Ladies and gentlemen, thank you for standing by, and welcome to AAC Technologies 2017 Q3 Results Investors Webcast and Conference Call. At this time, all participants are in a 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 your telephone. I would now hand over to your host today. Please go ahead.
Good day, everyone. This is Ricky Man from IR Team of AAC. Joining us today we have our CEO, Mr. Benjamin Pan, and our Managing Director, Mr. Richard Mok. Before we start, we'd like to remind you some information you may hear during the discussion today may contain forward-looking statements. Actual results or trends could indeed turn out differently. We will now briefly review the results before opening up the call to questions. Richard, please.
Good late afternoon, everybody. Thank you for dialing in. Quickly, for the first nine months of 2017, we have hit new highs on both revenue and profits. Year-on-year basis, revenue rose 43% to around RMB 14 billion, while net profit up 42% to RMB 3.5 billion, i.e., high profitability was maintained. Gross profit margin and net profit margin, respectively 41.1% and 25%. The strong revenue growth came from both acoustic and non-acoustic segments. For acoustic sales increased by 20%, accounting for 40% of our total sales. We are witnessing wider adoption of stereo sound designs, waterproof features among the smartphone flagships. Also we saw that in some mid-tier models, too. Both shipments and ASP of our major platforms are growing. On the non-acoustic side, sales increased by 39%, accounting for 47% of our total sales.
We have very good progress to penetrate into more new customers, and we are seeing growth on both ASP and volume due to upgrading design solutions that we are shipping. On the OpEx, operating expenses, we maintained our discipline, and it has paid off. The first nine months, the OpEx ratio came down to 12.8% compared to last year, 13.9%. Meanwhile, for the same period, we have maintained a higher R&D investment, roughly equal to 8.2% of our total sales. This larger increase is for both new acoustic and optics directions, which, as you all know, focusing on delivering new innovative design for our customers. On the nine months revenue breakdown, as you can see, non-acoustic and acoustic now become more evenly distributed, 47% and 48% respectively.
Top five customers contributed 90% of our revenue in the first nine months, up from 79% in the same period last year. When we look at the third quarter performance year-on-year basis, increasing shipments volume of major platforms of both acoustic, non-acoustic, was the main growth driver. I'd like to highlight the excellent progress on our optics business, which we are turning the 10 million monthly capacity into shipments. We are now speeding up for capacity expansion and hence, as you expected, increasing CapEx investments in this optics exciting business segment. Our unique innovative solution of Wafer Level Glass and hybrid lens are already receiving wide positive feedback from various customers.
Without further ado, let's open up the floor and we welcome your questions for us to discuss more of our company's operations, in the presence of the CEO and myself. Thank you. Operator.
Sure, sir. Ladies and gentlemen, 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 the hash key. Once again, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. The first question comes from the line of Cherry Ma from CLSA. Please ask your question.
Hi, Benjamin, Richard and Ricky. Congratulations on the results and thank you for taking my question. My first question is around optics. The press release mentioned that your Wafer Level Glass solution is much more well-received by the customers and you're accelerating your capacity expansion. Is it possible to tell us a little bit more the types of projects you're working on, for which end application, how big of a scale, capacity and revenue contribution we should see next year?
我觉得我们从光学来说，我们的策略很简单，就是我们将来的一个技术的立足点一定是在混合镜头上面。那我们混合镜头的技术是我们的WLG这种技术。从现在的一个项目来看，我们认为明年，就像我们上次投资人会议的半年报的时候讲的，我们明年会建满3个million到5个million，per month，这样的一个WLG的玻璃lens的一个机器。我们希望在明年我们整个产能中间有5个million到10个million的shipment，最多到10个million，是来自于混合lens，等于中间有一片玻璃，这样的一个混合lens，这是一个基本。而且它的价格，我们上次其实也谈过，我们的目标价格是在每件两块以上，这样的一个水平。
Our strategy remains, the focus is the hybrid lens, and the foundation of the hybrid lens is obviously our WLG capability. As we have said previous in that meeting, when we talk about interim results, we are preparing for a 3 million to 5 million per month capacity for WLG, whereby we believe our initial thinking that for the whole year next year, in terms of shipment for hybrid lens, it will be up to maybe 10 million shipment. We've indicated ASP unchanged from the indication we had last time, $2. Those are our main optic strategy.
Just to clarify, it's the 5 to 10 million, it's per month or it's the full year? My follow-up is that if the end application will be strictly for smartphone and if it's for camera taking pictures or if it's for 3D camera.
