the market adoption. Generally, as we have said before, there are two different paths that we are promoting the hybrid lens and WLG. I think the more closer to what we will see is the replacement or adoption of hybrid lens in terms of delivering a 64 million resolution pixel design.
In similar to plastic lens, we believe it's a platform approach, whereby I think we can achieve mass production of products of something like 100 million, but we can handle different many projects from different individual customer, covering maybe 48 or 64 resolution design, whereby I think the WLG has a very strong competitive pricing. As we have said before, we do not aim to price out or price too much higher than a pure plastic lens design. We expect something like RMB 5. In terms of a 48 resolution periscope design, around not more than, I think, $1.50 is what we are expecting to see. More importantly, I think we are seeing the glass lens costing definitely have a very strong advantage. In terms of comparing to the other traditional GMO process, we believe the glass lens can deliver something like one-third of the GMO glass lenses.
This is the platform approach. On top of that, we definitely are also working on and developing and promoting to different customers on higher specs, hybrid lens design, 70, the periscope, et cetera. Again, our timeline is not changed. I think overall, we will see a couple of projects in mass production before the end of the year.
Thank you. Sorry, go ahead.
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We are confident and we have well-prepared, not only for the business side of what we just talked about, but more importantly, as we have mentioned in the past, we have facilities in Denmark and Czech Republic. We have already have 120 direct, what we describe as professional precision technicians, and some of them are classified as professional engineers. These direct technicians, precision professionals, have been receiving our training already in the past few months already. This expertise is not about paying them salaries, but really it's about investing in training, enhancing their know-how, and putting the efficiency into the preparation of the tooling production lines. In terms of financial investment, I think we roughly estimated something like RMB 40 million has been spent already, of which RMB 15 million is directly related to the technicians' salary costs.
These costs are something that we believe actually is not only in terms of financial barriers.
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The RMB 15 million includes the R&D people who work in the WLG.
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The R&D and the production and the precision technicians that I described are included in the RMB 15 million cost that CEO just described. More importantly, we believe through the training, through the timely investment that we have already invested and the logistics setup, we are well established in terms of the preparations for the required tooling to deliver the mass production backup to support the onslaught of the hybrid lens business.
Thank you. May I take the next question? The next question comes from the line of [Wang] of Credit Suisse. Please go ahead.
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The cycle of a rolling inventory is a typical arrangement for business to match production to the sales plan or forecast from customer. We believe an average of maybe when we talk about the production, we prepare for a forward-looking sales plan. Maybe we're talking about a time gap of one to one and a half months. Generally, I think we can work on the basis that the sales performance kind of lags behind production by one and a half months to reflect the rolling inventory that keeps in the company. More importantly, I think we need to focus on what we call a stabilized, achieved efficiency in terms of yields, in terms of our tooling. I think we need to focus on the stabilized yield, production yield and the arrangements for tooling.
From there, we can definitely perform fine-tuning enhancement to the base, whereby we use, as we have mentioned before, data simulation to continue to improve. I think the focus here is to establish a sustained, stabilized, high efficiency on a certain mass volume plan and turn that into what we call one and a half months later of sales performance. [Foreign language]
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We are quite positive that the CapEx requires or incurred or to be incurred in the second half is going to be less than the first half amount. Mostly we are focusing on the Optic business, whereby we are looking at different developments and preparations for plastic lens and some for hybrid lens and thirdly, for the module, camera module business. In terms of the preparation for 90 million to 100 million per month plastic lens, as we have said before, most of the major equipment have already been in place.
I think we are left with adding some what we call mold forming machines, [Foreign language], these are the final kind of adding to the capacity, which I think by that we can look at by the end of later this year, maybe some more additional capacity to take capacity beyond the 120 million-140 million per month. Mostly, I think we also want to make sure that the portion of hybrid lens of shipments are increasing and hence making use of the hybrid lens, the increasing of the molding machinery for WLG glass lenses. Finally, the module production line, as we have said before, we have 10 lines already in place, delivering 8 million per month capacity.
Whether I think by the end of the year when we have assessing customers project development, I think by that time we will make some more judgment whether if we are to add another five to 10 lines.
Thank you for the questions. I will now move on to the next questions from Hu Yejin of CITIC Securities. Please go ahead.
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I think it's only realistic that the inventory cycle kind of behaves to the implementation as we grow the business. I think at the moment when we describe one and a half months, I don't think we have reached that kind of duration yet. Maybe at the moment it's slightly more than a month. We anticipate the largest kind of duration is one and a half months. I think clearly, as we see the cycle possibly peak or climax by Chinese New Year next year, thereby, I think from then on, we will work to reduce that cycle lag period to around three weeks.
Certainly we have to bear in mind, we need to look at the market demand and the time to set up, kind of match the market demand to AAC shipments capability, because the shipment of plastic lens is not a very flexible, very kind of quick set up. In terms of, for example, when we looked at the operators that are responsible for the escalated gross margins that we have delivered, we are looking at the same kind of laborers or the number of optics operators, workers that we have since November last year. It does take investment in terms of training your teams of people, setting up our own kind of production lines as well.
I think realistically speaking, at the moment it's a month and a little bit more, but the maximum is one and a half months, but the longer term is to reduce that to something like three weeks. We will pay attention to the market demand.
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To talk about, obviously, we briefly talked about the CapEx outlook for optics business in the previous question. I think the reduction of holding inventory and the review of market demand has a lot of relevance when we look at the incremental extra CapEx required. Hence, as we have said just a while ago, we don't anticipate any big significant CapEx on the plastic lens. Then again, I think we are already in talks and in discussions with customers outside the smartphone industry in terms of these drones devices, automobiles.
