Good morning. Welcome to Sunny Optical Technology 2023 Annual Results Briefing for Investors. I'm Jingjing from Porda Havas. On behalf of Sunny Optical, I would like to thank you for your attention and support to the company. First of all, I would like to present to you the management of the company. We have Mr. Ye Liaoning, Executive Director and Chairman of the Board. Mr. Sun Yang, Executive Director and CEO. Mr. Ma Jianfeng, Executive Vice President and Company Secretary. Ms. Huang Peiling, Investor Relationship Director and Joint Company Secretary, and Ms. Liu Yanfeng from Investor Relationships as well. Now we would like to kick start the briefing, and the presentation material has been uploaded to the official website of the company. Now I would like to give the floor to Mr. Sun Yang, Executive Director and CEO. Good morning, investors.
On behalf of the group, I would like to present to you the 2023 Annual Results of Sunny Optical. I would like to first thank you for your participation and listening. For the year 2023, we have made a lot of efforts within the group. For the vehicle lens sets and handset lens sets and handset camera modules, we have achieved good growth. However, as we know, in 2023, the overall shipment for smartphones has decreased, and for handset lens set and also handset camera modules have been downgraded for 2023. So with these two negative factors, our revenue reached RMB 31 billion, down by 4.6%. Gross profit, RMB 4.59 billion, down by 30.5%. Profit attributable to owners of the company, RMB 1 billion, down by 54.3%. Earnings per share, down by 54.3%, around RMB 1.00. So this is for 2023.
We have seen growth for some BUs, and some BUs have seen slow development. Well, the smartphone segments have been lagging behind in terms of the revenue. For 2024, we are seeing the application of AR modules in handsets. Therefore, it will drive the consumer demand. So that's why we will talk about in terms of HLS and HCM, we have seen the light at the end of the tunnel. So this is a general introduction of our performance. Next, I would like to go through the expenses and spending. We would say that it's quite normal, but we have seen a 12.6% increase for the total operating expenses. We have seen growth for selling and distribution expenses. It's very easy to understand because we have seen the lifting of the pandemic restrictions, and we have lots of customer and client visits.
For other expenses, they're well under control. In 2024, we expect that the expenses ratio would be around 12%, and we hoped to keep it under 20%. 2023, the number was 12.6%, and the main increase lies in the selling and distribution expenses. Next is about other operating indicators. Current ratio, 1.7 times. Gearing Ratio went down, and it is still positive. Mr. Ma will give you more explanations later from the CEO's point of view. I would say that the inventory turnover days, AR turnover days, as well as the AP turnover days have been quite normal for 2023. We have seen a very normal collection from the client side. We might have seen some structural issues, and our CFO would give you more explanations. But in terms of the operations, AR, AP, and inventories have been performing quite normally.
For Gearing Ratio, it stands at 11%. ROE went down to 5%. Our CapEx was RMB 2.5 billion for 2024. Our CapEx would be around RMB 3 billion, which includes RMB 1 billion for VR and AR, especially for AR. And for RMB 500 million, which will be invested in the handset lens set upgrade, mainly targets the major global clients. And another RMB 500 million will be invested for motor or actuator capacity expansion and for vehicle lens set and vehicle lens modules, around RMB 100 million, respectively. And the rest would be invested in the production-based construction in Vietnam. So that's the guidelines for the capital expenditure for 2023, which would be around RMB 3 billion. So this page shows the revenue contribution breakdown. As you can see that in the past years, our breakdowns have been quite balanced.
For the handset-related products, it reaches 61% from 78.9% and 70.1% from two years ago, and our vehicle-related products reaching 16.7%. So this is a very good growth momentum. AR/VR-related products stand around 7.2%. So as an optical expert, our products in terms of the applications are more balanced and more solid. This page is of high interest to you, I believe, which is about the gross profit margin and also the gross profit margin by BU. And here you can see that the overall gross profit margin went down to 14.5% as a group for optical component, 28.4%, optoelectronic products of 5.5%, optical instruments quite stable, 41.2%. So 28.4% for optical components actually includes handset lens set, vehicle lens set in combination. For optoelectronic products, 5.5% includes handset lens set as well as vehicle lens sets and AR/VR sensing units and lens sets.