我觉得我们的目标是5个million到10个million per month。我们希望明年最晚在年底以前达到这样的一个产能。当然我们希望说尽可能地把它变成一个shipment per month。然后当然你从现在的混合lens来说，我觉得这两种可能性或者两种类型的客户和项目都会有。因为在3D结构光有一部分准直镜头，它会需要用混合镜头。然后另外一部分就是在摄像的camera这一块，因为要大的光圈和更好的散光，更好的一个control，还有就是说包括高度方面也需要混合lens，所以这个是两种类型的opportunity，我们在全力争取。
When we mentioned a range of 5 million to 10 million, we're talking about per month production capacity. Clearly we are targeting by year-end next year, this capacity will be turning into shipment capacity on a monthly basis. You've asked about the application. I think it's very clear. The 2 types, what we call 3D sensing, and the other one is imaging. Clearly with this hybrid lens design, the comparative specs are very suitable for both applications. For example, in imaging, the aperture and the issues of what we call structured light control is much more obvious. Hence, we think the hybrid lens will find its way into these 2 applications.
Thank you. My second question is on RF mechanical. I'm wondering how we are doing in terms of fulfilling our 30 million shipment target this year. How is the progress of 3D glass mass production? I remember we're supposed to start mass production this month or last month. What are the product trends ASP of the metal frame and glass if we're going to produce, and the sales volume expectation for next year?
我觉得在金属的casing上面，因为现在随着3D glass的这种流行，这种全厚的glass的流行，越来越多会走向于这种金属的框。所以从这种趋势来看，因为我们的capacity已经建完，大概在3个million到4个million之间，这个要看具体的一个project。我觉得我们这一年来或者今年以来的发展，对我们来说，金属的RF mechanical方面最大的一个变化是，我们已经从原来比较单一的客户走向了一个等于是Android系统基本上主力的客户，我们都已经开始。而且在这些major的主要的这种Android系统的客户中间，我们已经拿到主要的项目，所以无论是在单价和订单的稳定度，我认为都比今年年初要进步了，优越了很多，这是我们看到比较正面的。所以从我们现在的一个情况来看，是基于现有的这种产能，尽量在后面的一年，或者最长到两到三年的时间中间全面自动化。我们认为，AAC的一个竞争优势，在这个方向主要还是要用自动化，还有数据化来全面地提升良率和效率，这是我们应该跟这个市场，或者跟我们现有的竞争对手也好，同行也好，所不同的一个地方。所以在自动化和数据化逐步到位的情况下，我们相信RF mechanical这个4 million per month的一个产能，将会很稳定地给客户提供这种价值。同时，我们认为它的一个毛利水平也会跟我们的平均水平接近。我们不能讲说达到或者超过，因为毕竟这个行业它本身的毛利水平就不是一个相当高的，但是明显高于同行的一个毛利水平。我认为在自动化和数据化到位以后，还有我们在Android的客户端，做终端端的一个项目以后，我们认为是可以值得期待和完全有可能做到。对于说3D glass，我们目前已经建完了，差不多到这个六底，我们1 million的一个capacity已经建完。我们在下一步，明年的Q1，或者Q1末，我们应该会建满最多2 million到2.5 million的产能，也就是我们再追加1.5 million。至于说这个2.5跟一个million的一个产能的这个问题，基本上完全来自于是Android系统major客户的一个需求。所以我们认为在明年Q1和差不多Q2之间，差不多四月份、五月份以前，我们的3D glass应该会有2 million，甚至2.5 million左右的产能。
As we have said, this year, there is a beginning alternative of putting glass on the front and the back cover. That would change the design from a complete metal casing to a metallic frame. We believe also this year we have achieved what we set out to do instead of in the beginning phase, whereby one to two only customers. We are now firmly penetrated, and we are completing projects for most Android major brands, whereby these projects are what we call the mid- to high-end. Doing these projects, obviously the ASP is better, and it also gives what we call reliability in terms of the commitment or volume from the customer side. Looking generally with these features, what we are saying is our RF Mechanical business is much more stable and has much improved from where we were in the beginning to when we started.
Clearly, we are also quite positive that our differentiating competitive advantage to other industry players is what we call fully automation and digitalization. We like to be able to apply our already proven capability in design and arranging automation lines, but also the use of more and more digital data in terms of improving the process, improving the outcome of our efficiency of the production. That would be an important core advantage, strength, and capability when we compare to our other industry players. In terms of capacity, we plan to be able to a range of 3 million to 4 million monthly capacity. With that capacity, we believe we would see an uptrend in the existing gross margins. We do understand that the gross margins that this business segment would be able to give may not reach our average corporate gross margins because the structure of this industry.
Nevertheless, it will be a lot nearer to our average gross margins. You mentioned about 3D cover glass. By the end of this month, November, we already will be completed on the preparation of 1 million pieces per month. We have also planned by Q1 or around April, May time, we would be able to increase that by another 1 million to 1.5 million, giving us a total capacity of around 2 million to 2.5 million per month. That increase and that kind of volume, we should be able to meet what we call Android customers' demand for the 3D cover glass.
My final follow-up will be on the ASP, if you can comment, the ASP you'll be charging for the 3D glass and the relative frame if it's going to stay at around $15-$20. Thank you.
