Good afternoon, and welcome to the Second Quarter twenty twenty Financial Results Conference Call for ASUS Tech. This conference call is divided into two parts. First, Mr. Nick Gu, our CFO, will brief you on the financial results of Q2 twenty twenty, followed by remarks from our Co CEOs, S. Y.
Xu and Seng Song Hu. The second part is a Q and A. You can enter your questions by clicking the question mark on the left of the webpage. We will address your questions after the presentation. Now let's welcome our CFO.
Thank you. Hello, thank you. Dear journalists and institutional investors, please turn to Slide five. This is the first half twenty twenty brand P and L. In the first half of twenty twenty, brand net revenue was TWD149 billion, down 4% year over year.
This was mainly due to COVID-nineteen and its related disruptions in the supply chain. However, in the second quarter, our revenue grew significantly. In terms of operating profit, it was billion, up 308% year over year. Net profit RMB6.2 billion, up 60% year over year. In first half twenty twenty, EPS was TWD8.4 per share.
Now please turn to Slide six for the second quarter brand P and L. In the second quarter, net revenue was billion, up 33% Q o Q and 19% Y o Y. Operating profit RMB4.8 billion, up 68% Q o Q and 380% year over year. Net profit was RMB5.3 billion, up 500% Q o Q or 216% Y o Y, EPS was 7.2. In the second quarter, both revenue and profits went up significantly.
They were much higher than our expectation. This was driven by strong demand from the market as well as our strong execution of plants. We will give you more information on that later. Please turn to Slide seven for the pro form a brand P and L excluding phones. In the second quarter, looking at old phone models, net revenue was about million, operating profit RMB251 million.
This was due to reverse tools as earlier we recognized some losses from falling prices, but now we're recognizing reversals for the old phone models. As for new models, in Q2, we were still in transition. Operating expenses were million, pre tax loss was about RMB818 million. However, our gross margin was maintained at 21.3%. Our expectation is that in the second half volume will go up and we will see more substantial results.
Excluding phones, the net revenue was billion, operating profit RMB5.4 billion, net profit RMB5.8 billion, EPS RMB7.8 billion. Now please turn to Slide eight for major non op items. In the second quarter, there was the investment loss from ASCII about RMB107 million. We also have investment income from others at RMB430 million. Exchange gain was about RMB1.6 billion.
This nicely offset the exchange loss that we incurred in Q1. Next up is the brand balance sheet. Cash and cash equivalents was about RMB62 billion. This figure remained stable. Accounts receivable RMB71.8 billion, inventories billion, accounts payable RMB59.7 billion.
These all went up compared to the last quarter. This is because we have quite a positive outlook for the third quarter. Because of that, both accounts receivables, accounts payables and inventories are going up in preparation for Q3 operations. Please turn to Slide 11 for revenue breakdown. In the second quarter, PC accounted for 66% of the revenue, component and others accounted for 34%.
Slide 12, breakdown by region. Europe 30 4 Percent, Asia 40 3 Percent, Americas 20 3 Percent. Please turn to Slide 13 for our business outlook for the third quarter of twenty twenty. We expect PC to have a Q o Q growth of 30% and component will grow by 10 quarter over quarter. To translate these numbers into Y o Y numbers, both PC and component might enjoy Y o Y growth of 20% or more.
You will get more detailed information from our co CEOs later. Without further ado, I will turn it over to our Co CEO, Mr. S. Y. Xu.
Dear investors and journalists, good afternoon. I will now give you an update on our outlook and strategy. I'm sure you have seen this slide many times. When Samsung and I took our current positions, we talked about several focus points. First, we need to strengthen our PC business.
And those three points that you see on the slide are for our PC business. First one, how to manage market dynamics. And this year, COVID, of course, it's the biggest factor in the market. In Q1, we experienced disruptions in the supply chain. However, by the end of Q1, the supply chain returned to normal.
In Q2, cities around the world went into lockdowns. So people started to work from home and to study from home and that drove demand up. In light of this, at ASUS Tech, whether it's our sales team or our supply chain management team or how we manage our OEM, we all had to adapt. And from the Q2 results, you can see that we actually performed quite solidly. That means we have adapted well.
