Good morning, everybody, and welcome to poLight's Q3 presentation. My name is Øyvind Isaksen. I'm the CEO in poLight. Together with me today is also Alf Henning Bekkevik , the CFO, and he will go through the financial review. We will have key events, introduction to poLight for newcomers, update on the market side, financial review, outlook, and Q&A. On the Q&A session, if time doesn't allow, we need to come back to some answers, so please leave your contact details so that we can ensure that everybody is getting feedback. Key events in the quarter. We had a follow-up purchase order for barcode scan engine worth approximately NOK 1.45. This was also mentioned in the Q2 report, just to be precise.
We have received two purchase orders related to a surgical device, and that is actually accumulated to NOK 4 million already. Part of that was mentioned verbally during the Q2 presentation, but the orders was booked in the Q3. We luckily had a private placement, successfully raised net NOK 130 million, including subsequent offering in October. We're happy to say that all in all, for most cases, we have very good progress towards customers. Yeah. poLight, in summary, a global player in tunable optics. Application in many different sectors. We have been around since 2005. We have today around 15 worldwide patent families and pending applications. Step by step, we are increasing a little bit in headcount. We are today, including consultants, around 32.
Those are distributed throughout the world. We are, as you know, headquartered in Horten outside Oslo. We have office in Finland, China, and representation slash people in France, U.K., U.S.A., Taiwan, Korea, and Japan. We are working in a global market. Most of our customers is far away from Norway, so local organization is key for us. The highlights of the technology, as seen in the right bottom, is extremely fast response time, instant focus. Do not have to wait for your camera to focus. Very compact solution, constant field of view, and very low power consumption, which is super important for many of the application we are addressing. We have already customer wins. We are already in a web camera called MAXHUB UC W20. We are already in a Xun and Xiaomi smartwatch for kids.
We are already in a scan engine from Honeywell, and we are already in a machine vision system. We cannot mention the name of the company. Already proven that we can deliver into consumer and industrial. poLight products and technology having what should I say an impressive number of verticals, market segments we can apply our technology. The focus for the company is smartphone and wearables, barcode slash industrial. Augmented reality is becoming more and more important for the company and other segments, and specifically want to mention then medical, which is and videoconferencing, which is starting to be a very interesting area also for poLight, but still in somewhat early days. Okay, let's go into the market update. Starting with the industrial, the barcode side of the business.
As you know, we are included in the EX30, left bottom picture. You should see the scan engine from Honeywell. They are reporting a good feedback to us. So far, we have accumulated NOK 4.7 million order intake. Supplies is going well. No complaints and no returns. It has definitely increased the appetite for other customers, similar customers. As you can see on the bottom left, sorry, of the presentation, you can see EX30 is starting to be more and more used by different OEMs realizing their barcode systems. In addition to Honeywell, we have today three design-ins.
One example of that is on the right side of the slide, which I say design-in example, which is a Teledyne 2-megapixel multi-focus model, and is highlighting the key feature, fast focus, MEMS-based technology combined with wide aperture. This is relatively advanced in the process. They are already talking about it. They already received some awards for the design. This is, as you can see on the top right, has a poLight TLens installed on top of the camera module. This is still to receive commercial mass production order, but hopefully that will happen in the future. That's one of the three. We have in addition two proof of concepts ongoing, and we have three OEMs planning to start a POC.
We do feel that there is a design win potential for the first half 2022. Very important area for the company, slow-moving market, relatively low volume initially, will step up to higher volumes, and will be a significant gross margin contributor over time for the company. AR. AR is an extremely interesting area for the company. Augmented reality, smart glasses. As mentioned before, still in an early stage, with relatively low volumes, and the main products out there are related to, I would say, professional use cases enterprise. You can see on the right side of the slide, we have highlighted some of the use cases we see: education, healthcare, manufacturing, and logistics. Those are what we say, professional use cases, where we see most of the project we see are in that area.