I think the pricing definitely like all our, when we commence on new platform or new product solutions offering, what we aim to do is to create a differential whereby our capability or our design, our production process reflects both perhaps the technology premium. Again, as we have said, through our efficiency in automation management, etc., we would like to bring that to a very competitive pricing for the trend to be firmly established in the industry. I would say the ASP we get, first of all, we will be depending upon individual customer specifications. Again, I think there's a lot of technology premium that we will reflect the willingness of our customer to accept such a pricing.
Clearly, we would be doing our best to deliver the gross margins we are after, but a realistic pricing for this trend to be penetrated in our customer.
我觉得在这些个3D glass和就是金属的case，中间价在15到20美金是可以预期的。
Ben just mentioned that he reckons that at this moment he believes a range of $15-$20 is reasonable, even from the customer's perspective.
Thank you.
Thank you. The next question comes from the line of Arthur Lai from UBS. Please ask your question.
谢谢。潘总、莫总跟Ricky，谢谢你们。恭喜我们第三季达成这么好的一个成绩。那我想就刚刚的问题再follow up一下，就是有关我们目前的这个wafer level glass的部分，到底现在是哪一种设计最受潜在客户，最有机会被采用，是怎么样的设计？然后我记得潘总之前提过，就是说如果我们是用我们自己的玻璃镜头的话，一般我们会搭配自己的塑胶镜头。那如果说明年年底有可能是1,000万单月的这样的一个量级的话，那如果是1:5的配置，是不是表示说我们的塑胶镜头的话，明年底的产能规划应该是到5,000万。刚刚我记得莫总好像原先在做introduction的时候有提到，我们CapEx会有一些加速的扩充，所以是不是也可以跟我们update一下CapEx现在的一个状况？以上是第一个问题，谢谢。
我觉得本身玻璃变成用WLG技术，玻璃或者上造变成混合的，对光学的作用是不光是3D结构光会有更好的温度的稳定性，更精确的这种分类。还有对成像的镜头来说，会有更好的更大的光圈，然后相对来说同样的更好的温度，还有更好的这种散光啊，这样的色彩的一个调整。这个是整个行业我认为大家都是实际上普遍的认识。那至于说为什么原来这种混合的用的就很少，我认为主要还是说molding glass，一个是cost高，第二个也很难量产。那我们在WLG的这个技术上，从现在来说，我们花了差不多共计也花了七八年，也发展了七八年。在这个技术可随讲，我们明年希望说上半年到三到五个亿，主要还是解决说市场这样的一个需求是说希望用合理的价格能够批量的来提供这样的一个混合镜头。实际上我们看到的是一个市场的一种潜在的趋势，而且也是将来的一个必然的一个趋势。所以我们认为WLG更多的是给行业提供的是一种技术的一个平台，而不在于说今天这个客户要用这个项目，明天他又不用了。所以我们看重的这个AAC追求一个技术方向，从来要的是一个稳定的、长期的一个技术方向。而且这样的一个技术方向，我们希望能够不断地通过我们的努力，研发的投入来进行不断的优化。我们不追求说今天很热门，明天又变成说大家都不感兴趣了，不用。这样的技术方向或者产品方向不是我们去努力追求的，我们如果碰到这样的方向，我们的投资也是会非常谨慎的。所以这个是第一点，我要补充的，比较主要的反应。
discuss. I think there's lots of studies which have stated quite clearly on the design and the structure and the fact of hybrid lens involving Wafer Level Glass lens. In terms of not only 3D sensing, I think the subject of a tolerance of higher thermal temperature, capability of giving more details on clarity, a potential of larger aperture and better reflective indexes performance. I think those have been covered and been talked about. More importantly, I think why such a design of hybrid lens involving a glass lens has not turned up in the market yet. I think we believe that the technique of creating a glass lens was very much dependent on molding techniques, whereby mass production was not possible and costing has been relatively unrealistic and unaffordable.
Through our kind of capability that we've been developing, we are preparing, as I said just now, a three to five month capacity on a per month basis. We believe what is important is that from that, a very acceptable kind of mass production preparation or platform will be a beginning, whereby it will meet existing, what we call market demand. This demand is not only a transient trend, we believe such optics capability is a must for the applications to be evolved to take place in future devices. What we'd like to bring out and talk about is that our strategy and the directions that we have been developing this kind of capability. We are not just meeting selected customers' demand on a transient or a short-term trend. We are not a product company as such.
We do not invest just because we saw projects that customer requires. We believe the capability that we have long invested and through our hard work and R&D and continuous improvement, amending our direction, etc. We have found a genuine, stable, long-term evolving technology capability platform, whereby this is an important technology capability enabling our customers in the application. This has always been our philosophy and method of approaching such a development of a new technology capability. We are very cautious if these capabilities do not enable us to give long-term, stable, important, innovative capability. We like to reiterate that AAC has always been insisting on this direction.