Second point, how to expand the addressable market. Despite the impact of COVID-nineteen, we are still managing several markets well, for example, India and in Central And Southern America. In several markets, we are doing quite well. Number three on the slide to focus on areas of growth. In the past few years, of course, the PC market has been slow.
You can say it was declining slightly. However, if you look at several segments within the PC market, they are actually showing growth. For example, gaming, education, commercial, which we didn't dwell on too much before. And then there's also the creator segment. These segments are all growing and we are focusing on these targeted segments.
You'll hear more about this later. A few words about our Q2 performance. Earlier you heard about our numbers, you know we did well in Q2. Now let's look at revenue and shipment units. In Q2, our open platform revenue went up 45%, our system product revenue went up 21%.
In terms of shipment units, motherboards and graphic cards went up by about 15%. Gaming PC, well because of lockdowns, people had to stay at home, so they play games more. So this grew significantly. Our gaming PC shipments grew by around 40. As for commercial PC, now our companies are asking their employees to work from home.
So this part grew by about 20%. There's also Chromebook. This is related to what I talked about, how people are studying from home. And in various markets and countries, there are special programs to support this and we experienced quite a nice growth of 30% in this segment. From Q1 to Q2, we actually reviewed our operations.
And I think this is a very important message we'd like to get across in this earnings call. In our view, COVID-nineteen will not go away as quickly as SARS did. After the pandemic, we will go into a new normal. Against this backdrop, the PC demand may even grow by double digit. Why do we say that?
Let me explain. First, as mentioned earlier, people are working and studying from home. So people are going to have a stronger demand for PC. In the past few years, the total addressable market of PC PC remained flat because there are a lot of alternatives. For example, tablets and smartphones.
Smartphones are getting more and more powerful. People can do a lot of things on their smartphones. However, when now you need to work and study from home, when productivity is vital. PC in this scenario is still better suited, the better tool compared to the smartphone. Another thing to consider, in the past, perhaps in one household with three children, children can share one device or share their parents' device.
But now when everyone needs to work and study from home, pupils cannot share one device any longer. Because of that, the demand for PC is going to be strong. Let's look at some numbers. In 2019, on average in The U. S, One household has about one PC.
If we estimate conservatively that this number is going to grow from one to 1.1 or 1.2 PCs that translates into an increase of 3,900,000 to 6,500,000 PC, that's a growth of 16% to 17%. Now in Europe, every household has about 0.6 units of PC. If that number goes up to 0.7 or 0.8, then PC shipments will go up by RMB6.3 million to RMB10 million. That is significant growth. In addition to that, we also get important insights from suppliers such as Microsoft and Intel.
Right now at ASUS, consumer PC is still our forte. And we have some numbers from Microsoft. Based on those numbers from Microsoft, for the first half of this year, the growth is about 30%. We expect the second half to continue that trend. We also have been asking information from Intel.
Intel is at the upstream of our industry. And in Q1, they were pessimistic. However, in Q2, they've turned from pessimistic to slightly more optimistic. They were expecting a decline of 10 plus percent, but now they think it's going to be flat or may even slightly increase. Now based on the orders that we have received, we believe until the end of this year, PC the market of PC is going to continue to grow.
What about next year? The uncertainty is still there, because we have to consider how COVID-nineteen is having an impact on economies around the world and that will dampen PC consumption. On the other hand, the need to study and work from home will boost demand. So how will this play out? We're not sure about what's going to happen next year.
But so far, we remain cautiously optimistic. As mentioned earlier, in addition to our forte, the BC business, we're also trying to build another pillar for ASUS and that is our AIoT business. Here, I would like to update you on the progress of our AIoT business. Last week, our AIoT BU Head also launched the new wearable and a smart health care device. This is a handheld ultrasound device.
And this device can use AI to help doctors interpret data. Another focus is smart manufacturing. Since the establishment of the AIoT business, we've been working with key players in smart manufacturing. And this slide shows you some of our developments. Lastly, together with our partners, we want to tender of National Center for High Performance Computing, specifically Taiwan Air two.
From this project, we learned a lot. Because of this, we have also got one some projects in Singapore. Last year, we worked working on Phase two, we are getting more involved. That is a quick update on our AIoT business. While the AIoT revenue accounts for a small part of our revenue, we do believe it has big potential.