One thing which is highlighted by the customer related to our technology and the fit of our technology is, of course, the speed, which is always very often important, but also the power consumption. The power consumption budget in glasses is very tight, and much more tight than in a big phone with a big battery. Our power consumption being so low is very much an important attribute. Then, of course, we have the compactness and no gravity sensitivity, etc. Two use cases for poLight in the AR space. World-facing cameras, so similar application as in the smartphone area and other areas.
Also, some of these devices have laser-based displays, and that laser-based display needs a TLens tuning the laser so that the user always see the messages on the glass in focus, independent of where the user are focusing. We feel that poLight is very well positioned for market entry at an early stage. You can say in the extreme, you can say there are multiple TLenses per glass. Say 1, 2, 3 cameras, I don't know. At least one, maybe two, maybe three. Then also you have the laser display. There is say a small handful maximum feature of use cases for poLight TLens in one glass. We have actually 3 design-ins. We have 6 ongoing POCs. We have 4 additional OEMs planning a POC.
The three potential design wins within first half of next year. Maybe it will slip some of them into Q3, but there is a significant potential of design wins first half of next year, some of them slipping maybe into Q3. All of those are related to the professional use case. Of the ongoing POC, which is six, three of them are related to consumer. So you can already now see that we are involved in proof of concepts, which is targeting to use our technology into a consumer-oriented device. Obviously, that's why I'm saying in the last bullet that long term, this could be super important area for poLight when it comes to volume. Very interesting and very positive development in this segment for poLight. Smartphone, not at least, super interesting and super exciting.
I would say interest in TLens remains high. The add-in showing on the right bottom, where you see the blue TLens being added into the lens stack, realizing a very compact design, is definitely getting still a lot of interest. One obvious application is for the selfie camera, as illustrated in the figure to the right. We see other application, and we do think that when the camera engineers start to get used to this technology in the front, which is a sweet spot for us, they will hopefully evolve that technology also as a part of the back camera structure. We have progress on several proof-of-concept projects.
There are definitely improvement activities at the OEM, at the camera module players, and also poLight to optimize the performance, including dimensions, optical performance, yield, reliability, et cetera. This will go all the way till we will be in a phone being released to the market. They will do testing and scrutinizing every single day to be super safe that this is a solid and robust technology. That is how that market works. As I said, the closer the TLens come to a real smartphone application, the more detailed testing will be carried out and new improvement areas normally surface. Then it's all up to us and the people we work with to debug those and optimize the solution.
We have today seven ongoing POCs, and I would say we have three design-in possibilities first half 2022. Potentially maybe we can see start shipping into a phone in end of the Q2 2022. Sorry. It will be done a full release second half 2022. That's a typo. Let's move and just summarizing, very many opportunities, still work to be done, but constructive cooperation with our customer is gonna make this happen. We are very confident. Other cases. Web camera video conferencing. Definitely the pandemic, the COVID situation, have forced us to cooperate more virtually. Video conferencing has been definitely a topic and has been selling very well. poLight technology is a good fit for webcam application.
We have already one design win, MAXHUB. We get good feedback from the customer. I was made aware by some of the eager shareholders about a kind of rating. On the right side, you can see this camera has been rated as number one of 15 best tiny cameras in 2021. I don't know the basis for that rating and how they do it, but I think it was fun to show it. Thanks to the eager shareholders who are making me aware of these kind of things. Good feedback. Still a relatively low volume product, which was kind of already told us that it will be, but it's gonna last for some years. Let's see what's happened.
Somebody told me yesterday that it's sold out currently at Amazon, so maybe new shipping will be coming. We are involved in, I would say, early stages of a trial for volumetric video conferencing based on dual camera. Then two cameras with both TLens to have three-dimensional video conferencing. That is kind of the target for this company. They are highlighting to us that the performance of TLens is crucial for this to be possible. Let's see. I think this is some time ahead, but still interesting to monitor. Healthcare is also starting to show us more and more opportunities, specifically for kind of compact surgical equipment, endoscopes and equipment like that.
We have one design-in which we have already received NOK 4 million POs. We are planning, we are now sampling the customer, and we are also preparing for mass production for that particular device. In this case, we do a little bit more than only shipping the TLens. We have four ongoing POCs in the medical and four planning to start. Also similar activity as that 4 million case is also starting to show possibility. I mean, laparoscope, endoscope, poLight TLens can be a very good fit for this area. Typically, high value, low volume market. The design-in we have already announced can potentially be converted to design win in the first half 2022.