另外一点，我要补充一下，就刚刚你提到的，就是说一片玻璃配五片塑料，我们讲的就是我们现有产能1,000万，不是讲说我们是1,000万片塑料，是1,000万个的镜头。这中间的镜头，比如我们目前在这个月超过1,000万shipment的，大概是，我想差不多90%是5P，大概4P占比很少，目前来说6P占比也很少。所以这样的话，也就是说到明年年底，我们希望有500万到1,000万组合镜头的一个shipment的话，中间有一片玻璃的话，其实只是占用我们500万到1,000万镜头的产能，而不是说要5,000万片的一个capacity。当然，如果整个是五片的话，会有5,000万片塑料。所以这是一个不同的概念。
When we mention that we are already reaching a capacity of 10 million, we are, in a way, referring to our capability of delivering what we call a structure comprising of 5P. We believe that 90% of our capacities are 5P. Very small percentages are related to 6P or 4P as such. 5P is what our major core portion of our 10 million sets. When we also talk about the 5 million hybrid, we are talking about clearly, we are putting one glass lens in between, whereby the 5 million hybrid lens that kind of match, took up some of the capacity within that 10 million. All of it reflects our flexibility to capture the market needs irrespective of our capacity. We are not seeing a constraint as such.
好，所以这个我理解，就是说本来是想了解说哪一项的设计是最受欢迎的，然后跟明年的一个塑胶镜片这边的一个扩产规划，跟CapEx这边的update，不知道可不可以再麻烦补充一下。
实际上，我刚刚也讲了，你如果在3D结构光这个上面，主要需要玻璃的作用是温度的稳定性。那至于说在前摄的照相方面，现在主要是因为你直径要越来越小，那这样变成你光是塑料的话，进光量、光圈就会是一个很大的挑战，然后再加上有高度的要求，所以这个是前置摄像头要用玻璃的一个重要原因。至于说后置，那现在大家也知道，主要是光圈，还有一个就是当然费呀，还有其他颜色的一个控制。这是刚刚我们也讲的。但是总之我刚刚也补充了，它的玻璃技术是整个一个系统，要提升它的性能的一个基本要用的材料。塑料不管从综合的发展来说，不可能说玻璃的一个性能一样，这个是我们要发展它这个技术的一个重要原因。然后另外一个，就是说你刚刚讲的一个我们的产能的扩展，从目前来说，我们大概到下个月，我们2000万塑料镜片的一个产能扩展基本上会到位。所以我们原则上是希望在明年的秋末或季末，能够把这个2000万产能变成一个shipment。那至于说明年上半年，我们比较合理的估计是，我们希望有3000万左右的一个产能，同时把它变成一个3000万左右的shipment。这个是我们目前的一个计划。
We are reiterating the stronger characteristics and features of glass lens when it's compared to a plastic lens. Clearly, glass lens has a superior optical properties than what plastic lens can offer. When we talk about a 3D sensing design, clearly the tolerance to a thermal temperature is very desirable. When we look at the design of a front-facing camera, the form factor of an optimal form factor can be derived from a hybrid lens design. When we talk about potential qualities adopted by a major back lens, the flare control and a larger aperture, etc., is clearly again, a very desirable design that hybrid lens can offer. You've asked about the plastic lens capacity. We've mentioned that we are turning existing 10 million per month capacity into a shipment capacity.
We have already arranged, and we would soon see the arrival of equipment that enables AAC to reach 20 million pieces per month capacity. Clearly, we would put that into use very quickly. We believe by Q1, we should be in a position whereby we will be working hard to turn the production capacity, 20 million per month, into a shipment volume capacity on a monthly basis. That going, we have very much strong confidence that would go according to our plan. By first half next year, we believe it's reasonable to assume that we will soon be working on the same thesis of turning production capacity of 30 million into shipment capacity by before first half. That is the schedule we have our team working very hard on at the moment.
不好意思，通常11月的时候都会提一下明年的一个大概的框架，不知道今年现在看起来，明年能有什么样的一个方向，除了刚刚在这个Apple这边可能著墨比较多，整个大方向几个产品项目，明年现在看应该是大概怎么看比较妥当。谢谢。
Next year, I think we are seeing exciting opportunities in the 4 segments. We already kind of have very good penetration and firmly set out a very clear strategy how to take things further. Overall, we would like to say the work is not done yet. For acoustic, for example, we are seeing already high adoption of speaker boxes even in our Android phones, and that has spread to mid-segment. In addition to that, we are already seeing very strong demand for better stereo sound and waterproof specs, even in not only high segment, but also mid-segment phones. We've also mentioned a new structure that I think last time we talked about, we are very excited about it. I think our customers are also very excited about this new design, whereby we believe the acoustic performance will be taken another leap up.
I think last year we talked about in 2018, we estimated for this new design, we are saying 100 million units may be shipped. We are now much more kind of positive that this could grow to 150 million pieces. That represents the feedback. The very exciting kind of positive feedback from our customers trying out our solutions, working with us, and we believe those shipments could turn into very good opportunities for us in the year 2018. I think we've discussed a lot about the hybrid lens and our preparations for further increase and further penetration, not only in the traditional plastic lens, but also, as we have said, we are accelerating our CapEx. We are ready for stronger kind of shipment in the hybrid lens design, not only in 3D sensing, but also in imaging as well.
