Ladies and gentlemen, thank you for standing by, and welcome to the AAC Technologies 2018 Annual Results Investors Webcast and Conference Call. At this time, all participants are in listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, you will need to press star one on the telephone. I will now hand over to your host today. Please go ahead.
Good afternoon, everyone. Thank you for joining AAC Technologies' 2018 Annual Result Conference Call. I am Eddie Kung, Head of Investor Relations. Joining me on the call today are Mr. Benjamin Pan, our CEO, and Mr. Richard Mok, our Managing Director. Before we begin, we would like to draw your attention to the disclaimer. Some information we discuss today may contain forward-looking statements. This information includes revenue, gross margin, future products, and capital expenditure. Actual results or changes may vary different from what you hear today. We will now briefly review annual results and take questions afterward. I will now turn the call over to Richard. Thanks.
Hello, good evening, everyone. Thanks for joining the call today. I'm not going to take up our precious time too much, but let me quickly go through, I think, what most of us have read through and saw in our result announcement today. In 2018, AAC Technologies achieved significant transformation. We adhered to the objective of leading innovation and enhancing user experience. We had achieved much progress in innovation and established new versatile platforms. Despite the decline in global smartphone shipments, leading to deceleration in the technological innovation in 2018. During the year of 2018, the company's revenue reached RMB 18 billion, a drop of 14.1% on a year-on-year basis. Net profit RMB 3.8 billion, decreasing 28.7% on a year-on-year basis. Gross profit margin at 37.2%, a decline of 4.1 percentage points.
We declared a final dividend of HKD 1.03 per share, which means we maintained a full-year dividend payout ratio of 40%. In this slide, in acoustics, we achieved major breakthroughs and launched innovative new acoustic platform. Most of you had heard already, Super Linear Structure, the SLS, in 2018. It successfully penetrated most mainstream Android flagship models, and it came with significant enhancement of the unit price. However, since the overall shipment of SLS is still declining, and there was the pricing pressure of legacy products, revenue of this segment has declined at 9.4% on a year-on-year basis to RMB 8.7 billion. Our gross margin for this segment dropped at 3.6 percentage points to 37.2%. In 2019, this year, we will continue to accelerate upgrade of the SLS technology platform, and we will significantly enhance its penetration.
We target to penetrate into all mainstream flagship models and also mid-range models during the year. We believe the continuous upgrade capability of this platform will enlarge our market share in acoustics and drive revenue growth, and also improve gross profit. At the same time, this platform will enable us to explore new markets, such as the VR/AR devices and smart cars, which I think all of us strongly believe will deliver exciting business opportunities. The optics business segment contributed a satisfactory revenue of RMB 550 million in the year 2018, a year-on-year increase of 240%, meaning we successfully penetrated into major smartphone customers. This revenue accounted for 3% of the company's total revenue in 2018. Monthly shipment of plastic lens already reached 20 million at the end of 2018.
We believe there's room for further improvement in our operational efficiency and gross margins, where economies of scale will continue to contribute. During 2018, the company continued to increase R&D resources. As announced, this includes the expansion of the optical R&D team in Finland. This year, in 2019, I think we all see triple cameras getting more and more popular. I think the demand for upgraded optical specs, we all agree, is increasing. We expect the price of lenses will be driven up as demand should remain strong. We will increase monthly production capacity for plastic lenses to over 50 million. Needless to say, we will continue to promote WLG hybrid lenses for high-end applications to create the revolutionary user experience that all our smartphone customers and the industry are looking forward to.
For the electromagnetic drive and precision mechanical segment, the customers in haptics demonstrated a kind of slowdown in terms of innovation. Average unit price and shipments of the haptics dropped in the year 2018 as competition intensified. That has led to a decline in the revenue. There were weaknesses in the high-end models in the year 2018. The utilization and gross profit margin were impacted, and precision mechanical shipment was below our expectation. Revenue of the combined segment of the electromagnetic drives and precision mechanical stood at RMB 7.90 b illion, a decline of 23.8% on a year-on-year basis. Gross profit margin dropped 2.8 percentage points to 41.1%. This combined segment accounted for 43.5% of the company's total revenue.