From a volume perspective, not so potentially important, but there is a very famous group in Norway at Kavli Institute for Systems Neuroscience and Centre for Neural Computation, which has recently published a paper, which has generated a lot of interest in poLight and TLens. They basically developed, as you can see, a very detailed plot or picture on the right side. You can see, on the very right side, you can see a mouse which they install a microscope. And that microscope has inside some TLenses. If you look at the top right, you can see actually four TLenses stacked together, giving them a fantastic optical power, which they need.
They're saying that the improved cell yield was achieved through a new optical system design featuring an enlarged field of view and a new micro tunable lens with increased z-scanning range and speed that allow for fast and stable imaging of multiple interleaved planes as well as 3-day functional imaging. That micro tunable lens is based on 4, as I said, TLenses stacked together to achieve the optical power they needed for that application. Other research teams, companies around the world has been contacted with poLight and we are currently in dialogue for them also to enable them to do similar kind of devices. They report the reason why they have selected TLens, and they have used other technologies before. Why they have converted to TLens is due to the small size, XYZ, focus range, focus speed, low weight, and extremely nice thermal stability.
As I said, not a volume, high volume case for poLight, definitely not, but it contributes to making TLens as a component into different system, kind of visible for a wider shall I say, audience within the health space. Thanks to Kavli. In sum, most customer cases do have good progress. Of course, there are things we would like to move faster that we do not control. If you look at the bottom line here, we have ongoing supplies, 5, same as last quarter. We now have 7 projects, meaning design-ins, which is compared to 5 last quarter. We have completed now 39 POCs compared to 35 last quarter. We have ongoing POCs 21 compared to 23, and we have 18 planning POCs compared to 9 last quarter. In sum, progress.
Alf Henning, will you support me on financial review?
Sure. Okay, and thank you for that, Øyvind, and good morning to you. Deliveries of TLenses and ASICs gave NOK 1.7 million in a quarter, compared with NOK 600,000 the same quarter last year. EBIT, there was a loss of NOK 2.9 million, compared with NOK 2.7 million last year. In the Q1 this year, we recognized approximately NOK 7 million related to the social security tax on the share option program, since the share price of poLight have increased in that quarter. This quarter, we have reversed NOK 5 million related to the share options, social security, due to the decline in share price.
In the Q3 last year, we had a VAT receivable of approximately NOK 8 million due to the fact that we were re-registered in a VAT register and got VAT back three years. On the balance sheet, we had cash of NOK 164 million at the end of the quarter this year, compared with approximately NOK 80 million last year. As already mentioned, the private placement gave, including the subsequent offering, NOK 130 million. Of course, the approximately NOK 12 million in the subsequent have not been recognized yet. That will be Q4. On the cash flow, we started the quarter with NOK 55 million, give or take. We used NOK 9 million in operating activities, compared with NOK 10 million last year.
We used NOK 600 thousand in investing activities, received NOK 118 million in financing activities, ending up with NOK 164 million in cash deposits at the end of the quarter. Okay. Thank you.
Thank you, Alf Henning. Outlooks before we go to the Q&A. As mentioned, overall, good progress in the quarter, all market segments. Smartphone customer still in proof-of-concept level. There is no concrete project yet. There are challenges to be addressed and solved, but the possibility of a real phone project in the second half 2022 is definitely in place. In the augmented reality space, the company is starting to build an impressive and promising pipeline. Longer term, as mentioned, this can be key for us in the high volume segment. Further, progress continues in the barcode segment, although it is a slow-moving market. Just to remind ourselves, that kind of products last for, say, five to eight years. It will represent an element of a very good foundation for the company.