So I would like to emphasize this point so that it won't be very confusing when I talk about the guidelines for different divisions. When we talk about the overall expectation for 2024, we won't be too optimistic. But as I have mentioned, we have seen some good signs. We have seen some light at the end of the tunnel, and that's why we have given out some guidance. First, we believe that the gross profit margin for 2024 will increase. We have three major products. For handset lens set, the gross profit margin would reach around 20%, which is an improvement compared to 2023. Secondly, our main profitability contributor is vehicle lens set. The gross profit margin for 2024 would remain stable at 20%. The biggest revenue contributor, handset camera modules, targets a gross profit margin of 5%.
So these are the gross profit margin guidance for different business units and for the whole groups. Next, let's take a look at our breakthroughs in R&D and operations. First, let's first talk about the vehicle sector. On the left-hand side, you can see the vehicle lens and cameras part. I would like to talk about four major highlights. The first one is quite interesting. We have completed the R&D of 70-megapixel vehicle lens sets, but it consists of a telephoto lens set and also a 7-megapixel front-sensing vehicle lens sets. So this is a 2-in-1 lens set. It can reduce the cost of the clients, which prepare for level 3 autonomous driving. So you can have a wide vision and also the telephoto lens set in one module. And we have achieved a breakthrough for hybrid lens sets, which can also help us to reduce costs for the vehicles.
It can help popularize level three autonomous driving. So we have completed the R&D of 8-megapixel hybrid in-cabin monitoring vehicle lens sets. The third highlight makes us very proud. We have obtained the largest designated project on 8-megapixel vehicle modules. This is a milestone for us, a designated project on 8-megapixel vehicle modules. The four highlights are the designated projects on the compact DMS. But of course, we have third-party partners. So it includes hardware as well as software and algorithms, and we are one of the major contractors for this project. So this is a very successful project for hardware and software. And there are many other achievements in the vehicle sector. There are several parts. First, we have mass productions of three LiDAR projects.
And as you know, we have been producing AR-HUD, but last year, we focused on high-end DLP AR-HUD module for smart headlamps and dynamic headlamps, smart headlamps, major directions for the current vehicles. And we have mass-produced the lens sets and also modules for the smart headlamps. So these are the achievements that we have made in the vehicle sector. And we have mentioned that we have continued to work on the prism lens set as well. Next, I would like to talk about the XR sector. I would like to share with you two aspects. The first is that we have obtained the largest we have become a preferred main solution of reference design for the next generation mainstream platform of a renowned platform provider. And for AR and VR in the future, the miniaturized camera will be in high demand.
At the same time, it needs to have low energy consumption. That's why we have developed a series of cost-effective miniaturized packaging technology, which will be applied to all series of VR/AR visual modules. For robotics, we are waiting for the chain to come. We believe that this is the main driving force for robotic visions. We have mass-produced the recognition modules applying a palm vein algorithm. This is a self-developed algorithm. This will be applied to intelligent door locks in the Chinese market. Secondly, we have mass-produced RGBD modules for robotic vision. The main highlight is our in-house algorithm SCC, and it will be applied to the service robots. Lastly, I would like to talk about the smartphone sector. For handset lens sets, we focus on the mainstream products.
We have mass-produced handset lens set with large image size and variable apertures for main cameras. Secondly, for telephoto lens sets, we have mass-produced periscope handset lens sets with internal focus in the dual group. It is autofocus. This technology can also be migrated to zoom function. For handset cameras, we have mass-produced handset camera modules with large image size, variable apertures, and OIS. We have also mass-produced 180-megapixel periscope handset camera modules. For telephoto cameras, the megapixel is usually quite low. This time, we have mass-produced 180-megapixel periscope handset camera module, which is a breakthrough. We have mass-produced handset camera modules with large image size, 1- to 1.3-inch based on the integrated design, and it's equipped with our self-developed OIS module. So this is a high-end product that combines the lens set, actuator, and integration.
