Good morning, everybody, and welcome to poLight's Second Quarter Presentation. Together with me today is also CFO, Alf Henning Bekkevik, and Board Chair, Grethe Viksaas. Alf Henning will go through the financials. The agenda as normal: key events, introduction to poLight, operation and market review, focusing on market, a financial review by Bekkevik, outlook statements, and Q&A. Regarding Q&A, for those in the audience to here today, please before asking question, wait for the microphone. Those on following us on webcast, please leave your contact details, so in case we are not if we're running out of time, that we can respond to your question through email. Okay. Key events. Well, I guess, the event is that Meizu 20 Infinity is shipping. It was available, I think, in June.
Many of you have already bought the phone and tested it. Come back to that. I would say good feedback on performance. As I mentioned many times before, there's no doubt that the, the consumer market is in a, in a difficult sentiment, and you can listen to whatever quarterly presentation you, you, you will, and you will see that all companies are reporting that. It's a difficult sentiment. What we also know for sure, that sentiment change. Also, during the quarter, which we also announced during Q1, is that the Chinese company LLVISION has released a product, an enterprise AR product using TLens.
We also have to, of course, obey to all formalities, and one of the important aspects is Norwegian Transparency Act, which we company was published the first report in the end of June. As you also know, the rights issue was oversubscribed by approximately 25%. Many didn't get what they wanted. There were big oversubscription, and it generated net NOK 125.8 million in net proceeds. Thanks to existing shareholders for that. For those who are new, poLight, in short, a global player. As you can see from the map, we are basically all over the place. We are slightly less than 40 employees, and we are more people outside Norway than in Norway.
The strategy we have is to have people, competent people, close to customer and partners. That's why it's set up like this. We are a tunable optics player. Hopefully, step by step, we will have different products in that area. Focus is on different market segments, but I would say consumer, AR, industrial is, has been the main, but definitely, like medical and automotive is coming. We have 21 worldwide patent families, eight pending application, and four registered trademarks, which is a few up since last quarter. Listed in Oslo Stock Exchange in 2018. If you're gonna say four things about our technology, super fast. For those who have tested the phone, it's quite amazing. It's can realize very compact solution.
As you can see, the whole of the screen in the Meizu phone is really, really small, due to TLens. Also, when you take a picture and you're changing focus, very often you can see a pumping, because of the movement. For TLens, there is no pumping, making type of all the focus application much easier to make. For many, many cases, power consumption, super important. AR glasses in the future for consumer, of course, if this is gonna be the glass, there's not much space for battery, so power consumption is critical. Those are the four, I would say, key, and there are others. Technology, replicating the human eye. On the left side, you see a membrane being bended. Under that membrane, there is a polymer, which is the lens, which is the only thing we produce.
When you bend it by having an ASIC driver changing voltage from zero to 50, that bending shapes the polymer underneath the membrane, and hence change the focus from close to infinity. As you can see from the top right, it's a very small, small, sensitive lady. You can see it in relation to a tip of a pen. On the bottom side, you see the supply chain. We produce the polymer. We have ST as a partner for the MEMS wafer, which basically is the membrane, which is bending. We have an assembly partner, which is packaging the TLens into either a bare TLens, without any clothes, or a TLens with some plastic around, which is the packaged TLens.
We sell that to camera module suppliers, who have integrated in different ways, add on or add in. Those guys are selling them to different OEMs. Okay? As I mentioned, consumer, specifically smartphone wearables, key. Barcode, industrial, important but slow-moving market. It typically is a market where product is lasting for, say, five to 10 years. An important part of, over time, the recurring business. Augmented reality, huge opportunities for poLight, and as you said, also VR. There are those are the three, I would say, main focus areas. I think more and more we see that we have a big role to play in the medical endoscopes. We're going to talk a little bit more about that, but also we can see now automotive, being more and more relevant for poLight.
As I mentioned before, and I will back say later, that's a non-trivial volume opportunity for us. Yeah, you have seen the design wins. Not gonna go through that in details, but just saying that, of course, having these design wins and the latest one, the, the Meizu phone, is a big help for us when we are communicating with other customers. We have proven that we can deliver, and we can have different applications. Okay, if we go into the consumer side, as I mentioned, it, it is clearly a difficult sentiment. People are spending less. People are very afraid of, of, of, their jobs in many areas. That is obviously impacting the OEMs. The OEMs see the need to cost-reduce products. They, they, they want to reduce variants.
This is impacting the whole industry, definitely. I have to say, having this in your hand when you meet customers is definitely creating interest in, not only in smartphone, but in all segments. The focus on the quarter was smartphone and augmented reality, but we are also working on other applications such as webcam, laptop, smart home. Wearables is, is also being addressed. We have four design wins, 34 completed POCs, five ongoing POCs, and 10 planning POCs. First, smartphone using TLens on the market, that's definitely the, the biggest news for the quarter.