Looking ahead, we expect price and volume of haptics components and solutions to increase, as, for example, under-screen fingerprint technology with unibody large curved 3D glass back cover design will continue to drive the upgrade of haptics. Also more customized smartphones for video games. Our newly launched step motor module solutions for pop-up cameras to achieve full-screen smartphone design is likely to create high development potential for this segment. As for precision mechanical, we target to optimize existing production capacity in the year 2019, this year, to significantly increase revenue contribution. Moreover, we believe the glass casings in the 5G era will continue to give us opportunity to develop new integrated solutions incorporating ultra-narrow metal frames, large curved 3D glass, and also the laser plastics for the high-end models. Going forward, we will continue to lead technological innovation to create value for customers and further enhance user experience.
We will adopt a two-pronged approach. R&D and manufacturing continue to develop core technology to strengthen our versatile technology and manufacturing platform. This will give us the unique competitive advantages in our collaboration with strategic customers to deliver innovate user experience. We will also rationalize our global resources to maximize the efficiency. We believe the arrival of 5G era will drive specification upgrades in smartphones. We also believe innovative smart devices launched recently, such as the foldable and telescopic smartphones, will allow us to realize our leading technological advantages. We are actively preparing to leverage our capabilities and synergies to tap on new markets. Thank you all again for supporting us. I think that brings us to the end of my short slide image for discussion to start. Joanna?
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 questions at each time. Once again, if you wish to ask a question, please press star one.
Here we go. Yes, Kyna.
Our first question comes line of Kyna Wong, Credit Suisse. Please ask your question.
Thank you for taking my questions. I would like to ask about the guidance in the first half 2019. For your first quarter 2019, because you have provided guidance firstly from your profit warning. I wanted to check if it's actually caused from demand issue or margin pressure or ASP pressure, or there will be some one-off impact in the first quarter to drive the over 65% year-over-year decline for the profit. That's the first question. The second question is about the seasonality in the second quarter or the outlook. I know it's a bit early, I think so far because the smartphone market, we see in the press release that you mentioned some of momentum picking up. I wanted to check if there's any seasonality you see going into second quarter will affect the business as well.
May I also ask another third question about.
Sorry, two questions. Sorry.
Okay, fine. Which are then Yeah.
Okay. Let's talk about the first quarter, what you described as guidance. We pointed out that I think we've seen a potential decline of 65%, a range of 65% to 75% in our net profit on a year-on-year basis. I think that came about, as we have said in the announcement, that the industry has a weak first quarter as expected, but that's not the major kind of factor that we need to draw investors' attention. I think the 2018 slowdown in what we call a prolonged replacement cycle, but also the fact that the slow momentum in 2018 has not yet kind of recovered, especially, I think for the month of February. February being the Chinese New Year and the festive season, I think particularly hit the industry shipments of smartphones. You asked about whether this is a one-off.
I think it's very much a one-off because AAC's position is to deliver exciting, innovative solutions and products to not only gain good recognition in increase in ASP, but also deliver exciting new roadmaps for technological innovation. I think first quarter is not an ideal quarter for company to take advantage of the industry situation. I think furthermore, you asked about gross margins. I'm afraid we no longer kind of gave precise guidance on gross margins. We have to recognize that our margins will reflect our product mix, and also in terms of our efficiency of economy of scale. I think the first quarter, those potential of displaying our strengths, do not really give us the best scenario of creating a very good kind of performance for this first quarter.
We very much believe it is a one-off because I think the smartphone innovation will continue, as you kind of suggested also in your question that we're already seeing new designs of different smartphones. The second question you asked is about second quarter. I think second quarter, April to June this month, there are from industry lines of new models. But I think, have we seen the peak of customers launching new exciting models? I don't think second quarter has not been, and it doesn't look like this year second quarter going to be the best kind of new launch quarter either. I would rather kind of say, instead of giving guidance, I would say, second quarter, we are seeing opportunities in all the segments that we are in.
In acoustic, in haptics, and also in what we call the electromagnetic drive, coming to shipment opportunities project we're going to deliver. I think second quarter will be interesting, will be a good foundation for us to move into the second half of the year.
I-
Sorry.