In the optical instrument sector, there are two parts: intelligent equipment and microscopes. For intelligent equipment, we have completed the R&D of handset chip component inspection equipment. We have been using our self-developed AI modules. The deep neural network might not be applicable to all products, and that's why we have developed in-house the AI modules and combined that with an internal image algorithm. I believe this will give us a lot of opportunities for domestic production for lots of products. For microscopes, we have mass-produced blood morphological scanners, and we have also mass-produced circulating tumor cell scanners. It can help us to identify the mutation of tumor cells. We have mass-produced a full series of semi-apochromatic metrological objectives with ultra-long working distance objectives, a core component in microscopes. Here are the highlights for the optical instrument sector.
Next, I would like to talk about the patterns. In 2023, we have added 5,111 new patterns, among which 2,290 are invention patterns. So in terms of the number and quality of our patterns, we have seen great progress in 2023. Among the 5,000 new patterns, most of them are for our pipeline projects, for example, in vehicle LIDAR, XR, and robotic visions. Next, I would like to share with you the shipment volume of our vehicle lens set, handset lens set, and handset camera modules. For vehicle lens sets, the shipment is quite ideal. In 2023, the shipment was around 90 million, up by 15.1%. So what is our shipment guideline for vehicle lens sets? The shipment growth is expected to be 10% year-on-year. ASP, we expect it to be stable. So this is for vehicle lens sets. The next part is handset lens sets.
Handset lens set, last year, the volume came down a bit. It was down 1.8%. So we shipped around 11.7 million units of lens sets. And this year, our guidance is on the right. You can see some high-end picture. It is not our lost market share. In fact, we have lowered the overall supply. And so last year, the shipments or the guidance is we hope to increase by 5% for handset lens sets. Most of the growth will be from high-end customers. ASP will be able to increase. So that is about handset lens sets. For camera, last year, there was growth because the Samsung technology used to be low. And in mainland China, we have done a lot of work. Overall speaking, for camera, last year, there was growth by 9.8%. Shipment was 567,000 units. So here, you can see the right-hand side chart for 2024 guidance.
We hope that for camera, in terms of volume, it will be flat, more or less the same as last year. But we would like to adjust structure. We hope to produce more difficult items, for example, long focus, large image size modules. And then for actuators, we'd like to enhance our capabilities. Through such efforts, we hope that gross profit margin and ASP can go up. So that is our basic views about handset cameras for 2024. Volume is not our most important goal. We'd like to adjust structure so that we can enjoy better profitability. That's our view about camera. We don't have much update about our global layout or overseas developments in China, India, Vietnam, basically mainly in Vietnam. So progress has been quite smooth. I have not much to update you on that. Part three, medium- to long-term strategies and outlook. First of all, vehicles.
You are all interested in that for vehicles. There are two main points here. First, we're of the view that for vehicle camera vision, so for the vision part, in the coming 10 years, it will be in a rather stable and sound growth cycle. That is our first viewpoint. Our second thought is we're of the view that for vehicles, when they are migrated towards autonomous driving, I think vision is the most important point. So FSD, you can see more and more from the reports, the importance of vision. And it is also an opportunity to win. So for camera, it is mainly for sensing. So when it comes to ADAS, it is no longer absolutely correct. So basically, you have to go up to level three or even higher level for that direction. But for sensing-type cameras, they will become more and more important.
For sensing camera, now we can clearly see two directions. First, the pixel needs to go up further. We need to see more clearly and farther down. So that is a clear direction. Another direction is hybrid. You need to make use of the camera over a large scale, and you need to lower your cost. While performance doesn't change, you need to lower cost. So there is no doubt that, well, of course, we are good at the hybrid technology. That is a big direction. So in the vehicle area, these are the two main points. And then for things outside cameras, well, of course, when you go up to level three or above, well, the standard can be high or low, and there can be strong or weak algorithms. There are things that you may not be able to handle.
So there's the need for other auxiliary or supplementary products. For instance, LIDAR, microwave LIDAR, and so on. These are some directions that we will empower the industry. And then HUD, there are contentions about HUD in the future. Is it true that you can replace HUD by wearing a pair of glasses? But then now HUD is still quite good business that we are following up. And then another thing is headlamps in vehicles and also ground projection lamps. These are also good directions. Even if you have reached level three or above, the headlamp or ground projection lamps will still be promising. So these are areas that we are working at, and progress has been good. Next, the first main direction in the vehicles sector, what work are we carrying out?