I think in the previous question, Benjamin has also indicated, and it's been proven, that we are very much on track on our mechanical structure business involving our RF. We have achieved phase 2. We have firmly penetrated into most of the Android customers, whereby we are completing projects in mid and flagship. We are well-prepared for turning that metallic casing capability into metallic frame, interacting with different materials with our solution preparations for 3D cover glass. I think we've already indicated some timing for that 3D cover glass to happen. That leaves the last segment, haptic component. Again, I think there is still scope for not only the current kind of design to AAC to work on to get even better specifications.
We also believe that in the untapped segment, I think gradually this segment, when we see the devices trend of larger displays or potential of better sleeker design without touching, et cetera, and now already tested success of haptic vibrations in the design, we will definitely see more in the Android camp as well. Those are the activities we are preparing, and we are embracing and working hard to deliver. I think to take this opportunity, we believe next year's growth, our top line, we are working very hard, our teams are working very hard. We like to think we'll be able to deliver a growth year-on-year top line, not less than 25% growth for 2018. On that, we believe the CapEx for next year, possibly similar level to what we will be incurring for the whole of 2017.
Again, those will be roughly kind of divided into the various areas. Clearly, maybe non-acoustic overall will take a slightly more high percentage of our CapEx allocation, but still there will be a meaningful amount in acoustic CapEx investment. With all that said, we believe overall, I think the next kind of what we call profitability. We believe the opportunities after all these CapEx investment and the trend of our capability of showing up in this spec design, there's no reason, there's no exceptional issue that it does not create opportunities for AAC to keep working hard to improve the already existed average gross margins as a base to further improve.
Next year, 2018, now we're in November, we are ready for an exciting year, and our team are ready to work hard, and we believe all our members from R&D, automation department, procurement, et cetera, we are all ready for a very interesting and hopefully a rewarding year for our shareholders as well.
Thank you. Shall we move to the next question? Excuse me.
Yes, please.
Thank you. Thank you, sir. The next question comes from the line of Sam Lee from Credit Suisse. Please ask your question.
Thank you. My first question is about the combination of glass lens technology, such as molding glass, WLG, and WLO. Thank you.
涨到这个价位。所以现在看来，Heptagon大家也知道，是一个很好的投资。然后我对于WLO也有一些了解，谈不上很了解。WLO是用epoxy，一种特别的胶水，然后用mask把它反向印刷到玻璃上面，是一块平板玻璃，它的非球面基本上是epoxy。这是WLO。那WLG是用molding的工艺，我们现在做的是一个两寸，明年我们出来的会是四寸。四寸的玻璃上面，把两个面的非球面全部molding出来。所以这个是一个很大的区别。那也就是说，WLO的成像，或者是它的非球面部分全是epoxy，但是WLG的一个非球面部分全部还是glass，这个是最大的区别。So the major difference between WLG and WLO, we have came to understand, because back in around 2008 and 2009, we invested in two different wafer level companies.
I think one, Kaleido, as you understand now, we've also invested in a WLO company called Heptagon, which I think you all will not disagree it is a good investment for AAC as well. The technique that WLO Heptagon company is using compared to Kaleido, WLG, is completely different. In terms of a simplified technique, what Heptagon is doing is depositing an epoxy on a mask, whereby this will form the lens that Heptagon is creating. In Kaleido, we are using a two-inch wafer glass, whereby we are using molding technique. These aspherical lens shapes are being molded on both surfaces, on the top and the bottom, for the wafer level glass lens. As you can tell, the process and the output are completely different.
然后WLG跟molding glass的一个区别。我现在因为我们对molding glass有了解，但是没有非常深入的了解，因为我们没有去发展这个制程，所以它是不是有performance的一个区别，我现在不敢下很明确的结论。我觉得这两种制程出来的performance应该是比较接近的，都可以达到类似的一个performance。但是最关键的是制程的区别，因为molding glass据我原来的了解，最多一次压一颗，而且是用连续的一个这样的压制方法，所以它需要一个比较长的一个冷却周期。现在就算发展了，我不认为它会超过两颗或者三颗这样的区别。因为我们也在七八年前有买过日本Toshiba的一个molding glass的一个模型，我们知道和了解它的一个结构，如果压一颗以上，它的同心度和精度是没有办法control的。那WLG两寸的，这样我们目前的制程，一片上面应该最少有30颗到40颗，基本上取决于说这个lens的一个它的一个棱廓的一个确定，或者一个精度，还有取决于它的一个直径。那到四寸的话，我们认为最少会有100颗，就是一个wafer上面。所以从这个制程来说，我认为它最大的一个区别还是在WLG和molding glass它的一个批量的一个能力。因为我每天的产量，按照四寸来说，我们一台机器可以达到大概4K到5K minimum以上这样的一个产量。然后molding glass我就不知道，可能是只是这个1/10或者这样的一个产量，cost就不用说了。We cannot pretend we are expert or kind of experienced manufacturer that have been playing around with molding glass, using machines.