We believe these projects are of interest not only to these potential customers, but also to verify our WLG capability and our optic capability as well. I think we also describe and we are very confident that the WLG capability, the design process and the production process has a marked advantage in terms of comparing to the traditional GMO process. In terms of new momentum in the new sector, we have third photon ventures ongoing. All these are in progress and we believe the optics business is a good start at this moment, but we have not neglect the capability of its strength in terms of user experience in the other markets.
Thank you. We'll now move on to the next question from Susanna Chui of DBS. Please go ahead.
Hey, thank you management for taking my questions. I have two questions. The first question would be I would like to update the product mix. Maybe load that 6P shipment contribution in the second quarter and 15%-20% contribution by the end of 2020 is still on the track. May we also know how about the 7P target shipment in 2022 as well? My second question is actually about the competitive landscape, because your largest peers saw the slow smartphone camera spec upgrade in first half. How you view the optic spec upgrade outlook in second half and also 2021? Do you think that AAC could take advantages of the slow upgrade? That is all for my questions. Thank you.
[Yu Xia], [Foreign language]. Oh, Susanna likes to first.
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At the moment, we are developing and progressing well with 6P. At this moment, product mix-wise, 6P is not a major percentage. Our ASP at the moment, RMB 3.75, I think slightly fall short of our competitors. At this moment, we are already seeing orders and shipments requests for 6P up to 5 million per month in the third quarter, going up to 7 million by fourth quarter, thereby enhancing the overall product mix and increasing the blended ASP. More importantly, although as we have said previously, we expect 1 million shipment of 7P projects, we still prefer to focus and promote the alternate hybrid lens design in terms of 6P. I think the differentiation of hybrid lens is very clear in terms of its user experience proposition for different customers.
With that, we believe that I think going forward next year, the continued enhancement of the product mix will more be able to deliver a higher plan of 6P plus hybrid lens 6P projects.
Thank you. In the interest of time, I'll now take the last questions from Frank He from HSBC. Please go ahead.
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The 20 million that we talked about earlier in the call, we are referring to a total output. We don't by any means, we are quoting a shipment number. What is important is here, as we have said, the hybrid lens based on the WLG is more like a platform approach, whereby we believe several customers are already expressing interest and could be satisfied with one to two platforms, i.e. the capacity or the capability of building up a mass production of not only in terms of a stabilized monthly production output, but also in terms of making sure these go through the production verification by our customers. It's also very important. Hence, we don't mean 20 million by the end of shipment number to the customers.
More importantly, we have already said that we have already achieved 2 million per month capacity, and we are expanding that by October. The new facility, a 4-inch facility in Chongqing, I think it's going to be online in October time, thereby increasing substantial amounts to more than the 2 million per month as of today. It's a capability that our customer, not only through the adoption of hybrid lens design, but also a verification of AAC preparations in terms of capacity, readiness and also the building up of inventory. We talked about 20 million is an important number, but by no means we mean a shipment target by before the end of the year. Let us clarify that point.
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VCM。
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The VCM, we are already in the process of qualification with our customers. We expect the timeline may be 12 months that we will see projects, shipments and customers project actively involvement of AAC design of these VCMs.
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I apologize for the translation error. I think by Q1, Q2 next year, we will see the VCM design come out. I think we have taken the last question. If I may, I would ask, I think our CEO, Mr. Pan, would like to give a few concluding remarks before we end the call today. [Foreign language]
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CEO wants to give conclusions on the recent development, not only on what we have discussed in length about optics, but also on acoustics. In optics, I think we have plenty of questions and answers. We believe the development not only give us to deliver the momentum in revenue, but also the continued uptrend deliver of betterment of gross margins in terms of plastic lens and coming online, the hybrid lens project. Lastly but not least, we talked about the timeline of AAC Technologies for proprietary VCM coming to the market shipment stage in Q1, Q2 next year. I think those are quite certain that we are going to deliver. In acoustic, I think we did not talk much about acoustics at all during this call.
For those who are familiar with our acoustic development, I think some seven, eight years ago, we already see quite a significant upturn and kind of delivery of our strong strength, not only in design, but working with different customers, that we gradually conquer the market on transition from a what we call single speaker design to a speaker box design some seven and eight years ago. I think we are at the stage whereby we are seeing many of our Android customers are coming to the market. We are working with them on many kind of different smaller projects that leads to a fragmentation of design, whereby kind of impacting the gross margins that we used to deliver in the speaker box projects.
We are pleased to hear the feedback on the recent kind of sales and design migration to actuate what we call an integrated speaker box design, whereby we believe through our automation process and through our continued research and implementation of new material, we will be able to pass on some of the latest innovative design in terms of savings, kind of making the speaker box smaller and smaller, but on a what we call again, platform approach, not at the expense of the acoustic performance. Already at this stage, most of our Android customers are very positive in responding to this, what we call minimization design of integrated speaker box. We are very confident that this will be a very good opportunity for us to deliver better and better kind of road maps, but also better and better enhanced financial performance in terms of margins as well.
I think as of this stage, we believe as quick as I think later this year and maybe early next year, this integrated minimized design speaker box will conquer or take something like 20%-30%, what we call penetration rates. Clearly the long-term target is to see something like 70%-80% penetration. We believe this is a very strong opportunity for AAC to deliver solid and good gross margins, like what we have already done so some seven or eight years ago when we launched the speaker box design.
I think that's the two major conclusions that CEO wants to kind of emphasize. At this point in time, I'd like to thank all the shareholders and investors for their interest for this Q2 interim results call.
I think our IR team will get to work this week, and we will talk more about the different business segments that all of us are interested in. [Non-English content]
这个投资人已经全部下了吗？好，再见。现在下了。我现在要挂电话了。
[Foreign language]. Thank you.
Thank you for your participation. This concludes today's conference. You may go ahead and disconnect. [Foreign language]