Well, we have made some achievement in the first direction, but we think that in the future, this will be very promising. So XR, we think that this is going to be worth RMB 1 trillion in terms of market scale. And then within XR, especially within AR, optical BOM cost will be very, very high. It will far exceed BOM in smartphone. It will far exceed BOM in vehicles. So in AR, the optical BOM will be costing a lot. So here, we are doing three things. First, I think you are all clear about it. In summary, we have done perception and interaction camera. So for example, eye tracking, facial tracking, 6DoF camera, 3D camera. These are things that we have been doing a lot, and we are good at it. And then the next thing is we are also strong in pancake.
In the future, pancake is going to be a platform. It is not only a pancake. Apart from pancake, there will be a lot of optical content. It has to be connected to pancake for R&D. Now we are working with customers in this already. Another thing is for optical engine in AI, we have LCOS, Micro LED, and other areas. So we are leading in this area. Another direction is optical wave guide. We have made much investment in this area. So AR display area or XR display area, we are very strong. From here to here, we want to assemble these or group these together. And then there are also some other chips, VID1, VID2 chips. All these will be combined together. And finally, we will be reaching FATP.
This is just very natural from AR to FATP because when it comes to many optical components and modules, they are produced by us. So for optical components and module assembly or aggregation, for those producing these components and modules to do the assembly and aggregation, it is just natural. So this is a total solution in the AR area. So for our internal work, here, we are trying to do some extension work, and we do look forward to the explosion of this market. Finally, I would like to talk about innovations in handsets. Of course, for large models, when they are put in handsets, what kind of requirements will there be for optical image? Now, we are still deliberating and examining with our customers. I have not listed out these points yet, but will there be some new requirements? I don't know.
I am still doing some studies with my customers. Now, in vehicles, in order to achieve FSD, we are clear already. We need long view, clear view. And we have to make sure that there would be some good functions when we assemble the lens set modules. Then we have to clear all the dirty parts. Now, when large models are placed in handsets, what will be some additional requirements? Right now, one natural direction is hybrid. Hybrid is a direction. Second, aperture. You will see large apertures, small apertures with different use scenarios. And then sensor shifts, OIS. So the lens set will become heavier, but you have to balance it with the power consumption. So it has to be light, convenient with sensing function. And then internal focus, telephoto. So for telephoto, there will be internal focus between groups.
This can solve the current focus problem, and it can be better for zooming. So that is one direction. So these are the three major areas: hybrid, variable aperture, telephoto with internal focus, and then ultra-thin, and so on. These are some of the points that we are doing to satisfy requirements. Well, three major product lines and our expectations. So now I'm going to talk about our ESG work. It is quite good. For MSCI rating in 2023, we have done some upgrading. Now we have reached 2A. So that is the outcome of our work. And then for green development, for green development, last time I reported to you that we have issued a 3.5%-year, $400 million sustainability-linked bond. So in Asian technology manufacturing industry, this is the first of its kind. And what is our target for 2024? There are two targets.
First, we use green energy. The proportion of green energy should be higher than 2023 by 14%. So this is about use of green energy. And then for scope one and scope two, greenhouse gas emission reduction, that has to decrease by 10%. That is, the emission intensity should decrease by 10% versus 2023 in terms of greenhouse gas. So this is about scope one and scope two. So in terms of green sustainable development, these are our main goals for 2024. Okay? So the above is my presentation of our operations in 2023. Thank you very much. Thank you for the presentation. Now we will start a Q&A session. If you have any questions, please feel free to raise your hand. And please also state your organization and your name before you raise the question. The lady on the first row?
I'm Cherry Ma from Macquari . I have two questions. The first question is about the CCM guidance. The smartphone market expectation is around 1%-2% growth. And for us, our expectation is flat. So from product mix perspective, do we mean that we will give up the less profitable business and focus on the medium to high end? And that's why our growth expectation is not as high as the market. And the second one is about customer groups. Huawei has returned last year, so that's why our contribution was not so high. What about this year? What is our strategy targeting Huawei as a client?
First, the growth for smartphone, 1%-2% percentage point, has been the rumor, but it has no conflict with our expectation, which is flat. But the second point that you mentioned was quite right.