As you can see from the Meizu homepage, among all the highlights, it says, "Its selfie camera is equipped with a hybrid lens, TLens, latest innovation for the company poLight, which aims to revolutionize the autofocus on our mobile devices." This is not said by us, but it's said by our customer, and I guess that's the best feedback so far. Yeah, we have been in China specifically, we have been having the phone in our hands for quite some time, since mid-June, and we have done a lot of roadshow. I will myself go to China next week, and the feedback so far, which is still early days, is, I would say, from a performance perspective, very positive.
You have been using it and testing it, many of you, and I know that you also have seen that. We have said that what the typical customer feedback is that, "Wow, this was a really compact solution. Wow, this was fast," and, "My God, how smooth!" In general, saying that they feel that, and this is the engineers in the OEMs we met. Of course, they like the small nose, which is meaning that you have a very small hole in the screen. No pumping, breathing, basically better user experience, they, they say. These are statements from customers. It's also important to say that the TLens in an add-in camera module, which is produced in very low volume compared to competing technology, is expensive. Not so much. What should I say?
Not only due to TLens, but mainly due to the process of manufacturing, is still early days. Of course, that means that in this sentiment, you need to convince people on performance and to take the cost penalty. Over time, I'm sure that our camera module suppliers will be more, so there will be competition, and also they will kind of learn how to manufacture it in a more efficient way. Also, we were so lucky that we managed to implement an all-in-focus, touch and refocus algorithm in a actually commercially available phone. I don't have it here, but we have it in, in, in China. This is a cooperation with Almalence for quite a few years ago, when we demonstrated the Google Pixel phone with the same algorithm.
As you can see here, are amazing pictures. Here you can see all in focus. You can see this on the left side, you can see the signs, and you can see the background and the business card in very sharp and in focus. You can see the Jason FAE in China standing there front of the building. You can see the bottle, and you can see the background in focus. Quite amazing pictures if you look at it. Who wouldn't like to have something like this? Left side, is Renfa. He is the GM of China, and I would say the single most important guy why we have achieved this. Jason is the FAE. Great team in China. This is half of it. Status on consumer.
You can see here, quite a lot of activity. Four design wins, one design-in, 12 POCs, and 19 planning POC. Just look at that, those glasses, meaning that there's a lot of consumer-related AR companies now planning to test the TLens. I should also say that part of this is also TWedge. Not, not huge, but part of it. AR, you know the drill, you know why. Ultra-focal points, solution, very low power consumption, fast focusing speed, constant field of view, no gravity impact when you move your head, super important, and athermalization, meaning robust focusing over a spectrum of temperature, and which has been actually one of the key enablers. One of the reasons why Magic Leap went in that direction was exactly that. Yeah, we talked about that before, so that's nothing new.
LLVISION is currently shipping, which is great. Definitely a positive development. Look at this table. There are two design wins, that's, that you knew. There's one more design-in, so five. There's 12 completed POC. There are 11 ongoing POCs and 12 planning POCs. There's a huge activity, and I think it's important to say, whatever we do to position us for this market has a direct relevance for, for this market, for, for the AR market. TLens is the main drive here, but TWedge, which is this wobulator, which is this product enhancing microLED displays, resolution-wise, is also receiving, I would say, really a good feedback.
We already engaged with key players in the area, we recently shipped samples, the immediate feedback after them installing it in the demo kit was quite amazing. They were surprised how much it really improved the resolution. How are you on the AR, then? Two design wins, five design-in, 11 POCs, 12 planning POCs. The glasses are the glasses, and the, that are enterprise, whereas, the, the orange or whatever it is, is consumer-related. You can see a high portion of consumer-related cases. The consumer cases are typically a few years ahead of us, and, there are small companies and big companies working with us on, on this. Industrial, not so many new things to say, I will save time on this, still, I would say, good activity.
Quite a few has completed the POC during the quarter, 27 compared to 20. It's a market which, as I said before, which kind of takes a lot of time, but the, the good thing about it is that the product is shipping for many, many years. I think the volumes, for the volume, on this market to increase, we need to be kind of qualified or used in, in closer to the point of sales, area. Because where we're used now is typically in manufacturing plants, logistics hubs, where, of course, the volume is, is low. But as we can cost optimize or customer can cost optimize, hopefully, they can bring it into closer to point of sales, which is, giving a significantly higher volume. Yeah. Use case, healthcare and automotive.
Healthcare, many of you are following closely, Xenocor. Very interesting case, laparoscope. Human trials to be carried out. After human trials, they will release. Key, key case for us, it will, it will be hopefully a design win within this year. This will be the first design win for a commercial endoscope, laparoscope application. Xenocor, to remind ourselves, is a disposable product, meaning that a one-time use. They claim, Xenocor, that this kind of devices is unique, and they think that it's gonna be the future, and, and they are thinking actually quite amazing high volumes step by step.
We have been in contact with some medical doctors, which is also saying that they see a great opportunity for TLens in the healthcare space. So, Kavli, we have to thank because they started using TLens. They have been to tremendous help to, to profile poLight and TLens in important journals. We are in close contact with them still. They're still using it. They just released a new Mini2P, which is also using the stacked four TLenses. We have also seen a tremendous number of research institute, universities throughout the world, who's doing the similar things. There is even a, a commercial, a few commercial companies which actually is now selling this. You can go to LABmaker as an example.