可以确定我们的增长来自于技术的一个迭代。所以包括我们在今年四季度，我们可能更新的超线性的产品平台会推出，从而使我们的价值能够拉到一个更高的高度，所以这个是真确。另外一点，从我们的一个光学来说，去年我们是有一个比较大的增长，那今年来说，基本上也可以确定每一季的增长会比较大，因为我们现在大概是2,000万一个月左右的运势，但是我们的capacity最少有4,000万。当我们的效率和良率进一步提升以后，我们相信我们的产能可以拉到5,000万以上。所以怎么使这个产能在客户端的项目进行匹配，然后使我们的销量快速增长，是我们现在正在努力做的一件事情，这是第二点。然后第三点，从mechanical来说，我们今年会是我们投入RF/mechanical以来，第一年所有产能会拉走的一年，而且我们已经进入Android主要客户的一个或者high-end的一个project。所以这一点，mechanical来说，也会等于这个销售是逐季上升的。当然，从第二季开始，第三季、第四季，因为mechanical的产能从第二季慢慢就拉走了，所以第三、第四季的幅度会增长，但是不是那么大。然后另外一点，就是我刚刚底下有谈到，我们的电子式零件，在相机模组的推出上面，我们这个是从一季度，有只是一个很小的量，像苹果开始，二季度会有指数性的大量上升，基本上三季、四季度达到高峰。所以从这一点来说，我们对Android市场的渗透的一个增长，我们比较有信心，今年是逐季上升，而且跟前面几年的形势在Android市场化，会有比较大的改变。
Let me repeat that for the English listening investors. Benjamin wants to emphasize that the outlook for Android segment is a completely different story to 2018. The opportunities that stand in front of me are very clear and it's happening. For example, let's go through the different four major production lines. As we know, the acoustic, the SLS platform, we introduced this new platform in the second half of 2017, and mass production gradually becoming fully unfolded in the year 2018. I think this year, we will see increasing penetration of each of the Android customers taking place throughout the whole of this year. With that reflects the technological advancement we have achieved in this SLS platform. We expect on a quarter basis, the business that SLS contribute should reflect the increasing penetration of the Android customers adoption of this platform.
In optics, we've seen good sizable contribution to our revenue in the year 2018, but we are preparing for more exciting things to come. In the year 2019, we are already planning, as we have announced, for a 50 million capacity, up from 40 million. Although at the moment we are saying we are shipping something like 20 million per month. With increasing utilization and improvement in our production efficiency, we are confident that our gradually fully utilizing the capacity will enable us to see very strong interesting growth in the optics business as well. For the third set of product lines, the RF/mechanicals, I think we are again very confident this is the first year that we have strong business plans to deliver optimized utilization. We already are in the process of delivering some high-end projects of our customer, starting in 2Q.
For the nature of mechanical business, the jump from 1Q to 2Q, when we launch this business, it's going to be quite a marked jump from 1Q to 2Q. Looking at the nature of the different projects unfolding throughout the year, we believe 3Q, the year-on-year growth, and the 4Q year-on-year growth, the opportunity is there, but it's unlikely to be a bigger kind of the marked jump you will be able to see from 1Q to 2Q. Last but not the least, we talked about electromagnetic drives. We already in this first quarter, we have already entered the phase of what we call pre-product production. I think we are well prepared to start mass
production and shipment in Q2. I think the trend of our customers gives us strong confidence that this business will continue to see growth in the third and the fourth quarter as well.
Thank you. Thank you. Thank you. Our next question comes from 黄, CICC. Please ask your question.
Thank you for taking my question. My first question is about your camera, about optical business. 我用中文问吧，就是我问一下，现在我们看到的情况是，光学行业很多模组厂都有自己的镜头的子公司。我看到我们今年镜头的量还上得非常快，我就想问一下，就是几位光学业务我们的差异化的，特别是那个塑料镜头的差异化在什么地方？我们怎么能够量上起来很快，然后我们也包括我们在分那个投资，我们的马达也在起来，就是未来我们光学这块怎么布局？是不是我们也会去做模组，我们整个供应链都会做。我的问题是，你们怎么看中国的模组厂，因为他们大多数已经有自己的镜头业务了。
How do you differentiate yourself, especially we see the volume ramp up very quickly this year. Do you think you plan to enter the front module business and have a full supply chain? Thank you.