We do see, as I said, more and more cases, and we will get more and more design wins in this area. Medical application, as I mentioned, is definitely starting to show visibility. We have one very concrete design win for this compact surgical device. If we are able to get in, penetrate this market, it's definitely gonna contribute significantly to those high-value market segments as a barcode is representing. It's extremely busy days in the company. The team in poLight is very dedicated. They work extremely hard. Many of us too much. There are so many opportunities we are addressing that we will step by step need to increase staff worldwide, and that we do.
We're not gonna do something very fast and a lot, but there will be step-by-step added resources throughout the world and maybe mostly in Asia. We also need to continue to invest in our capability and capacity in the supply chain. We are continuing to ramp up, as we have communicated before. There's no reason that we're gonna be out of job. This is a fantastic opportunity for us. We have so many market segments we're working on. Luckily, we are financed in a good way, enabling us to follow these different opportunities in a good and robust way. Alf Henning, will you join me for Q&A?
Sure. Okay. Ready? First question. Since there now exist various patents related to Add-In design from various camera models and tier two and three OEMs, which may move faster, is it possible to get market launch earlier than second half 2022 mentioned in the Q2 presentation?
Well, that was a nice typo in my slide then because that was Q2 2021. That's earlier, but that was a typo. Be aware of that. I don't think it's realistic to have a phone released before second half in 2022 with a TLens. As I mentioned, you may see that we are showing signs and even supply of TLenses in, say, end of Q2 next year. Market release phone will most likely or I would say definitely be the second half. Everything else will surprise me.
Is there interest to use the existing TLens platform as a part of the back cam structure, or will it need the concept development on the announced MOU to be completed?
I would say that the TLens structure as is, and also enabled by the Add-In design, do definitely have potential for the back cam. We are discussing with OEMs how that could be done. I think, however, that the beginning will be selfie camera, and then as they get used to it, they will evolve it to the back camera structure. I think back camera is definitely a potential with an as-is product.
If so, can you mention the advantages in using TLens in the back cam?
No, I think that's very much the same advantages as we already talk about, which I also mentioned in the beginning. Of course there is one thing also which I can maybe emphasize, is that the back camera structure is not one camera anymore. It's two, three, four, you know, cameras. Obviously they are placed relatively close to each other from an application. If you have a VCM solution, those make relatively fat footprint XY. If you have a TLens, that could be much more compact. Also the electromagnetic noise which a VCM-based system will have, you have coils, you have magnets, that completely disappears in a TLens-based camera.
I think many are the same advantages as for the selfie camera, but that footprint is definitely an additional one which is important on the back.
Can you comment on the market strategy in the company?
Yeah. Market strategy. So far, we have been very focused business to business. Face-to-face meetings, having local organization, and we have less so been kind of broadcasting poLight in social media and other things. Of course, we are participating in key events like Mobile World Congress, typically. Also we are participating in different ways at the CES in Las Vegas. I think that we acknowledge that the use of social media when the company is now gradually coming into many different type of application and including consumer. I think the company probably need to, I would say, step up in more kind of modern way of doing marketing. So far it has been very much a business to business activity.
Can you elaborate on the markets in U.S., U.K., Japan, as you recently have added resources in these countries?
Yeah. When it comes to U.S., it's a good example. When we started to see traction in that market in different sectors, different markets, we said that when we decided when we saw that at a significant level, we said then we're gonna establish our own resources in the U.S., and that we have done. That is basically because we see so many opportunities, and we have seen that after we established ourselves, those opportunity has only been increasing every week. When it comes to U.K., that's more a, I would say, establishment because there is a very clever guy sitting there and he would like to live in U.K. and not because of the market.
When it comes to Japan, that's basically our distributor in Asia who have opened a Japan office. What else? Yeah. Those were it.
When the Xiaomi and the Xun smartwatches were developed, were they registered as one or two POCs in your table?
To be honest, I'm not recalling that, but I would assume we registered as one POC because Xun and Xiaomi has been developed by the same design house. That was in a way one POC and which quickly became two projects.
When Honeywell, MAXHUB or Xiaomi Xun launched a new product based on the same TLens setup, will they be registered as one POC in your table, or will they most likely go straight to design win?