You will see they are selling, selling these devices, and you can see from the prices that the TLens is relatively highly priced. Super important from, I would say, a profile perspective. Of course, we earn money in on that, but that will never ramp in a big volumes, but it's a super good qualification of TLens. One design win, two design-in, and 17 POC ongoing, and six planning. There are a few of these POCs which is purely commercial companies. I mentioned that there is one which is with a huge Tier 1 player in endoscopes, not disposable, who is today qualifying TLens. And that will be a sterile endoscope application. Very interesting. It's a long process, but so far, so good.
Automotive, yeah, non-trivial volume opportunity. Everybody tells me, "Stay away," because it's so difficult. I, I believe them. It is difficult. We have started internal qualification for this market. It's, it is. We cannot neglect this opportunity. This is a huge, potential volume opportunity. Yes, difficult, but we as we see today, and we may be wrong, but as we see today, this market should be good for poLight and TLens. What we are. When we are engaging already, we are, I think we ongoing, as I said, three POCs already, after just kind of starting exploring this market with big names. The, the thing they are saying that we need a solution. There is a need for AI for different reasons.
Today, they don't see a solution of the existing incumbent technology, and they think about vibration in a car. Of course, moving parts in that kind of environment is super, super difficult to handle. They're looking for something like TLens. I'm sure they're looking also at other things. The question then is will TLens survive in such an environment? That's what we are doing internal qualification tests to, to show. The way we see it, is that we think we should. There may be a need for tuning here and there, but we think this should be possible. At least it will be extremely arrogant not to try. It will take time, but from, from a market opportunity perspective, I think this is one of the biggest opportunities the company have. Yeah, summary.
As you can see, different market segments, we already, already talked about them, case by case. As a company with slightly less than 40 people, this is. One guy asked me, where the how is our health? If you look at this table, it's a, it's a stressful life, but it's a good life. Financial review, Alf Henning.
Thank you. Good day to you, to you. In the quarter, we had revenue of NOK 7.2 million of deliveries of TLens and drivers, ASICs, compared with NOK 2.5 million the same quarter last year. In the quarter, we had NOK 3.8 million that we have received for units that were meant to be used in a smartphone that was canceled in 2021. The EBIT loss was NOK 18 million, compared with NOK 13.9 million the same quarter last year. In the quarter, we had NOK 1.8 million in reversed Social Security related to the share options that was recognized in the quarter, compared with reversed Social Security accrual of NOK 3.5 million in second quarter last year.
As you might know, this is related to the decline in the share price, that reversal. On the balance sheet, we had a cash position of NOK 153 million, compared with NOK 84 million at the beginning of the year. Inventory ended up with NOK 66 million, compared with NOK 46 million at the beginning of the year. It increased by NOK 9.5 million in the quarter, and as said in previously quarter, it's related to the wafers that we have increased. Okay. On the cash flow, we started the quarter with NOK 54 million in cash. We used almost NOK 26 million in operating activities. That is more or less the same level as the same quarter last year. We received NOK 125-ish million from financing activities due to the, to the rights issue.
At the end of the quarter, we had NOK 153 million in cash deposits. Okay, thank you.
Mm-hmm. Thanks, Alf Henning. Okay, outlook. Even though consumer market is difficult, we will continue to emphasize and position us for that market. We have a super tool. Meizu 20 Infinity is a super tool in that process. It's also fair to say, I said many times, the sentiment is difficult. Currently, there's no kind of visible signs of that gonna change, but we know it will change. We will actively use the Meizu as a reference, not only for smartphone but for any consumer-related application. That is, as I said, a super tool.
We will mature and cost-optimize TLens solution, both addressing the component TLens in itself by learning, and, and of course, when we ramped and deliver everything to Meizu in a, in a month, actually, only, we learned a lot on, on the manufacturing process, and the only way to improve yield is to produce. That learning gave us a lot of. That, that process gave us a lot of learning, and, and we are continue, continue that. We have kind of weekly yield task group reporting to management to see how we are progressing in, in this important area. That will be a huge focus. Also, simplifying the manufacturing process when we have yield improved is something we are working on. That is on component level.
Also we need to work together with our camera module players to optimize system-level performance and cost. We are addressing that from, from two angles. There's no doubt that there are potential ways of enhanced performance of the, of the TLens and solutions around TLens, and that is a huge focus area for us. Actively develop the capability and relationship to existing camera module suppliers and new camera module players. This is key for us. Also we see now opportunity, we are currently doing some nice designs for, I would say, a higher value application of TLens. TLens is today used in the selfie camera, as you know, but the budget for a selfie camera is significantly less than the budget for a back camera structure.