Now I will turn it over to Shansong. Dear journalists and investors, good afternoon. My name is Sansong Hu. I will give you an update on transform our business and as Y mentioned earlier, we are targeting some key segments in the PC business and this strategy PC We will continue on this path focusing on gamers, creators, business users and students.
For these targeted segments, we will provide differentiated products. Our goal is to grow faster than the markets in the next three years. How do we achieve that? First design thinking. We also need to leverage AI to build the best experience.
At the same time, we need to focus on CRM and connected services. We also want to strive for high net promoter score. Net Promoter Score is an important benchmark for all brands. It's about brand recognition and reputation. We attach great great importance to that.
We want to get nine out of 10 for NPS. And it has to do with the product quality, product experience and after sales services. These factors all have an impact on NPS and NPS translates into brand position. That is why we attach great importance to it. And as mentioned earlier, we want to lift up our brand position from multiple dimensions.
Again, we will use NPS as an indicator of our brand position. Within the PC business, we think business users and students are going to drive strong demand as people work and study from home. And as Y mentioned earlier, going forward, even if the pandemic goes away, we believe some of the corporations will still ask their employees to work from home or perhaps a certain percentage of their workforce will work from home. And that of course will boost the PC demand. As for the creator segment, we think this is also another segment with good potential.
I think I've mentioned this multiple times. For the creator segment, we have the sub brand ProArt. We will continue to amaze and endear creators with thoughtful designs. In the second half of the year, we're going to launch new products in the ProArt series. Now gaming, ASUS provides the most comprehensive gaming offering in the industry.
We also work on the ecosystem and the community. Looking at the internal share of revenue, if we include all gaming related products from motherboards to graphic cards to router and ROG phones. If we add all these up, then the gaming series contributes more than one third of our brand revenue. Our ambition and commitment are quite clear. And we will continue to drop this segment further.
Now let me give you some numbers. Thanks to our innovation and great design and excellent community management. For example, our community is called Armory Crate. We also support some e sports teams. Because of all these efforts, in the first half of this year, we've delivered great results.
In terms of year over year growth, in regions across the world, we've grown faster than the market. In EMEA, our growth rate was 47%, North America forty three %, Southeast Asia forty six %, China thirty two %. Globally, we grew 40% year over year. And this is thanks to the hard work of our team members. In the next three years, ASUS is going to build on this strong foundation and further lift up our brand position.
Thank you. First question is from JPMorgan. This year the supply chain is disrupted due to the pandemic. Now how can you prevent similar supply chain problems from happening? For example, earlier ROG phones experienced supply chain problems and how has been the market reception for ROG-three?
I will take this question. This year due to COVID-nineteen at RBU, we have done a lot of preparations. When we launched ROG-two last year, we worked with Tencent and we held a physical launch event. However, this year, a physical launch event was not possible. At the BU level, we actually made a lot of pre event preparations.
For example, how we talk to influencers before the event, how we shift devices to them and how we explain to them. I think we held four to five pre events with influencers. We make sure they can get their hands on the device and then they can test the phone while they listen to our presentation. And because of this arrangement, the online launch event was quite well. I can give you some numbers.
This year, the online launch events got more than 11,000,000 views. Now last year was of course different because we had a physical launch event for ROG2. So the comparison may not be like to like. However, the difference is huge. Last year's event got only 1,400,000 views.
So that's a difference of eight to nine times. This shows the success of this year's online event. Now post event, of course, we've been monitoring Google trends and our share our voice online. So far, ROG III in terms of share of voice is about more than two times the share voice of ROG2 and it has the highest share of voice among all gaming phones. We are an early player in the gaming phone segments.
And now this gaming segment is getting more crowded. For example, Lenovo is launching one gaming phone as well. And this indicates that the path we've chosen is the right one. Now with more players in the segment, they are creating buzz in the market. And when we have more players in the market, the high end segments will experience volume growth as well as profitability growth.
Let me add on share of voice. We've compare our flagship model with those of our competitors. And we are quite comparable with our competitors. So far, I think in terms of our pre event arrangements and our events, our preparations have proved successful. Of course, I'm sure you're curious about sales numbers.