From the handset to camera module perspective, it is not possible for us to expand our production capacity in the larger scale. So our limited production capacity will be put into the more profitable products with higher value add. So your understanding is correct. But I'm not saying that we would reject all orders, but profit would be one of the key considerations. And we also focus on cash flow. So our practice, I believe, makes a lot of sense. And secondly, we have a great positioning. I can review some information to you here. For Mate 60 or P70, the camera suppliers are from Sunny Optical, but this is sensitive information. In terms of the camera modules, the top projects numbered 10. 10 means high end. So we are involved in such projects. And the person responsible for handset and camera module visited H Company.
So we welcomed the return of H Company, and our cooperation has been running quite well on the basis of compliance, of course.
The second question is similar to CCM. So in terms of handset lens set, we expect a 5% growth for 2024. In terms of pricing, in the second half of last year, the clients are more willing to pay more price. But what about this year? Can you please share with us the projection for gross profit margin? You said 20% for handset lens set, but for competitors from Taiwan, 50%. So in terms of product mix, is it similar to CCM? Profit will come first. And can you also please share your comments on Apple?
We have already shared with you that we expect improvement for gross profit margin for handset lens set. We will also see ASP improvement.
Of course, we will see customer mix improvement. As I have mentioned, we have a quite good share for Edge Company. We are also number one in terms of supply to the Korean handset company. For product mix, we also want to focus on high-end product lines. We are number one for handset lens set, around 30% of the global market share. So sometimes we cannot reject all orders because we are a large contributor to the market share, and our product supply would always be customer-centric. For handset lens sets, the adjustment might not be as flexible as handset camera modules. Of course, we are transitioning to high-end handset lens set, and we will stick to this positioning on the basis of maintaining our global number one leadership position. On that basis, we will make some product mix adjustments.
For American clients, the overall progress is quite ideal. For the shipment in 2024, I believe that it will be on the increased side. Next question, please. Thank you.
Thank you, management. I'm Gina from Citi. Concerning GP margin, I would like to clarify. Last year, in the second half, it seems that GP margin improvement for optical is quite significant for vehicles. If it remains stable more or less the same as first half, then that means for your handsets, there is a good improvement for handsets. Now, in 2024, where last year in the first half is over 20%, perhaps we have done the calculation wrongly. In 2024, above 20%, this should be rather objective. You may have considered some customer problem so that you will give a stable improvement. You will see a room for stable improvement. So that is GP margin about handsets. That's my question.
Then on the module side, GPM, this year you expect 5 percentage points. Last year, how was the situation in the second half for vehicle CCM? Will there be some impact for AR/VR? Let's say if you do some aggregation or assembly or service business, then will there be a lowering of your GP margin? How was the change?
Okay. Now, for handset GP margin, handset lens set GP margin, last year, the average handset gross margin was 15% roughly. In the first half, gross margin was lower, 10%-15%. In the second half, there was improvement, but we did not exceed 20%. But definitely, we were above 15%. So for the whole year, average was around 15%. So last year, all the way to this year, we seized the opportunity of improvement in product mix towards the high-end side. We hope to achieve 20%.
So this is a slow or gradual recovery process for modules. First of all, for vehicles, now there are a few parts, as explained just now: handset modules and then vehicles, and three VR-related modules. These are the modules. So GP margin is the worst for handset modules. The reason is related to the industry and competition as a whole last year. So gross margin did not perform well, is lower by 5%. That's for the whole year. And we hope that this year, as explained just now, this year, through improving the product mix, we can control product mix and total volume so that ASP can increase significantly. That is our direction. For vehicle modules, GP margin this year should be more or less stable as last year. In 2023, for VR-related modules, as you know, VR did not sell quite well last year. So there was a decrease.
GP margin did not perform well. Comparing with handset modules, it's still much better. We expect that in 2024, for vehicles modules and VR-related modules, gross margin will not pull down the overall optical business GP margin. If sales performs well, then there will be some help. The main point is handset modules, GP margin recovery is more important. We hope that the whole segment gross margin can increase by 5 percentage points.