That's, that's what we now are kind of focusing more and more on, to see how we can maneuver in, in the back camera space with a TLens solution. That will be kind of the focus for, for, for the product side. AR market, as I said many times, it will be key for poLight. There's not many. Two years ago, maybe, since we started to address this market, and it's in a way, it's a, it's a big world, but I would say it's it has exploded in interest. And of course, shipping with Magic Leap is a huge reference, and LLVISION for that matter, but we are really engaging with, with many, many players, small and big.
there is a, we feel, a perfect match between what we have and and TLens, both for, for camera, but also for display. We talked about TWedge. So far, TWedge seems to be also a fantastic match for this segment. In a way, two TLenses and two TWedges could be a wet dream, in a pair of glasses. I'm not saying that is realistic, but there is, we have a potential, several product which can go into that market or several units go into that market. TWedge is still at the prototype stage, mind you, and we are still kind of making the business case and, and to take a final decision whether this is gonna be a product or, or not.
That is still to be decided, and it will be decided this year, most likely. So far, it looks promising. The AR/VR cases is still enterprise-focused. The consumer market will drive volumes, but the consumer market is still years ahead of us. And, but it's important to establish a position in the early days, which we didn't do in smartphone, which we will do in the AR space and VR space, for that matter. Yeah, automotive, step by step. We are putting resources on that. We are engaging with customers now. Three POCs, as I mentioned, and it's, I would say, it's a part of understanding the possibilities and the challenges in this market. So far it seems interesting, but yes, difficult. Healthcare, same there.
There's no doubt that all this activity, we are now adding kind of two sectors, market segments into our kind of focus area, which, which means that we have a lot on our plate. I think it's fair to say that we have to, to continue or, or maybe increasing, strengthening our organization to, to handle these above mentioned opportunities in a good and professional way. Yeah. I would say a lot of opportunities and a lot of challenges, but the enthusiasm and the energy to address these opportunities and challenges is, is very high. Thank you. Alf, will you join me for Q&A?
Sure.
We take that right back. As I said, if any question from the audience, please wait for Grete giving you the microphone. Should we start with your screen?
Okay.
Mm-hmm.
I can start. Are you ready?
Mm-hmm.
Okay, first one: Given the wafer inventory, how many TLenses or TWedge products can poLight currently produce?
When it comes to TWedge, that is far from being in mass production. That is if you look at the kind of like the wafer inventory as an example of Henning talked about, that's not relevant for TWedge. On TLens, you may remember that we, we were forced to put a quite big PO on STMicroelectronics for wafers to secure supply. That's what you're seeing coming in now quarter by quarter. That PO is being delivered. It's taking some two years or something. I would say that when, if you look at the inventory we have today, we can, we can produce probably a handful of TLenses based on that. We are very, w hich is super good.
We just had a management meeting with a big player, and of course, this is, for them, very comfortable to see that we are kind of, that risk is not there.
poLight has been increasing the testing capacity for TLens over the last few quarters. What is the production capacity for TLens?
Yeah. I think the, the, the bottleneck in TLens manufacturing is, I would say, on the final test. As you know, all TLenses are 100% tested for important parameters. The manufacturing, the assembly of TLens is giving that you have control of the wafer, which we have. The assembly of the TLens is relatively simple and standard equipment, and can easily increase in capacity. The test equipment is highly specialized test equipment, and today, depending on the spec, the customer demand, which means which kind of testing we need to do, is everything whereby, say, 0.5 million-1 million capacity per month. If we're going to increase that, typically that type of test equipment six to nine months delivery time.
What's the latest update on ongoing POC with the top tier medical customer?
Yeah, I, I briefly mentioned it. It is really a top-tier company. I would say, so far it looks very promising. Again, it's a, it's a quite thorough investigation. It's a, it's a worldwide team in this company working on, on this aspect. They're testing all kind of things. It's very advanced configuration, as you can imagine. At the moment, it seems like they are moving in the direction of wanting to use it. Still things can happen, of course, but that's what our understanding is today.
Is poLight still supporting and supplying TLens for the project related to March 2022, design in AR case that included support for our display solution development? Also, is a design win likely for this solution in the near future?
Yeah, we are engaged still with, with this company. This is related to a display, so using TLens for, for controlling a display. Customer is super enthusiastic. They claim that the TLens is a key enabler for their performance. We have shipped what they order. We have no dialogue with the customer on a revised packaging, because also here we are responsible for how to package TLens into their system. When that is being designed, we expect there will be more orders coming in this. When market? Well, we don't know. If you say that it's to all these AR consumer cases is quickly three, four, five years ahead of us, we believe.
There are different companies saying different things, but it's definitely not, not a next year thing. It is a longer term, longer term, cases.
As the recently upgraded Mini2P in its 2026, 2023 version becomes commercially available, how do you anticipate these changes will affect poLight's profit margin and sales volumes?
I think that version in itself is still using the same stacked, Four stacked TLenses, so in that same way, it's same. What I would say more importantly, is that it seems that more and more company are engaging in this area and want to make and sell these kind of units. I've said before that I don't see this as a big revenue maker, but it has been relatively significant. I think that as the rest of the world engage using the same thing, I think it will, it will seems like it will increase, at least stay at very healthy margin.
Juho Alakarhu served as a director of the board of the directors for the past years, but did not continue following this year's general meeting. He is listed under the conflicts of interest section in the rights issue prospects due to his role as VP of Axon Tampere, a company that from time to time has, and will likely in the future, assess use of poLight's products in operations of Axon Tampere. Is this the likely reason for his non-continuation?