Our limited understanding is that when we studied, quite some time ago, that the process could only involved perhaps one at a time or maximum two at a time, of a relatively long cycle time, whereby individual lenses are being molded. When we look at these molding glass machines from the Japanese a while back. On that, we see kind of issues related to the precision nature and the yield, etc. That there are, we understand, kind of mass production deficiencies related to this technique. Whereby our WLG capability, using this wafer process on a two-inch wafer, we believe we could achieve good 30-40 lenses, depending on the design and the shape and the depth, etc., of the lens that we are manufacturing. 30-40 is achievable on a two-inch wafer. On a four-inch wafer
Easily over 100 pieces of lenses can be generated, can be made. The yield through our investment, we believe it has reached whereby if we create what we call the proper mass production machine, it's not difficult to have something like 4,000-5,000 outputs of these lenses from one machine. This is the major kind of basis when we discuss about molding process and using wafer level production process. We believe the mass production has much more control; it gives a kind of better result on you and etc. With that knowledge, we believe that wafer level glass should clearly, in terms of output on the mass production consideration, could easily be a lot bigger than under the one-at-a-time molding glass process. That would also kind of give rise to the costing consideration as well.
哇，这个非常有帮助。就这个问题我想稍微跟潘总再补充确认一句，就是我们那个WLG，它用在3D的transceiver side的时候，也可以实现WLO的microlens的那种结构，对吧？我只确认这一句，然后我问第二个问题。谢谢。
[Foreign language] We believe the answer to whether the WLG can be a substitute for WLO in a transceiver. The answer is clearly yes, because WLG has a very high precision product or output capable of delivering such a feature required in the lens of the transceiver.
In the WLO, as we discussed, putting two wafers as layers together would also involve complicated process of precise precision milling capability as well. We are talking about different kind of capability, but we believe in short WLG is a viable alternative with huge potential for adoption in a transceiver.
非常感谢。我的第二个问题是关于马达在安卓市场的前景，比如说明年您觉得这块会有一些什么新的发展吗？My second question is about the haptics development in the Android market. Thank you.
我觉得安卓的市场，我觉得明年我们会看到一部分major的客户开始使用。但是这个就像我们最早的预期一样，安卓的市场数量会大，但是相对来说，它的一个要求的，比如这个haptic的规格也好，各方面也好，相对来说比较简单，会有一个不错的用户体验，但是它的ASP不会太高。这个基本上是现在看来市场的趋势，也在我们的预期在走。We are still very much confident that major customers in the Android system or in the Android camp will see wider adoption for haptics, because of its successful features, etc., these interesting applications.
We also are quite prepared that the ASP for a less complicated design that Android market will firstly adopt may not fetch as high as ASP as what we normally see.
您提到量不错，能稍微给我们一个大概的概念吗？我的问题就这样了，谢谢。
[Foreign language] Benjamin personally believes that in the segments of the mid and high tier of Android phones, ultimately 50, half of the models in the mid and high segment of Android camp will be using haptics in their design. The timing, we have escalated all our own internal kind of thinking for the year 2018, a range of 30-50 million pieces in the year 2018.
好的，非常感谢。谢谢。
Thank you. The next question comes from the line of Anne Lee from Nomura. Please ask your question.
潘总、Richard，你们好。我第一个问题是有关WLG的，因为刚刚潘总有提到，今年是大概2寸，明年会upgrade到4寸。但是刚刚潘总有提到非常多，例如说像同心度、精度的这些问题，以及WLG跟塑胶镜片在做组装的时候micron的对位。那我只是想说，公司这边从2寸到4寸，这些精度的问题，我们之前在实验室是不是都已经有过完全的准备？那不会有upgrade之后，精度会比较低的一个状况。以及在玻璃塑混合的组装的时候，我们如何去克服这样的一个challenge？还有整体来看，明年lens在sales的占比，有没有一个目标的一个percentage？
其实就是刚刚讲的，WLG我们其实包括把Kaleido买下来以后，也发展了至少有7到8年了。包括到现在为止，我们现在WLG的tooling的加工全部在欧洲，包括我们现在第一期的一个tooling的制造，大规模的也是在欧洲。下一步我们这次董事会也通过了，会确定在新加坡来大规模制造WLG的一个tooling，然后还是由欧洲原来Kaleido的team来进行管理。所以WLG尤其从tooling和装备来说，都是一个巨大的挑战。然后刚刚谈到的2寸和4寸的装备，实际上我们一开始买Kaleido的时候，那时候它用的是完全实验性的装备，那我们大概用6到7年的时间，已经完全发展出大量的一个装备。我们目前手头已经有大概有10台这样大量装备在手上，而且应该从初期各方面的数据来看，制成数据来看都会不错。所以我刚刚讲的，我们能达到4K到5K per day，是完全基于我们已经有一定批量的一个数据来确定的。至于把玻璃跟塑料混合，就这样讲，做混合镜头，我们的一个评定原则是，假如我塑料的能力差，那会影响混合镜头的一个良率和效果。那反过来讲，我塑料的能力再好，玻璃的能力差，反过来也会影响。所以我们的一个发展目标是，我的塑料镜片和WLG玻璃镜片的水平都不能差。再加上我们的组装机，目前用的是完全按照合作过的，我们目前的一个集团，虽然我们在大规模生产5P，但是是完全按照6P甚至7P的架构来制造的。所以这个是我们也是花了4到5年时间，跟我们的合作伙伴来共同发展的一个主要目的，这样的一个基础。所以就像我前面讲的一样，就是说AAC的发展，我们不希望说是看到一个近期热门的东西、项目，我去追求。我们是希望看到一个长期的技术趋势，我们建立这种越来越强的能力，建立这个能力以后，再来看说市场的需求，这是我的一种义务而已。
OK.