That's a little bit dependent. It can be yes or no. If, say, MAXHUB is wanting to design because they have many different products. If they want to design TLens into a completely different product, having different spec and different functionality, they may want to do a POC with that in mind. If MAXHUB is gonna do a UC W20 version 2, they may go directly to project. That depends on application.
Okay. Is the medical smartwatch from Simplify registered as a POC or is this the same Xun smartwatch with a different brand name and modified software?
It is the same Xun watch, but with some modification. Yes, it is a POC in the medical tablet.
Teledyne's 2MP multi-focus optical module with fast autofocus MEMS-based technology were recently awarded the Gold Award for innovative technology. Did you in poLight celebrate that award?
That one, we need to make sure we do that, of course. As I said in the presentation, we're kinda waiting for the first MP version PO. When that comes, we will definitely celebrate.
MAXHUB have recently 10 out of 10 possible points on webcam tests and is sold out on Amazon. This suggests a good product. Has this led to greater interest from MAXHUB in the development of other products with TLens?
As was mentioned by MAXHUB in the press release when we announced this design win, they do see different application for T-Lens. They stated that without us asking them to state that, and we believe that. They have many products. As I know we have been performing well. We have been shipping, and we haven't seen no complaints so far. If we can continue that, I don't see any reason why not.
How do you see future development with the barcode customers you have now? Will there be more products with higher volumes?
It will definitely be more products. Everybody believes that autofocus for scan engines and barcode system will be more and more used, so it is also anticipated to see an increased volume. I think, though, it will take time, yes, for that volume to be significantly increased, but we will get new designs in this area, definitely.
Xiaomi has been using the TLens in smartwatches, but it has been quiet from there for a long time now. How is the relationship with Xiaomi?
We are talking to and working with and promoting to all the OEMs, including Xiaomi. We are in dialogue also with Xiaomi, but anyway, if you think of Xiaomi as Xiaomi smartphone, there's no link between Xiaomi smartphone organization and the watch organization. As I said, the Xiaomi Child Watch is developed by a design partner. The link there is, I would say, limited. Of course, we use that Xiaomi watch in all ways we can use it to promote to Xiaomi smartphone, what we can do, and of course, that's helping, but there is no direct connection.
Teledyne has won several awards for its 2 MP MIPI camera module with TLens. When will such a project become a design win?
Yeah, that I can't say, but that depends on the progress for Teledyne and the customer they have. I guess it will clearly be a candidate for 2022.
You work with many smartphone customers, perhaps at different levels. Would you say that there are only a few of those, or is there contact with a vast majority?
Yeah. There is in a way not so many smartphone players of significance anymore. China had a lot of them, but they are really relatively few now. We are working relatively broadly in towards smartphone OEMs, and I would say that we have, as I've said several times, I would say, several possibilities of smartphone projects in 2022.
You have set up a financial guidance going forward. How much of this guidance was the suggested smartphone?
Smartphone. We won't be very specific and detailed on this, but smartphone from the volume perspective is basically majority in the foreseeable 2, 3, 4 years. We do expect AR to, in 2025 and maybe 2024 onwards, to also be a significant contributor on volume. Yes, that is. We have also the high value verticals like the medical, the barcode, and other which is contributing nicely to the gross margin. On the top line, they are insignificant compared to smartphone.
I see that at least three of the world's large camera module suppliers mention TLens specifically in their quarterly reports and investment reports. Some of these claim that TLens can become standard in smartphone selfie cam already in 2022. Is this in line with signals poLight has from collaborative camera modules on the potential add-in?
I think I've actually stated in one of my statements in quarterly reports that Add-In TLens design, it is fantastic. It is solving a lot of problems. That has definitely the opportunity to be a widely used solution for selfie cameras. That other people are commenting something which is similar, it's motivating to see. Other than that, I can only say what I've said and refer to that.
Related to the smartphone OEM for which you have had design-in with TLens, have there been signals that TLens may be relevant for more than one model from them?
Yes.
The company now has very solid financing in place. How will poLight be able to build a reasonable production capacity without too high a cash burn? Will it then be possible with a high capacity towards the end of 2022, so that the largest smartphone customers can order TLens for one of their models if it should become relevant?