I have to say, I'm impressed what you dig out. I think, well, you have to ask, Juho, but, I, I think the main reason for him, he is a very popular guy, and he has a very, tough job in, in, Axon. I think it's more like a capacity availability issue than anything else. We still have a relationship to Juho. And, and, then as a general speaking, I would say not related to Axon, but everything camera on, on the body, on being wearable has a high relevance for TLens, of course, but I wouldn't say that. It's more like a capacity and availability thing.
Do you have any intentions to take part or in additional conferences, seminars, or presentations within the next six months?
Yeah. We will be present at AutoSens, which is our first effort in the automotive area, to learn and to meet key people. That is coming, I think, in September, in Brussels, if I'm not mistaking. We will be, and I will be at CES in January, and we and I will be at SPIE Photonics West in San Francisco in the end of January. As you may have seen, we are more and more vocal and more and more present in different different shows and conferences. That's a part of our strategy. We have hired a marketing consultant who help us with, yeah, posting and stuff like that, to make us more visible in different settings.
poLight owns very strong patents. If TLens and TWedge can become standard components for many larger companies, then the ownership of the patent must be worth a lot of money. I wonder what poLight envisions the value of the patents to be?
Yeah. There, there's no doubt that IP is a key for us, and we are working very actively on protecting our solution. We spend millions on that per year. This is important for us and it's also important for our customers. I would say that if we engage, like, like this question is indicating, with larger companies, shipping both TLens and potentially TWedge, I think the valuation of the company will be very interesting. I don't like to comment specifically on that, but of course, IP will be a part of it. The case that you're shipping to major companies is, in itself, a big value driver, of course.
Which companies are poLight's assembly partners? Do you, do you plan for more assembly partners in the future?
That's a good question, and we have kind of qualified two. I, I should say, three, because we, Tong Hsing, which is our main assembly partner today, was qualified in Taipei, and also they have now qualified the factory in, in Philippines. Now we have moved everything to Philippines for cost reasons. As I said, Taiwan have also done it. Then we also have another company in we work with, in Taiwan. In a way, like, then you can say three sites has been used.
Today we only use one. The reason for that is that, you need to, you need to make sure that you have volume enough for, for, for the partners you have. Today we consider that we- sufficient, what we have in, in the Philippines.
Honeywell still has the EX30 in production with TLens, and it seems that it maintains Honeywell's position in the market. What can you say about Honeywell as a customer and about their feedback to you in the now almost three-year-old barcode product they have?
Yeah.
Are you still in dialogue with Honeywell?
We're definitely in dialogue with Honeywell. Definitely. I would say that they have that product seems to be well-received, that EX30. We also see that other ones do something similar. It's a high-end product, so it's a low volume, as we commented a little bit. The way we see it is that it seems like they claimed once, Honeywell, that this product is a product which gives them new accounts and keep them with old accounts. It's a key product for them to kind of keep the customer in, in their portfolio. That's.
It is a, it is a low volume, but they are still shipping, and I, the way we understand it, there are several years lifetime on that product.
In May 2022, a one to five share split was carried out. What was the rationale behind this split?
Yeah. Now, the rationale behind that is that, it's a little bit, we are a share, which is quite popular between smaller investors. There is this feeling that if the share is costing, say, NOK 200, that's a lot. So there's a psychology effect by saying that splitting that in five will be perceived as a cheaper share. That is, maybe it seems stupid, but that's basically the mechanism. So it was meant to be more accessible for more people, and it was meant to be important for the liquidity.
You mentioned that you have shipped several test samples for TWedge for OEM. Can you say something about the feedback?
Yeah. We, we sample is a strong word. We're just starting to sample customer. As I mentioned in my presentation, the, the one- the first customer who received it, has so far given positive feedback.
Can you say something about time-to-market for TWedge?
Yeah, first of all, we have to take a final decision whether it's going to be a product, that we shouldn't kind of take that for granted. It's also a costly development program. If we do it, that kind of development is typically be a, yeah, couple of years, 15-18 to 24 months or something.
Does TWedge use piezo actuators from STM, or are you targeting other partners for this product?
That, that could be possible. But the way we see it today, it's more likely to have a kind of bulk piezo, discrete piezo solution. That's what we're using on the prototyping.
If TWedge will be used in glasses having two screens, wouldn't that mean one TWedge per glass, so possible two TWedges per pair of glasses?
Correct.
Where in the supply chain are poLight related to TWedge? Is it so that you make the whole TWedge module yourself, or do you rely on partners for assembly of this product?
Yeah, good question. That, that can go in both direction. It can be that we do a special, highly integrated version for selected customer, but we also definitely will have as a strategy to have a kind of a standalone component, off the shelf, available from, from poLight, so, so potentially both.
Does OEMs see lower risk going for TLens now, after you show that you can deliver on quality, production capacity, and organization-wise?
Yeah, I think that's an important element. We have shown that we can produce. Actually, as I said, we produce all the TLenses to the Meizu phone in one month. I think it's a big yes to that.