我觉得这个要从两个角度来看，第一个角度是说，现在比如在塑料镜头上面，因为现在从原来可能就两个摄像头前后，慢慢变成越来越多，是四个五个，甚至长远来看，我们觉得六个也有可能性，当然这个是不同的用户体验以及功能。所以我们在这个阶段，差不多我们要走分两个步骤或者两个策略来走，第一个是快速地在塑料镜头上面把产能布起来，然后尽快地得到客户的真正的或者project，或者项目，来把我们的产量和shipment抬到一定的高度。因为我认为现在在这方面，光学行业现在就像跑马圈地一样，在整个手机的镜头从两个三个往四到五个的一个增长过程中间，这两到三年是一个非常宝贵的时间，谁能把这个shipment顶到一定的一个大型的程度，可能下一步对于对手来说就会有一个比较大的压力。然后在这种基础上，怎么通过技术的进步来提升良率，然后提升效率，来增加迭代的速度，是在塑料镜头上面，我认为下一步竞争的一个基础。这是一点。第二是我始终认为，就像我们七八年前的布局一样，WLG是非常有大的机会来变成一个混合lens的主要的一个资产，因为我们现在在技术上也走通了，包括我们在欧洲，因为我们这个tooling部分WLG在欧洲，我们现在已经有50到70个员工在training。我觉得差不多在7月份，我们在丹麦、欧洲的工厂可以full produce，在WLG的一个tooling上面。我们从技术的角度来看，完全已经看到了一个成功的可能性。所以下一步怎么在高端把它变成一个混合的lens，在六片和七片上面给用户以更高的体验。我觉得这个是我们在lens上面一个基本的竞争战略。那对于刚刚回答你讲一点，现在国内你看，我也认为下一步的趋势，主要的一个player，说做module的会做lens。但是这里面有一点，客户对lens的qualified是掌握一定的主动权的，他不会让你的module厂完全说，或者说很大部分绑定用自己的lens。所以从这个角度讲，塑料lens如果有足够的产能和这种交货的能力，以及有快速的技术迭代能力来维持这样的一个进展，其实还是会有比较大体量的市场，这是一个。第二个，你至于说高端的，那就看你的技术能力问题，你后面有没有这种玻璃，或者不管是用WLG technology，还是你用玻璃的technology，你有没有玻璃的这种技术，然后把它做成六片、七片，或者像潜望镜的这种高端镜头的结构，那决定了你在这个行业里的地位。所以这是我觉得我们的一个基本看法和基本战略。当然就回答你另外一个问题，就是AAC会不会进入模组行业？我认为从现在这个阶段我们来看待的时候，我们一定会，也一定有必要，因为如果从三到五年的事情来看，如果你光是一个镜头厂，你没有模组部分来建立这样的护城河的话，你可能会变成一个孤岛，你跟最终客户会隔开这种距离，所以我们一定会进入这个模组行业，而且我们也测算过，模组当然有模组的挑战，但是如果从潜望镜或者是更大级数的这种类似于单反这样的发展的一个看法来，我认为大家都处于同样的起跑线。而且我们如果整合了镜头、传动以及模组的技术在一起的话，我不认为我们用一定的时间建立不出这样的一个竞争优势。当然我们在前面也提到，我们在芬兰现在已经有一个30个人左右的团队。这个团队其实他们原来都是在手机端做一个光学图像的处理的。他们有很强的，包括做四倍、五倍这样的一个光学变焦和整体的这样一个下一代的一个图像处理器，整合软件和硬件的能力。所以我们要做模组，一定是下一代，怎么把这种我们混合镜头跟四倍、五倍的变焦，以及跟潜望镜，或者已经更大口径的一个主摄结合起来这样的技术，这个是我们看待模组的方式。
Let me capture the essence of what Ben has confirmed. I think in answering the questions about whether AAC will consider camera module business. I think let's go back to our analysis of how we see ourselves as a competitive or leading in terms of optics platform and technology. I think it's a trend that everybody would agree that there is interesting development for both the front and rear camera, of more cameras to go into smartphone devices. I think at the end of the imaging kind of design, it really looks at specific user experience in terms of how many number of cameras should be in the front, or how many will be at the back.
One thing is for sure, the next two, three years is a golden, what we call time opportunity for AAC to fully capture, not only on capacity, but to demonstrate in terms of AAC efficiency in utilizing our production capability and showing the efficiency we can achieve to customer. I think within these two, three years, if we could lock ourselves in with the industry, proving to customers that we have strong capability, it becomes a very strong foundation to build further success. We see at this moment we are well prepared for this opportunity. As you know, we believe hybrid lens is a very interesting potential kind of enhancement of what the industry is looking for in terms of optics experience. WLG, we believe is a vital, key part to hybrid lens.