Leping. I have two questions. The first question is about our vehicle. So last year, our revenue has reached RMB 5 billion. So for the lens and non-lens business, what are the breakdowns? And we will see a lot of changes for vehicle sector. There are lots of new products launched from clients and new features. So it is very easy for us to forecast the growth for vehicle lens. But what about other vehicle-related product categories?
I forgot to mention, in 2023, our vehicle lens set reached around RMB 1.5 billion of sales revenue, around 2024. We expect to have RMB 2 billion of sales for vehicle lens sets. And you mentioned Mi company's vehicle launch, and we also supply them with our vehicle lens sets, AR-HUD, LiDAR, and headlamps. The base is quite small, and the adoption rate is quite low.
So in the coming two-three years, I think the major growth driver would be the cameras and also the lens sets. For some new projects and new vehicles, we have been supplying to them in a very ideal percentage: RMB 1.6 billion-RMB 1.7 billion sales. We're mainly talking about lens sets. No, I'm just talking about the modules.
The second question is about the competition for handset lens sets. Has it improved in the last year?
The smartphone makers' profits made a record high last quarter, and this quarter, it remained at a very high level as well. So for smartphones, the parts and phone makers will see a return of gross profit margin. So the smartphone makers' gross profit will come down a bit, but the parts makers' gross profit margin will increase. But it's very hard for us to achieve maybe 10% for the handset camera modules.
So what do you think? From the competition perspective, for the phone makers who released their result yesterday have achieved very good results. For Oppo Vivo, they have also performed quite well. For us, we don't see aggravated competition for handset lens set and handset camera modules. We all need profit to become more sustainable. For competitors, we don't see any vicious competition coming from our competitors. For our industry, the most profitable period was when the spec was upgrading. All the smartphone makers came to me and signed the production agreement with us. In the past two years, it's a pity that we have seen a despec. Everybody can make the same kind of products, and they all have sufficient capacity. That's why for some industries, their suppliers would approach the maker and ask them to set the price.
The OEM actually has gained profit because of the concession from the parts maker. We're not just talking about optical components. For telephotos, variable focus have been the trend for handset lens set and modules. So I believe that for 2024, the market would be more fair than 2023. Next question, please. The gentleman over there.
Thank you, management. I'm Tony Jiang from CLSA. For handset modules, apart from the COB line, there may be other technologies and sectors. What are your views about those? Right. Chip and so on. Can you answer? Yes. These are two different technologies. So the technologies are different for these two sectors. If you want to enter another area, then well, that technology may not be in use. I think you are aware of that, right? What are you really interested in? So now you get into this particular segment.
What is your progress and plan? It's more or less the same as last year. It is underway. But I think so far, I cannot share with you more details, but the progress is good. Just now, Mr. Sun said that last year, cash flow experienced some special situation. So perhaps Mr. Ma can elaborate. Then for optoelectronic segment, gross margin in the second half of the year came down, but then the segment profit and operating margin in the second half is quite good for the optoelectronic segment. So what are the reasons for that? Thank you.
In recent years in China, credit environment is rather loose. So the discount rate for bank notes is very low. So in the past few years, in terms of finance, we made use of this credit situation to do some risk-free arbitrage.
Now, when there are no discounting, well, there is cash inflow as a result. So as a result, in 2021, 2022, the net cash flow amounted to a big amount. Then in 2023, well, we maintained a certain scale, and that is based on our normal logistics and supply chain management. So in 2023, we discussed with Deutsche, and then we went back to the normal cash flow position. So your second question is about our segment profits. Segment profits, overall speaking, well, that is the whole year number. But then on a half-on-half basis in the first half, comparing with the second half, there is improvement. So that's the result as such. But for optoelectronic, if you only look at GP margin, this segment in the second half has lower GP margin than first half. But segment profits, operating profit margin is higher, right? Okay. Let me explain first.
As said just now, we explained about GP margin. For optoelectronic handset modules in the second half of last year, there was no clear improvement. For the whole year, GP margin was not satisfactory. That's one thing. And then you talked about segment performance. And also, well, this is related to transactions between different departments. So this is only for your reference. The number itself may not be that accurate. Thank you.