Have Meizu 20 Infinity sales generated more deliveries or, from poLight than first ordered as follow-up orders?
No. We have so far only received one PO and delivered that. Of course, the phone is relatively recently start shipping, so, so we don't know yet what's going to happen in the next. As I said many times, this is a super high-end phone. It's expensive. Market doesn't like expensive things anymore, so that will probably sell relatively few. It's for, for Meizu, this is a showcase phone. "Look what we can do. The greatest of all technology is in this phone." This is not made for being a huge, kind of, millions, -
Yeah.
Let's see what, what, how it sells.
With the Meizu 20 Infinity in the market, have other manufacturers considered to do the same?
Yeah, we are just, I would say, starting the roadshow, showing this phone, showing the all the focus, which I've shown on pictures. That's early to say, but what I can say, they are listening to us.
Can you say something about the yield on the production of TLens for the Meizu phones?
What I can say is that the yield during that process, improved significantly. What we said before, our target yield of, of 90-plus is, is, is clearly within reach as we see it.
How is the progression, sorry, to add in models from other CCMs than the first?
Mm-hmm. Yeah, we are working with a few other camera module players, working on, on add-in solution. You've probably seen one of them being relatively vocal in the, in the press, a Japanese company. So, so w e have others who is working with add-in solutions. Also, one of the add-in solution is actually in a, in a VR space. Step by step, there, there are coming more, more camera module players, and that's, of course, important for us to, to create the, the correct dynamic in the, in that market.
Can you tell someone about the add-in concepts area of use? Is it only within smartphones, or is there activity now within AR, industrial, or other verticals?
Yeah, see, the, of course- clearly, the smartphone is the first one, but we see this having relevance for all markets, to be honest.
Bigger TLens Platinum, John Edwards mentioned in The TechBlick video, can come in 18 months if there are customers who demand it. Is the TLens intended for rear cameras, or what are the areas for use for this?
Yeah. TLens, typically, TLens Platinum case is a part of the back cam structure, typically. On this, as you know, this is highly related to the image sensor, and image sensor on the back camera is typically bigger than they use in other, like, selfie camera. Platinum is in a way intended for that kind of use.
The development of TWedge, is it something you are 100% responsible for yourself, or is it in partnership with another company?
The, the TWedge, as it is today, is 100% poLight activity. We do engage with a, a user of that product to make sure that we are hitting the right specs and, and, and performance parameters.
For Xenocor, you, you supply more than just TLens. Have others shown interest in the same solution where TLens poLight provides a total solution?
Mm. We have seen that in the, in the, in the medical space, we have seen that, including Kavli, we see that we are often asked to do a little bit more than just shipping the TLens, building it into some kind of, yeah, should I say, interface, so that it will become easier for them to interface the TLens into their system. Yes, we can see that, and Xenocor is one example.
Magic Leap 2 has recently unveiled new features and software capabilities, including the mixed reality capture enhancement. Has poLight involved in these enhancements, and do Magic Leap, with this update, utilize more of TLens's advantages?
You know, to be honest, I'm, I'm not quite sure, but I, I don't think this has a high relevance for the TLens. Potentially some, but at least it's nothing we are aware of.
Are there any ongoing software development initiatives led by poLight, OEMs, and producers or other entities that involve integrating TLens's advantages to offer functionalities such as all-in focus, refocus, bokeh, 3D photo, background removal, or similar features?
It's not bokeh, it's bokeh.
Oh, bokeh. Okay, sorry.
No problem. Yes, you know, I'll show you the pictures. That is an Almalence SDK, which is used, which is a quite a well-recognized company in that software space. That is. As you can see from the picture, this is a printing, kind of. This is an Almalence demo tag, so it's, it's a demo software, which they developed quite a few years ago, actually, which we used in the Google phone. You have, you know, this company called Wooptix. It's a Spanish company, which has also done things, something similar. There are activity. I think also, but what you can see from the OEMs, they don't like to pay license fee.
In this cost-sensitive world, you can see typically also they, they have internal development activity for, for doing things like this. We, of course, try to motivate Meizu team to, to make sure that they had that when they released the phone, but there were no capacity for them to do it. I think it will be a mix between them doing kind of other software companies, so like Almalence or Wooptix to, to, to install it, or they will be doing it themselves. Hopefully they will do it, but so far in this phone, it's not. As I said, we have software, so we can demonstrate it to customer. That, I guess, is the most important thing at this time.
How many ongoing projects or POCs are related to TWedge?
It's three ongoing POCs and three planning POCs.
I have seen that there is enormous activity in AR/VR among all the big, well-known tech companies in both the U.S., China, and Europe. Can you say something about the status and position poLight has as a company, vice versa, these large companies?
I think we answered that question during my presentation, but given the status of ongoing POCs and planning POCs, I think it's quite obvious that we have a, we have a very good position there and a very good relationship to many key players.
Will you make a pipeline chart also for TWedge?