We are pleased to report back that our plan to build up our capacity. In July, we will be able to deliver what we call capacity in mind. The plan for the Europe tooling facility is going on well. We believe by July time, we would have full-time, something like a team of 50 to 70 operators in training, or some of them will be fully trained to handle the capacity that we believe to deliver the hybrid lens capability of 6P or 7P. That is a fundamental competitive foundation that I think is unique and differentiate AAC from other kinds of optic players. About the view whether AAC will go into module business.
We believe at the end of the day, to some extent, the end customers have a final decision-making in terms of deciding which lenses or which suppliers lenses to use in the camera system. That decision will come from a validation of the suppliers, kind of capacity, efficiency, time to deliver, and their track record as well. On those parameters, we don't think AAC have any problems, and we are already proving ourselves in those aspects. At the end of the day, the other key determination for customers to make decisions to go for AAC solution is our roadmap in deliver high specs and prove that we have understanding and capability in such technology. For example, in the periscopic design cameras that we are seeing the market interest in.
The answer at this moment to the question is, I think we will be considering, and we will go into the module business. We see that the lens business, not the lens and the module business, not as a separate kind of island on its own, but really is an important moat that we built to connect to customer as well as to build up our defensiveness, to prove our capability in the optics business. As we talked about last year, we already assembled and built a team of sizable, experienced image treatment engineers that have experience in dealing with four times, five times zoom. We will continue to enhance that resources, which we believe will strengthen our optical capability in delivering not only the current kind of design specs that customers, that industries are looking for, but also the next generation.
We believe we have the management skills, we believe we have the commitment, and we have the optical kind of resources to deliver both capability in not only the plastic lens, WLG, and strong understanding of the module business as well for our customers to strongly appreciate AAC's long-term commitment in building up this optics business.
第二个问题想问一下，我注意到很有趣的是，今年我们把segment从以前叫haptics and mechanics改成electromagnetic drive and precision mechanical。我们一直有这样一个不是很清楚的地方，就觉得haptics的市场好像未来的growth upgrade path不是很清楚，包括我们看到刚才Richard介绍步进马达那些。能不能帮我们介绍一下背景，为什么我们segment的名字变了，意味着我们的haptics这个segment未来会往什么样的方向发展？什么时候，今年是个大年，还是我们要等到2020年才看到？The second question is, I noticed a very interesting thing that you changed the name of your segment from mechanics to the electromagnetic drive and the precision mechanical.
I would like to understand the reason behind, and what's the relation with your haptics upgrade path. Thank you.
我们把它改成叫电磁式零件的一个主要原因是说，从产品的架构和技术以及它的equipment的通用性来说，这个是非常一致的，这是一个基本点。而且我觉得AAC的做法跟其他公司有点不一样，我们很强调技术平台以及equipment的通用性，这样才有可能投资的长期回报，我们才有可能确立在一个比较高的水平，这是一个。第二个，从手机的一个电磁式零件的应用来说，如果这是haptic，那只是一个震动，有可能会侧键啊或者震动都放在一起。但是如果从电磁零件的一个角度来看，你可能变成震动是一个，然后第二个，下一步，我们原来也提到这种无孔的receiver，就是actuator，也是属于电磁零件。第三点，还有一个就是马达的一个，就是说现在把摄像头内藏地把它推出来，这个也是一个电磁式零件，不过这个电磁零件是步进马达加上一部分是我们叫减速器，用微型的齿轮来组成的。但是对我们来说，equipment还有很多技术是通用的，所以我们把它整合成这样一条产品线。第一，主要的目的是变成一个技术平台，在不同方向的一个应用。第二，可以提高我们现有原有投资的所有的装备，它的使用效率，从而提高我们净资本的一个收益。这是我们的一个主要考虑。然后另外一点，从haptic来说，我们看到Android在往我们这个方向，haptic方向走得今年基本确定。当然如果要非常大量的话，如果要超过1亿的话，可能还是要到明年。但是从这个摄像头推出来说，今年整个市场已经会有8,000万到1亿的量，明年可能会在这个数量上还会有一个比较大的上升。那无孔的一个actuator，今年从目前来说只是开始，但是后面应该逐步会起来。但是就像我刚刚讲的一样，对AAC来说，这个行业对我们有价值的地方就是我不用新的投资，我们也不用去hire新的team，我们原有的技术平台和原有的equipment已经足以来覆盖在这几个方向，有可能在后面几年产生的增长。这个是我们改变这条产品线，把它统一起来的一个基本问题。
Ben has commented that as always, the philosophy to make sure that AAC's positioning is not about single product or single project or customer, it is about building up strong, sustainable technology platform. I think the kind of better description of the business of electromagnetic drive for haptics falls into what we have always been trying to achieve. When we look at the haptics being designed to create a vibration movement of very high specs requirement, we have also understood and utilized the same knowledge to design what we call the poreless actuators to come up with receivers acoustic function. At the same time, the further utilization of the knowledge enable us to look at actual mechanical movements in designing the pop-up mechanism for these pop-up cameras, coupled with what we call the decelerated and gearing design. We can achieve this new exciting design for innovation for our customers.