Anne, let me translate very quickly. In our preparation for developing and cultivating capability in Wafer Level Glass lens, our investment stood back from almost around eight years already. Not only we have the necessary equipment. In our early days investing in Kaleido, it was more like a R&D lab. As of today, we already have in the past cumulating via various stages, something like 10 production equipment, which is closer to what we describe as mass production environment. Because of that, when we talk about a 4 to 5K per day capability, we are not in testing. We are already verifying, supported by what we have known to be what we call operating mass production data.
In further preparation, in our preparation for developing, designing the tooling required, we have done that in Europe, and we can conclude it's relatively successful, and we are moving on to the second phase to further our capacity and capability in the tooling. With the approval from the board, we have made a decision that it will be in Asia, in Singapore, whereby the European management team will be in charge of folding out the tooling capability out here in Singapore. As you would guess, the production efficiency, the production kind of process and outcome of plastic lens will impact the success, reduction yield of the hybrid lens, and also the success
The production performance of Wafer Level Glass will in fact impact the success of hybrid lens design as well. When we are talking about interlocking situation, at AAC, we have to have our own internal kind of above our target and objective to achieve new set and production process. Thereby, we are completely confident in success production efficiency in the hybrid lens. With that in mind, when we have come to design and made our assembly machines, we are not just restricting ourselves to look at a 4P structure design. We are already making plans for structure closer, like a 6P or 7P design, for us to evolve further ahead.
This feeds into what we have described, our thinking of looking at ourselves in developing, not to meet a project required by a couple of customers, but we are genuinely cultivating a technology capability to capture an application driven by advancement in the design and manufacturing technology. This is consistent and this will be our existing and future philosophy in looking at developing AAC capability.
谢谢。我第二个问题就是比较简单的数字，就是Richard可不可以提供给我们CapEx的一个update，以及简单的breakdown，以及我刚刚有问，我们整体2018年的total，不论是hybrid加plastic lens的营业额的percentage的一个target。
Just now we said we are working very hard, and we are making preparations to deliver year-on-year sales for 2018, not less than 25% year-on-year growth. At this moment, we believe non-acoustic will still be a larger portion of the overall sales. Whereby, we are not commenting or splitting into various segments of the non-acoustic.
Sorry.
For this year.
Sorry, I was asking CapEx.
Yes, I'd like to come to that, but I believe you would like to know the outcome of CapEx as well. Okay, I'll go straight into CapEx. For this year, I think in Q4, we are going to invest to take advantage of some business opportunities, not only in Q4, but also in directions of R&D that will enable us to deliver what Benjamin was describing in the last 45 minutes. Our CapEx, when we talk about preparations for production capability or production capacity. For this year, I think our total CapEx will be something like CNY 800 million more than what we described last time. A total of CNY 5.3 billion for 2017, whereby the non-acoustic will take up 40%, acoustic around 35%. As you recall, usually there's something like 20%-25% in our CapEx budget every year.
We describe them as infrastructure, factories, R&D tools, equipment, etc. This is in line with our business focus as well. Within the non-acoustic, as you would guess, optics will be the major element, taking more than the other two business segments. For 2018, we believe similar kind of allocation on a total, as I said, I think 30 minutes ago, similar level of CapEx amount toward the actual amount for 2017. Not much big increase compared to the total for 2017. We are preparing for the 2018 CapEx.
Thank you.
Ricky is whispering. I forgot to talk about sales percentage. I've already said, sales percentage, this year guidance, we have not changed. For 2017, optics percentage of sales contribution, single digits, that hasn't changed. I think next year, when we talk about year-on-year growth, Benjamin already described our plans for long-term sustainable penetration in optics. With that preparation in mind, I think next year, clearly, optics contribution in terms of absolute amount will grow, but I believe possibly still around single digit of our total revenue for 2018.