That will be when we have decided to, to develop that product, and we start shipping, kind of, or start selling that, that as a, as a product. Today, remind, remind ourselves, today is a prototype and we're sampling. When we have the product and we're starting to actually offer that product, that will probably be the time we do that. I will keep you updated on how things are progressing, of course, both from the tech side and the, and the market side in the quarterly reports.
Will you use the same supply and assembly chain partner for TWedge, or will you at least partly have to invest in new process equipment, et cetera?
Yeah. Assembly-wise, I think we can typically use the same type of partners from assembly perspective. What will be could be different is the PH, so how that's made.
It has been relatively few announcements from poLight the last months, compared with what could be expected from the pipeline. Could we thus anticipate a catch-up effect in third or fourth quarter?
Nothing will please me more.
Do you see any sign of a more predictable order intake, except, for example, repeat orders from existing customers?
I think step by step we will build that. But I think we need still, I know that you have been patient so far, but I think we need still to be patient. We are addressing big markets, some of them like, like, automotive, like healthcare, are market which it will take to develop. So I think, we still need to, to be patient, we still need to be very dedicated, but over time, that is definitely what we hope.
Do you see an increasing interest from the U.S. market, or is it Asia dominating?
I would say it's quite a, quite impressive activity we have built in U.S. in, in a relatively few years. We now increased 100% the staffing in U.S., now we have two people in U.S. The reason for that is that there is basically too much to do for one guy, even he works day and night. Of course, Asia is a key market for us. I wouldn't place one of them. I think they're equally important.
How about competition? Increasing, new players, incumbent improving their alternatives or cutting their prices?
It's an extremely good question. I think the main competition we have today is incumbent technology, evolving and, having extremely cost-efficient solution. That's the main competition.
Can you expand on the price sensitivity and how to cope with it? The world currently indicates that the price sensitivity is temporary, but is it really?
Yeah, price sensitivity is specifically, I would say, the case today. There are, there is a price on different levels. We have the component pricing from TLens, which we control, of course, but then also we have the pricing of the camera module. I think that we need to, we need to mature both the component, we need to produce more, we need to enhance, and our camera module players need to mature and produce volumes to be able to kind of produce cheaper. I also think that at the moment, our partners also would like to say that, "Okay, this is something new, you should pay a premium." They're also taking a little bit that position. It's difficult to say.
I think that, I think the sentiment, and I know I'm talking consumer, I think the sentiment needs to change before things to change on the competitiveness and pricing.
You have stated that you've had to say no to projects because of resource limitations. What kind of projects are they? What kind of support is generally required from you, by your customers, potential customers?
Yeah. Well, I think that, that, those we have said no to, I, I wouldn't say that- I wouldn't be- it would be wrong to me to say we're saying very often no. There are some cases which are very, very extreme, like military, space, type application, which never will be significant in volume, which will potentially also mean that we need to do something new, and it being resource intensive, and then we say, "Thanks, but no, thanks." We try to keep, be loyal to the focus area we have defined, and then we are opportunistic, but, but, we, we have a lot of things on our plate now, so we need to try to be loyal to our strategy.
Regarding the income of NOK 3.8 million from the canceled phone, will this mean that the project with this client has been canceled for good?
Yeah, yeah. That, that project was canceled, and the reason. This was the beginning of the downturn, where a lot of the OEMs saw a drastic drop in sales of phones, and they decided to reduce the number of variants. They decided to delay new releases, and that was the reason for that project. But we manage, which is not easy to achieve, that we received some compensation for all, for the pre-production we did. Yeah, so that is canceled.
There are four LiDAR-related camera, up from three in the first quarter of 2023. Are one or more of these one of the top players in the industry? Do you expect the one not expected to be released this year to be released within the next year?
The, the, the additional now in designing on the, on the AR space is actually a VR case. That one will be most likely next year. The three other ones, it has the chance to be released this year.
Second quarter had all-time high revenue, and revenue, revenue in first quarter and second quarter together had higher revenue than the full year 2022 in total. This shows growth worth, worth mentioning.
Yeah. Yes. At the same time, there is, there is a reasoning why we didn't, in a way. We could have, if you don't look into the details and the numbers, you can say, "Yes, yes, another record high quarter." It is related to history, which we finally managed to get some payment for, for what we shipped quite some time ago. That's why we didn't make a big, big thing about it.
In the healthcare market, you said increasing number of endoscope cases.
Yeah.
Will that mean more cases than the top-tier product already announced and Xenocor?
Yes.
Considering that Finland, especially Tampere, is a center of excellence for camera technology development, how crucial is poLight's presence in Tampere to the company's operations?
That, that was the whole reason why we established Finland, and, and you know, you may remember that Microsoft acquired Nokia, and when they then decided to withdraw and shut that down, we used that opportunity to fly in and, and recruit people with the system knowledge in, in the camera industry. In a way, people employed by us in Nokia, partly today, have many, many years of experience in working with Nokia and Microsoft, which is key for us to understand the system aspects. You know, we have always been super good in the component TLens, but when I joined the company, it was clearly to see that we needed to be more competent in the system.