My name is Shen Dai from Puyin International. I have two questions. The first one is related to vehicle sector. So from the OEM perspective, we can see that the overall pricing has been going down. So have we felt any price pressure? And the cost reduction on our side, can we catch up with the price decrease demand from the OEMs? And also, you have mentioned for the vehicle lens set is expected to reach RMB 2 billion. So the revenue will increase faster than profits. Is that correct?
So we are facing with a lot of pressure, especially in the Chinese market. Apple to apple, the unit selling price would, of course, go down. So what we are trying to do is to control the cost. There are lots of aspects that we can work towards. The first one is the hybrid lens.
We hope that we can maintain stable gross profit margin while the cost and the price are both going down. We will continue to see upgrade of vehicle lens sets from 5-megapixel to 8-megapixel to 10-megapixel in the future. As I have mentioned, that we have mass-produced 7-megapixel hybrid lens. Now we are working on vehicle lens sets for level 3 autonomous driving. It has higher demands for films and also imaging technologies. There are lots of rooms for innovation and spec upgrade. I believe that there are lots of opportunities for us to achieve higher shipment and at the same time maintain stable margin. In terms of camera modules for vehicles, it will be impacted by two factors. Of course, we will see some spec upgrade.
We have obtained several 8-megapixel projects, which will help us to improve the overall ASP, but of course, great pressure for vehicle sector.
The second question is related to smartphone sector. The gross profit margin for handset lens sets is expected to improve on the 2023 basis. What is the driving force for the improvement? Is it the less competition, or is it the spec upgrades? And also, the IR modules upgrade, would that increase the values of our hardware, or will it drive down the cost of the hardware? And in the long term, no matter if despec or spec upgrade, the values of the handset lens set, will that be more stable?
I have mentioned this part before. AI modules will be applied to handset lens, and it has been quite successful in some cases. And now we are communicating with some semiconductor and chipset makers.
This will be the major trend. It's good news. First, the consumers would be more interested to buy the new handset models. What is the impact of the AI models on ourselves? We are still researching on this topic. But for traditional AR, which focus on image processing, perception, and image detection, we cannot ignore this part because it would have higher and higher requirements for handset lens sets. And you mentioned that SOC would be more expensive next year. Would that reduce the cost of other parts on BOM? It would depend on the volume and also see if other BOMs can increase so that more costs can be allocated to imaging parts. And thirdly, it's about telephoto for Edge Company or other companies. And another one is variable apertures. The large-size main cameras would definitely need to have variable apertures. Otherwise, the image would be overly exposed.
So these are the definite trend that we are seeing, which is good news for us. And for lens, actuator, and modules combined, can help us to provide more value to our clients. I believe if we can achieve that, it will have a great impact on our gross profit improvement. Because of time, we will now take the last question for today. The gentleman wearing white shirt.
Management, I am Lin Junheng from BOCI. My question is about XR. My understanding is that last year, the market was a bit slow, and this year, there would be change. For example, Apple MR sale. So in the industry, will there be new changes? When you discuss with customers, what projects are you talking about? And then for this year, XR business, can you give a revenue outlook, please? Thank you. Revenue. Revenue guidance, how much is it?
Overall revenue will be up by 15%. But I think it will be more than that because flexibility here is big. And for the new situation right now, the information that we have on hand is that it may be bigger than expectation for OEM vendors. Well, this is the information from the big OEM manufacturers. So it will be even bigger. Some big Korean companies are seizing the opportunities to launch this kind of products. So this year, I think in the VR area and well, MR is also VR. So we believe that we will be able to give you some pleasant surprise. You talk about Vision Pro after it is launched. For companies with higher performance price ratio, it's like intangible advertising. So I think that there will be some positive outlook here.
And then for smart glass, I'm not talking about those Birdbath , but then well, we are talking about large model plus camera. I think shipment has exceeded expectation. Customers increased their orders constantly. And then for Apple Vision Pro launch, I think together with AI large model use in these areas, I think there will be some nice surprise. In this area, we have done more preparation than vehicles lens set area. So as I said in my presentation, so we would like to be able to seize this opportunity to achieve better results. Okay. Thank you for your questions. Thank you, online participants and investors, for your participation. If you have further questions, please feel free to contact our IR department. We will conclude our session here. Goodbye. Thank you.