All this comes back to our important recognition of what we call equipment use of general usage, applying a strong technology understanding, applying on the basis of a technology platform. Because of this, it has proven that the multi, what we call direct applications usage of technology platforms, can be versatile, can actually add a lot of values to our customers' design. Also in terms of financial returns, we will continue not only improving, but sustain utilization of the already invested equipment to enable a long return on our capital being invested. On those both achievements, it is definitely what AAC differentiate us from the other suppliers of what we call products as such. The pop-up products, we believe this year, initial target is a range of around HKD 80 million-HKD 100 million.
I think, we have to wait till the year 2020, next year, to see maybe that shipment exceeding HKD 100 million. Already, we are starting small projects on the actuators acoustic component. I think both of these will demonstrate sustainable growth, not only in short-term, but in a long period of time. That is exactly what AAC has been building up our strategies and our capability for.
Thank you. Our next question comes line of Anne Lee from Nomura. Please ask your question.
Hello, Ben, Richard. My first question I want to ask about this year's seasonality. May we know that which quarter could be the sales pattern for this year? Also, how about the margins trend for this year? It seems that you are very positive on Android development and also a lot of new products. However, it seems that the other big customer side's dynamic is not that clear. Could you give us some color from a whole company's point of view?
Anne, thank you for your question. I think the seasonality, a lot of it is only a short-term reflection of different phases that the industry is going through. More importantly, as we have described it early on in the call, in the different product lines, we are seeing exciting and definite opportunities to see either specs up or higher penetration of our existing solution. There is no reason that through better economy of scale and better specs in pricing of products driven up, that the company should not try the best in delivering a better improvement in gross margins. Without saying what quarter it's in, we're looking at, for example, acoustic, as we said, the SLS will strongly leverage on the already penetrated market share in Android phone and will further enhance that throughout this year from quarter to quarter.
We just talked about the electromagnetic drive, the component set create new design opportunity for our customers. Those have exciting kind of growth in ASP as well. We reiterate the point about without further incurring further investment on the equipment that we already invested, the return overall to the company would be positive contributory. On those things, I think we have, together with our teams in the production and our R&D team, we are seizing every quarter's opportunity to demonstrate the better improvement in the tech specs and also products. Ben wants to add the point that from where we stand at the moment, the industry looking and the various development phase of our product line, it looks like the first half and the second half, there will be a big difference this year.
I think this gives the opportunity for the company to capture and to deliver differentiated solutions to our various customers throughout the different quarters.
而且我还要补充一点，我觉得从今年的整体来看，整个AAC从一个盈利角度来说，会分成两个部分，一个是key components，就是AAC掌控这种技术底牌能力的key components。我觉得从毛利的角度来说，随着我们效率自动化，还有包括数据化的各方面发展，没有任何理由会比过去的十年明显差，我觉得至少应该努力到持平甚至更好的水平。但是另外一看，如果是module level的，市场有竞争的，或者是我们是用来建立副品牌的，可能毛利会低一点，如果是市场的需要。但是对我们的角度来说，如果从它投入产出的一个净资产的长期回报率来说，我觉得这个也不应该低。所以这是我们两个方向来追求，从而使我们重新恢复高增长的一个基础。所以从这个角度来讲，我们整体的SG&A，包括研发费用、销售和行政费用，整体费用来说，我觉得随着这种增长的一个回来，整体的比例，我觉得我们应该要看到也有明显的下降。
Ben wants to also add the fact that when we talk about the strategy that we've been pursuing, we are not changing anything for key components where we can demonstrate our key technology platforms through production efficiency, higher specs, automation, continuous improvement. There's no reason that we should see gross margins not being achieved as we have achieved in the past for these key technology components, i.e., above the 40% that we've been targeting. On the module level, whereby when there is consideration for competition or what we call to provide the connection to the customer, that after considering the minimum or the appropriate return for the company without further CapEx investment, we believe that, again, there's no reason it could not offer a tremendous adverse impact to the return on assets that we are seeking.