That's why we did that, and we tried many places to find those people with relevant background, and it was extremely difficult. You don't find them in Norway, at least not easily. We didn't try- we, we tried, but we didn't find. You could find them in Sweden, in like in Lund, as an example, at Sony Ericsson. The best case we saw was in Tampere. That's why we jumped in there, and we're still there. We also, step by step now, have built a little bit similar setup in Asia. In Taiwan and China has key resources with years of experience from OEMs and camera module suppliers.
Could you provide an overview of poLight's various locations, highlighting their core capabilities and unique contributions?
Could you provide overview?
I think you started on that.
Yeah, yeah. Okay. Mm-hmm. That is our strategy is to be in the different markets with key competence, and that key competence is related to sales and marketing, and it's related to customer support. Those are the two reasons why being close to partners and markets, is being able to sell trustworthy and aiming to support them trustworthy. We have this. I'm not saying I made this slogan, but we have this strategy that we think globally, and we act locally. If you only do fly in, like I do a lot, and you just leave, then, then you don't have the continuation of what you have to do every day with your partners and your customers.
Our clear strategy, be in the important markets with competent people, both on the sales side and support side. headquarter, Tampere, U.K. setup will be kind of the third line, when, when, when, and more the R&D side.
Do you think TLens will be approved for automotive during 2024? If when that will happen, how will you communicate it?
Yeah, I think we just need to take that little bit step by step. It's still early days, and I will keep you updated during the quarterly presentation. I think we need soon to round up.
Yeah.
Where are we? Is there many?
one of three, four more.
Okay, let's do.
What is the benefit of the reference designs? Is it a starting point for customers? Has anyone made use of the reference designs?
Yeah, you could say a good example here is add-in. When we, a couple years ago, when Xiaomi came out with this smartphone with this big screen, remember that? We were super close to design wins. That, at that time, the design win was based on, you know, The screen had quite the free space there for the camera and both top and bottom, and so there was space for the, for the selfie camera, and we were very close to the design win. Suddenly, the world changed, and everything was, it was all about the biggest possible screen and as small hole as possible. Those design win we were close to were stopped because the mechanical ID designer, he said, "You know, no, there's no space for a better camera.
I prefer have a bigger screen." Of course, we were very depressed, but then we said, "You know, let's, let's do one last try. Let's show them a reference design on add-in, which will enable a small, small hole in the screen, which will fit into the new mechanical ID." We did a tour, me and the CTO, and Ray-Fai Chung in China, to all OEMs, and we put that business card down, and well, they, they listened, but they didn't do anything. Suddenly they started to work on it. That's see the value of, of showing reference design. It's a kickstart for our customer, yes.
Can you say something about the big TLens order that everyone is speculating in on Nordnet, or is it just a rumor?
I don't know. I haven't seen it. I cannot comment on that, sorry.
Could it be relevant to sell wafers?
No.
There are two robot icons in the consumer POC. What kind of project is that?
Robot icons, I think that's smart home.
Is it possible to get an update on future financial ambitions?
We haven't updated the guiding, so, so, we, we, we will come back to that. We need to see now how how we can ramp the next couple of years, and and the, the only volume market today is smartphone, and, and that we need to understand better how, how that can ramp.
With what you know now, all consideration, is the company heading for sure success?
Yeah. Yeah. What can I say? We are a team of small 40 people, which are working day and night for creating this success and creating shareholder value. Spending so much energy and time on, on this, is obviously driven by that we believe this is a fantastic technology platform, and we have so many opportunities, but I can't guarantee anything, but I can guarantee 100% effort and dedication.
Under the screen camera seems to get slightly more interest. Are you involved in projects related to under the screen?
Yeah, we are in discussion with some OEMs who would like to improve the under the screen camera. It is, it is, and I think it will be a transmission issue. Light through a screen which is not optimized for transmission of light will impact the quality.
Apple Vision Pro is a showcase now. What does this product mean for poLight?
Now, I think it's a part of the AR/VR space. I think the more, the more, kind of, accepted the those kind of solution will be in the market and consumer, the, the, the bigger the faster the consumer market will develop.
The latest design in, in smart glasses is VR. Is this a big company?
What I can say is that it's a company who has a very high-end VR solution, and, and, maybe one of the most advanced.
Maybe the last one now.
Okay.
AR and consumer a few years ago, medical a few years away. Sorry, the AR and consumer a few years away-
Yes
M edical a few years away, automotive a few years away . Mobile, well, no near future projects. Well, where will revenue come from in close to future?
Yeah, we have a lot of, small, orders in. We do sampling in, in all the market segments. We ship to, to industrial customer, we ship to, to AR customer. There are, but there are no huge volumes, and but, it's a, it's a mixed bag.
Okay. That was.
Fantastic. Thanks a lot. I appreciate a lot for you. Today, the audience is completely, f- the aud- or the room is filled up. We need to have a bigger room, next, next time in November. Second November is, is Q3.
You have a microphone if, if anybody would like to ask questions.
I think we have to round up, to be honest.
Okay.
I think we have to round up, but, thanks for you participating through web, and, let's keep in contact, and see you back in the second of November. Thanks a lot.
Thank you.