So let me give you some numbers. In the markets that we are in already, take China for example, sales have been up by 10% to 20% of the units sold. In Europe, we are in fewer countries. So compared with last year, the numbers are down slightly. In Taiwan, we are selling quite well, up 60% compared to last year's sales numbers.
In Hong Kong, we also have been up by 70%. Now this year in India, we had a separate event for India. Post event, we sold the first batch about 7,680 units and these units sold out within fifteen minutes. Of course, ROG Phone will be available in more markets later on. And I can give you an update on that next time.
And I know you are curious about the supply chain. How can we prevent the supply chain disruption issues like we experienced in the past. Of course, we reviewed the ROG2 supply chain problem. There are several factors in terms of design, in terms of our manufacturing technique and the maturity of our vendors. Now with ROG III, we've learned lessons from past experiences.
With our industrial design team, at the early stage of design, they actually went to our vendors to produce test batches. Actually, these batches are not small, they are in thousands. Well, the idea was to screen out vendors that are more mature and can offer smooth production. And they so they tested that in the early stage. And before we went into mass production, well, our colleagues did work hard.
Even with the pandemic, we still sent a lot of R and D engineers to our OEM vendors. As you all know, it's quite difficult to travel and work in China right now, because you have to first quarantine two weeks as you enter China. And then when you come back to Taiwan, you have to quarantine for another two weeks. So we actually have an honest talk with engineers. When they travel on business, that business travel is going to be a long duration.
They will have to stay in China for one or two months. They can only come back when we know for sure the production is going to be smooth. Now this year, our colleagues have been working very hard and because of their hard work, we haven't been experiencing any supply chain issue this year. Another question from JP Morgan. In the first half, the gross margin and profit both improved.
Is that mainly due to product mix improvement? Also the revenue grew by 20% year over year, while OpEx only went up by 2%. So how did ASUS achieve this cost management? And can you maintain this efficiency? I'll take these two questions.
First about gross margin. Gross margin is affected by several factors. First, as mentioned, product mix. For the past one year or so, SY and I as well as our colleagues, we've been working hard to optimize our product mix to focus on high margin products. For example, with our Z490 products in the motherboard and graphics card series for notebook, we also focus on high margin items such as gaming, especially the high end ROG gaming notebook.
We also focus on Zenbook and other innovative products. We try to increase the share of high margin products. So yes, indeed, mix is an important factor. Then there are other factors, for example, with excellent design and innovation, we can enjoy a price premium. Compared to our competitors, even when the products have the same hardware specs, because customers like our products, our products enjoy a price premium.
And then there's cost management. Cost management is about key parts, for example, CPU, DRAM, solid state, panel, etcetera. These key components are very important, especially in terms of how you manage the seasonal fluctuation of these component prices. And because of that, because we've done a good job in this, this has also boost up our margin. Having said that, the market remains quite challenging.
Prices do fluctuate and that will affect our gross margin. Also supply chain, sometimes the supply is tight, sometimes it's loose. It also presents some challenges. We add the management team together with our colleagues, we continue to focus on optimizing our margin. Of course, we want to maintain this margin level.
Of course, we have to recognize there are some markets or environment factors. However, on our part, we will do the best we can to have better cost management and to maintain good gross margin. Regarding cost management, it comes from two factors. Now in the first quarter, at the height of the pandemic, we already told our colleagues to be more risk aware. We have to find new revenues at the same time, we also need to save where we can, specifically marketing expenses.
We tightened our market expenses. Second factor, personnel expenses. In Q1, we also asked all business units to better manage their personnel expenses. So to sum it up, it comes down to marketing and personnel expenses. Thank you.
The second question is from UBS. We see a trend in the market is that due to COVID-nineteen, the share of mid range PC is increasing, but it seems that this trend has not affected your Q2 gross margin. Could you give us more color on that? Second question, since PC demand is strong, do you have any concerns that component shortage or price hikes might affect your profitability in the second half. I'll take these two questions.
In terms of product mix, mid range or mainstream models have a neutral impact on margin. As mentioned earlier, we want to increase the share of premium or high end models. At the same time, we want to limit the share of entry models. Main stream models in terms of their internal share of revenue at ASUS, they have not this share has not changed much during the pandemic. That's to answer your first question.