That was a good and long question. I would say that when it comes to capacity and because one thing is capacity, how much can our partners produce? Another thing, how much material are we ordering? Those are two different things. I think that we also need to balance, of course, the cash burn. There is no doubt, and also specifically related to today's situation, where lead time for material, lead time for capacity is really tough. We see it in our daily life. We do not get components, we do not get different things we need because of the supply chain issues throughout the world, and that will probably last for some time.
That has been a consequence for us is that we need to place PO long before we have commitment for customer to have material and capacity. That's what we need to do, but we need to balance that, of course. As I'm also saying in my Q3 report, which I didn't say in the presentation, that we definitely have a quite tough ambitions to during 2022 to maybe have a capacity install of at the wafer level at 1.5 million a month. Which is a lot.
If an order is received for a high volume product, how large a volume can you handle if it is a model that is due towards the end of 2022?
Yeah. I just mentioned 1.5 million per month during 2022. Then you have the material situation, which we need to continuously consider how much we dare to buy. Anyway, that's the potentially installed capacity in 2022, if everything goes well. I think now the first project, which I've said many times for poLight, they will not go directly into a high volume device. They will go into a device which could be, say, a few hundred K, maybe a million, maybe two. That's the most likely scenario. We are, as we speak, producing step by step to stock to be ready to reduce risk for the OEMs.
To go directly into NOK 5 million or NOK 10 million project in 2022, that is unlikely.
How does poLight emphasize the value chain in the future? Will it be relevant to take larger part of this yourself, for instance, the assembly?
Good question. For the high volume business, we definitely need manufacturing partners for all except the polymer, the lens material, which we produce ourselves. There is a scenario where we say for other, I would say, verticals, high value verticals, that we could see benefits of having some assembly activity overall. That is possible.
In an earlier quarterly presentation, Øyvind said that TLens without design-in is also relevant for the smartwatch market. Do you have any news regarding this statement?
No, I would say, but I will reiterate that that is a fact. It is definitely not only smartwatch, even AR.
In retrospect, do you think the share price in the recent share issue was set too low? Why did the company accept the price of NOK 110 per share?
Yeah. First of all, I think actually if you looked at what happened some weeks after, I think the timing was relatively good. Yes, it was seen by many to be a low price. The way the process is that our advisors is trying to line up investors and the volume, the money, the level of interest and how much money they would like to invest to get the money we wanted to get, that's where the market wanted to be. It's not that we set the price.
We tried to talk to investors and said, "Yeah, we would like to participate, and we would like to participate with NOK X million, but then we think that the pricing for the company should be like this." Then you can in a way take it or leave it. We felt that it's more important to be financed in a good way than at all times optimize the share price. Then we will work damn hard, produce news flow, so that the share price we will get is what we deserve.
Has any of the smartphone manufacturers that has shown interest in TLens without Add-In design lost their interest and communicated that they will not use the TLens technology at this moment?
Definitely not. On the opposite, a very strong investment from OEM partners still in this area.
Has the customer with a medical case communicated an expected sales number or an expected first PO size if you receive a design-in on this case?
We do feel and that this is a relatively low volume. I would say some 10k cases a year, maybe in the beginning. This is an interesting market and not relating specifically to that one, but there is also a trend that there are disposable solutions coming. Of course, that kind of surgery and use of that kind of devices is really increasing. If that is combined by being disposable, it means, of course, that there is a significant volume potential. We know. I feel that we as poLight know too little to be too bullish. I would say it is still a relatively high value, relatively low volume market, but there should be potential for higher volumes.
Is there more than one camera module supplier using TLens in an add-in project? If so, can poLight then potentially tick off most of the major smartphone OEM's customers if the project succeed?
There are camera module guys, and no more than one, who's working with poLight, and who also are doing Add-In design. I don't want to comment on those biggest OEM. We have talked about what's the status in the smartphone. There are several camera module guys working with add-in designs.
How will the new funding affect operations, example, new projects, larger stocking to meet increased deliveries?
Well, it will enable us to continue as we have planned, ramping the organization. Of course, without that funding, it would be much more risky and challenging to prepare us for the design wins we hope will come in 2022.