Thank you. The next question comes from the line of David Dai from Bernstein. Please ask your question.
Pan总、Richard，你们好，请问听得到吗？
可以。
谢谢。我这边想要先follow up一个问题，就是镜头这边，Pan总刚刚您也说到，镜头这边虽然量产大部分是5P，但是都是照6P甚至7P来布局布的线。所以我想问一下，因为AAC传统上不是一个镜头的公司，所以在专利这方面，咱们是有什么样子的一个布局呢？怎么样可以做到？因为6P和7P，我们理解专利这边有一些barrier，这边我们是打算怎么样去跨过这个barrier呢？
我记得我的概念，大规模来说，我根本就没有大的一个计划去生产六片或者七片纯塑料的。我的六片或者七片，是六片，不是六片塑料，或者七片，也不是七片塑料。我要的是混合的，至少有一片玻璃的。而且在这个方向，我们有很强的专利的布局。
When we describe a structure of 6P or 7P, we clearly are actually referring to hybrid lens design, whereby the 6P, we are not talking about six plastic pieces as such. We are referring to hybrid lens structures whereby possibly maybe one glass or two glass, whereby one glass with five plastic or two glass with four plastic, that kind of one plus five or two plus four, 6P structure. With that in mind, we can confirm we already have a very strong portfolio of related IPs.
谢谢。那我们现在的hybrid lens现在还是以5P的为主是吗？什么时候我们可能会看到有需要去用到6P甚至7P的hybrid lens呢？
我记得七片还要晚一点。在今年下半年的时候，我认为我们应该看到我们的部分，就是在我们5 million到10 million的一个布局中间，有看到部分是六片的。那当然，我补充一点，六片纯塑料的，我们有一点会批量的，因为韩系的六片的纯塑料，它是完全不同的架构，所以这个是我们就当五片塑料一样，在要下一步追求会量产。
I think we are preparing for, as we said before, hybrid lens shipments five to 10 million, but we are referring to possibly a 6P structure. I think 7P will come after later stage. Having said that, I'd like to clarify that we may be doing some pure 6P plastic lens structure for one of our customer, whereby the IP involved are completely different and will not be a problem for AAC to get involved with such a production of a pure 6P plastic lens set.
好，非常感谢。明年下半年我们看到六片的这个东西，主要应该是拍照的，对吧？就是3D来看的话，我们应该还是不需要用到六片这样的。
对的，所以我基本上会用到六片的，我认为主要就是用来拍照的。
With 6P hybrid lens design, we will weigh it up. It's for imaging purpose. Taking photos.
明白。那明年下半年我们会有3D的用途吗？就是如果说明年下半年看一个split的话，hybrid用在3D和用在拍照，大概会是怎么样的一个比例呢？
我现在很难告诉你比例，我觉得现在我们追求的，现在就是讲说，主要还是我要用500万到1,000万的一个capacity，然后当然shipment最少要用500万以上，或者当然我最好能把1,000万填满。从现在来说，非常困难告诉你说3D的镜头和那个成像之间的一个或者一个比例，而且对我们来说定价也非常类似，所以我们也不care。
Benjamin is saying, at this moment, we are working very hard to deliver the at least 5 million pieces, but we are working very hard to get to the upper range, 10 million pieces in the second half next year. What is more important is not to work on too much on a definite answer to split where the product will go into 3D sensing or the camera, because we believe at the end of the day, this trend of hybrid lens is a very important differentiating, innovative user experience, up, whereby 3D sensing and also the camera will greatly appreciate to adopt. For us, we believe the ASP between the two purposes are not materially different. For me, we are not going to talk about a split between the two purposes at this moment.
好，我最后很快一个问题，就是Wafer Level Glass这边的一片上面，刚刚说可以做三四十颗或者是一百多颗，但是这个良率的控制，我们理解其实是直接影响价格的，或者说成本的。那请问这边良率这方面有没有一些什么样的进展，或者说未来的一些目标可以给我们透露一下的呢？
我现在很难告诉你具体的一个良率。当然在公开的市场我们更没有办法来透露。但是我可以确定的告诉你，我刚刚讲的就是说4寸的生产4K到5K是良品，不是说一个投入数。
At this platform, I'm not going to talk too much about yield and clearly not about costing. What I have said about, based on our empirical work, the 4-inch wafer delivering 4K to 5K. We are talking about good finished usable units, not just any outcome of it. We are, in a way, quite mature in this process.
Thank you. Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to the host for today for the closing comments.
No doubt, smartphone are continually blessed with more interesting feature and application. As a leading miniature technology solution provider, we care very much about user experience on your sense of audio, vision and touch. Our four major technology platform are well prepared to capture upcoming market opportunities for future growth. Thank you all for joining us today. If you like further information, please feel free to contact our IR team. We look forward to speaking to you again in March 2018 for full year result of 2017. Thank you.
Thank you for your participation, and this concludes today's conference. You may go ahead and disconnect. Thank you.