Regarding your second question regarding shortage. In late Q2 and continuing to the second half, We do see some tight supply of some key components, but this is relative to the strong demand. So demand is outstripping supply. Actually in terms of absolute numbers, the supply this year is actually higher than that in the past. But the demand is so strong this year.
So the supply cannot meet the demand 100%. That is the overall situation. More specifically, we see greater challenges for several components. First panel. And why?
The most important component for the panel is the driver IC. And why do we expect tight supply of driver ICs? That has to do with eight inch wafer fabs. The production of eight inch wafers is quite constrained. As you all know, companies have been investing in 12 inches rather than eight inches wafer fabs.
So we expect shortage or tight supply for driver IC. For other ICs, for example, power management IC, it also relies on eight inches wafer fabs. So it's going to be in tight supply. There's also logic IC also related to eight inches wafer. Recently, we've been working closely with our supply chain partners, whether it's panel supplier or IC partners, we've been in close talks with them, trying to prevent this problem.
One solution is to move the production to 12 inches wafer fabs. However, this transition will take two to three quarters. So the problem won't be entirely solved until Q1 or Q2 next year. In other words, with such a strong demand these days panel, logic power measurement IC are going to be in tight supply. However, like I said, in terms of absolute numbers, the supply this year is actually higher than in the past.
From this point of view, the situation is in line with our outlook for Q3 and Q4 in terms of both Q o Q and Y o Y growth. Thank you. Next question is from UBS. What's your view on the demand of consumer PC? Does the company still target to deliver growth in the consumer PC segment?
Is the growth driven by market share again or the market demand increase triggered by working from home and studying from home. I'll take this question. Whether in the market demand will slow down by Q3. Here's what we see based on the information we have. Until the end of this year, we think the demand will remain strong.
But as Samsung mentioned, due to supply chain tightness, we may not be able to meet the demand 100%, but we do believe the demand to remain strong until the end of twenty. What about 2021? While COVID-nineteen is having a significant impact on the world economy, well, people need to work and study from home. If the answer is yes, then because PC is an efficient productivity tool, then the demand will still be there. And it depends on how deep the buyers pocket is.
With a deeper pockets, people will buy a better PC. On the other hand, they will buy a cheaper PC. For the first half of twenty twenty one, we remain cautiously optimistic. Of course, we will closely monitor dynamics. Regarding market demand, actually pre COVID, we've been having talks with Intel.
Intel talked about how to enlarge the market. Intel often talked about how to accelerate the refresh cycle. Based on our discussion and based Based on Based on Intel's estimates, if you can shorten the refresh cycle, you can actually increase the demand significantly.
When we talked about growth numbers, we also estimates in a similar fashion. At ASUS, PC is a very important business for us. As long as we remain in this market, We will remain very aggressive. We will try to gain market share. Internally, we have several PC related BUs.
We've set very aggressive targets, for example, to achieve this and that certain years. Now to gain market shares from competitors, we have to have a strategy and our strategy is to focus on targeted segments. While the overall PC market remained flat or declined slightly in the past few years. If you look at specific segments within PC, actually a lot of segments have been high growth segments. As Sensei mentioned earlier, gaming, education, creator, these are all high growth segments.
When we want to gain market share, of course, we need to focus on these key segments. And as Sen san mentioned, we comprehensive offering in terms of gaming and we've delivered great results in this aspect. As for the creator segment, we have set up the sub brand called ProArt focusing on this particular segment. Through these efforts, through our product strategy, marketing strategy, we want to grow significantly in these high growth segments and that's how we gain our overall market share. Next question comes from HSBC.
What is your share of shipment and revenue of the Chromebook business at ASUS? What's the margin range of Chromebook? Has ASUS won key projects for Chromebook in some regions? I'll take this question. Demand for Chromebook, as you all know, this year due to COVID-nineteen, we see strong demand in terms of education, no projects and tenders both in The U.
S, in Europe and in Japan. Because of this, for the past one year, we've put more resources in Chromebook at ASUS. Now this year in terms of shipment, we have grown significantly. Based on what we know about the first half and the orders for Q3 and Q4, the shipment of Chromebook will account for about 10% to 15% internally. As for share of revenue, it's going to be lower.
As you all know, the ASP of Chromebook is much lower than regular notebook. So the internal share of revenue of Chromebook is going to be lower. As for our gross margin, since these are all tenders, the gross margin is more constrained. The tenders with one, well, like we said, as you all know, in The U. S, they have a lot of tenders for K-twelve schools, several countries in Europe as well.