Large volume customers often require second source. How do poLight cope with that?
Very good question. Yes, that is true. That is also, you can say, a little bit challenging when it comes to TLens, because TLens, there is one supplier, and that is poLight. There are other tunable companies based on liquid. There is kind of an option for them to kind of use both technologies. They can say that on the camera module level, there are dual supply and more. On the TLens component, today only one. You can say that, yeah, it could potentially be that we could license to somebody to produce the TLens. That is one way of creating dual source on TLens component.
As I said, then you have other tunable optics, and then you have several camera module guys who can do T-Lens integration.
How is the competition doing? Do you see any progress on new products?
No, I wouldn't say so. Same situation as last quarter.
What do you mean about the following point? In the augmented reality segment, the company is starting to build an impressive and promising pipeline.
I mean that we see more and more opportunities, basically. That's what I mean. We see better and better fit. Impressive development in this area, basically.
You say that more people is needed to be able to execute current plans. What are these current plans, and how is the current employment status?
Yeah, the current plan is, as we said, we listed in the guidance operational and financial last quarter and the quarter before that. Those are the plans. Meaning we want to have design wins in the medical. We want to have more design wins in barcode. We want to have our first design wins in the smartphone. We want to have a design win in several AR cases. That's the plan. To execute on that, which I said initially today, we are super busy. We need more people to support our customer. That's the plan.
Do you see any high risk around this or with this?
Always. I mean, we are going in to different very advanced verticals, and there are always risk while doing that. The risk for delays, the risk for failure. My duty is to have an organization in place who can handle that risk. I feel we have come a long way in doing that.
Which are the alternatives for the AR glasses?
Nah, I think they can use also potentially other tunable optics, I assume.
3 design wins potential deliveries to smartphones in 2022 can mean 12 million TLenses. How does this plan of production look?
Yeah, I think we answered to that already by having, say, target to have, say, capacity of 1.5 million per month in 2022.
Would you say that you are on track related to the guiding given in the Q2 presentation?
Yeah. We don't have any new guidance other than that, no.
Any sign of additional orders for the children's watches?
We see that, as I say in my quarterly report a few times now. We do see that after the COVID that impacted a lot the sale of these kind of devices. These devices, security devices, children want to be in contact with their parents or vice versa maybe, and control them and see them and understand where they are. When they're sitting in the same 30-square-meter flat, why do you need that? You don't need it. You don't buy it. If you buy it, you buy a cheaper version. That really have in a way impacted a lot all players in that area. That still is kind of relatively depressed, I would say, those high-end versions of that watch.
That's still the case. Very cost-sensitive market now and probably will be. I think it will take some time before that change. I think also one benefit though which may come later is that the platform, the hardware platform, the software platform in the watches will be better and better. I think as that happens, the performance and the difference between a poLight TLens and a VCM camera will be bigger and bigger, which may drive it to using TLens for other designs.
The last one: How many lenses do you have in stock?
Yeah. That is starting to build up, but still we are, I would say, step by step doing yield improvement processes and we have to produce something to stock. We don't talk about millions. We talk about kind of hundreds plus handful hundreds we are kind of building. We have buffer stock at different levels. We have stock at the material and stock of obviously finalized TLenses. We would like to minimize stock at finalized TLenses, but we have massive stock of wafer, which has the longest lead time. We need to build some stock of finalized TLenses also to manage the line, to debug the line. We need to do something, but we don't do massive, but we do enough to reduce risk, de-risk seen by the coming OEMs.
Okay? That's it.
That was it.
Okay. Thanks a lot for you participating this webcast. As I've said before, there are so many people who take the time to follow us closely, giving us a lot of questions. We really appreciate that. There is a high competence out in the shareholder community of poLight in this technology and poLight. They are very clever in helping us to follow different patents and U.S. laws . We really appreciate that. This Q&A session I think illustrates that dynamic and that interest in poLight, and we love that. Thank you a lot. Next time, Q4 2021, 18th of February, 2022. Hope to see you then. Thanks.
Okay. Thanks.