On those two approaches, we can see we should land ourselves back into the high-growth era of delivering very exciting in terms of new key components and also in terms of increasing market share. At the same time, we are not ignoring our cost control. With increasing revenue, we believe our relatively fixed operating expense, such as the admin or the R&D or the SG&A, I think there's still very strong potential and scope for them to go below the ratios that we have seen in the past. The management will have new impetus to drive revenue, but at the same time, deliver solid, good financial performance.
Thank you. I have some questions to extend from this question. It seems that you provide a first-quarter earnings warning, and also saying, you just mentioned it could be one-off. When we talk about visibility for second quarter, it seems that you have higher confidence for second half rather than second quarter. Can we say that no matter second quarter's sales, whether it improve sequentially or not, the margin should be able to come back to a normal level? Is that something we should understand? If that's the case, can you help us to understand what are the one-offs in the first quarter?
I think when I describe the one-off is the drag over of the weak momentum from the year 2018. Please do not misunderstand or confused by the word one-off. There's no one-off incident or event or one-off happenings to any customer that led to the general depressed profit situation that we expect as we announced in the announcement. Going back to the margins, yes, I think we do believe that we have good opportunities to drive back up gross margins with all the product lines and the exciting specs upgrade that we talked about.
Okay. My second question is, could you provide the updated CapEx plan for us?
我觉得19年来说，我们原则上整体的CapEx会跟比我们的一个折旧来说，可能会高一点点，但是高的比例不会大。这是我们基本上今年控制，而且主要的一个CapEx在光上。
Ben wants to comment that our CapEx for this year is comparable to the depreciation charge. Maybe slightly above the depreciation charge for the year, but not a lot. The most important thing is the allocation, the focus on optics CapEx.
Is that optics CapEx including the camera module you just mentioned?
会有少量的一部分。
There will be some allocation minor allocation of the optic CapEx towards the module business that we briefly mentioned just now. Thank you.
Yeah.
Sorry, Anne, I think it's time for another question. I hope you don't take this, but I think we'll give the opportunity to some other analysts. We'll see you soon anyway, Anne, I'm sure.
Thank you. The next question comes in of Alice Chen from UBS. Please ask your question.
Hi there, Richard team. Thank you for taking my question. My first question is still about the gross margin, maybe back to fourth quarter. If we compare the year-over-year basis, I do believe that acoustic component should be year-over-year decline. If we compare like others like haptics or the RF/mechanical, is there any improvement or is also showing big year-over-year decline?
Thank you. Thank you for your question on the gross margin. I think we've seen not some very big changes in the fourth quarter last year, 2018. The major impact I think happens, across the board, nothing significantly on one or two items. More importantly, I think on the optics that we mentioned of building our capacity to deliver 40 million, the shipment is now standing at 20 million. There is a very interesting, very genuine scope to improve gross margins on the optics business, even at the fourth quarter of 2018. I think in what we call haptics business, we continue, although we mentioned some kind of new products, electromagnetic drive, the pop-up cameras, I don't think they contribute a lot in the fourth quarter last year.
It'll be interesting to see how these new exciting facts of new design of the electromagnetic drive kind of contribute to the gross margins of haptics. Again, lastly, not the least, I think in the fourth quarter last year, our MEMS microphone performed quite well. We established a good trend in improving gross margins of MEMS microphone, which we expect continue too. All in all, I don't think there's any one product line that account for the changes in the fourth quarter gross margins.
If we compare year-over-year basis, even haptics product showing our gross margin year-over-year decline. Is that correct assumption?
I would say because we don't single out and split the margins performance on haptics, at the moment it's being combined into haptics and precision. I can only say, haptics is a strong product line that we are capable to show our capability of understanding the oscillation with regard to electromagnetic design. There's no reason that we should see kind of huge deteriorating or worsening in gross margins of this leading product line that AAC has.
Thank you. We have reached the end of our question and answer session. I'll now hand the floor back to the h ost for closing comments.
Thank you for joining us today. We will speak with you again around mid of May for our first quarter result of 2019. Thank you. Have a good day.
Thank you for your participation. This concludes today's conference. You may go ahead and disconnect.