In Asia, it's primarily Japan because the government of Japan launched a Ego School program, creating strong demand for Chromebook. In U. S, Europe and in Japan, our sales teams on the frontline have been working very hard and they have successfully won some tenders. Next question comes from Bank of America Merrill Lynch. What is the progress of your smartphone strategic development plan?
What is the expected P and L in the second half? Do you have a breakeven date and plan? I'll take this one. In terms of smartphone, we separate out the new models from the old models. As we talked about earlier, for old models because of some accounting reversals, there was profitability in the second quarter.
And the new models are still in the negative territory. But we expected this. We knew the first few years are going to be tough. And this year, we are seeing some favorable signs. For example, a lot of smartphone players are seeing the potential in the gaming segments.
They are now all crowding into this segment. That's actually a good development. Because if you want a segment or a market to have great dynamics, you need to have a lot of players in the segment. And when you have a lot of players, when we want to enable an ecosystem, it's more likely to be successful when you have a lot of players in the space. Now this year, because a lot of people are in this segment, we're seeing these good developments.
We also have talked about gaming phones with Tencent. They also see the same trend because of more companies are involved. Tencent has also adjusted their shipment targets. When a segment grows to a certain size, it's only a question of time that it will turn profitable. So our breakeven or profitable plan is to become profitable in three years and that plan has not changed.
Next question comes from Morgan Stanley. As mentioned earlier, PC component supply might be constrained in the second half. Will ASUS prioritize high margin models and will that optimize your product mix and profitability? Thank you. I will take this one.
Earlier we talked about some constraints in the components supply in the second half. However, I want to clarify a little bit to avoid any confusion. Let me use a metaphor. If the demand in 2019 was one and the supply in 2019 was also around one. So demand and supply
Now in the second half of 2020, the demand might be around four to five, but the supply will be around two to three. So this huge demand outstrips supply. However, this supply of two to three is still greater than the same time last year. In the second half, supply will not meet demand 100%. So it's going to have an impact on revenue.
However, in terms of absolute numbers, this year is still much greater than last year. It's just that in relative terms, supply cannot meet the demand, but the supply this year is still greater than the supply last year. So you can still expect very good Y o Y growth of our revenue in the second half. Your question also talks about whether we allocate resources to high margin models. Of course, that is our goal.
That's a very natural thing to do that can help our gross margin. However, in practice, we are still constrained by our clients, especially large retailers in Western countries. When we negotiate with these large retailers, we do not talk about one single model. We talk about a series of models. And these retailers will not allow brand companies to supply high models only, whether that brand company is ASUS or our competitor.
It's next to impossible to supply high end models without some entry or mid end models. Large retailers would require brands to cover the entire segments. To cover all the segments, we cannot only focus on high end models. So that's the situation with large retailers in Western countries. Now in some countries, for example, in Taiwan, China and other Asian markets where it's more dealer based, we have more room to operate.
We can control the kind of models that we sell to dealers. Overall, in areas that we can, we of course want to optimize our product mix. As for large retailers, we have to meet their demand. That is the situation. Thank you.
Next question comes from KGI Securities. Given your positive view on the market trend, what's your take on the growth of notebook and gaming PC shipments in 2020? UNIDENTIFIED Okay. Regarding the notebook business, well, in Q1, we were constrained due to the pandemic. So Q1 figure went down.
However, Q2 and Q3 are making up. Based on the information we have, we expect for the entire year, the notebook business is going to grow by 10% Y o Y or more. With gaming PC, now because of COVID, because of lockdowns, people are playing games at home. So gaming PC is selling quite well. Based on what we've seen for the entire year of 2020 gaming PC might enjoy a growth of 40%.
So compared to our competitors, we are faring better. As for components, we are seeing similar trends. In the first half of the year, component business grew The second half of the year is going to grow more than last year. For the entire year, I think it's feasible to have a growth of 10% or more.
Next question comes from Credit Suisse. Now COVID-nineteen is having a positive impact on the PC market. Does it also have a positive impact on the motherboard business? Can we expect the launch of Conestake and new GPU platforms to further drive the motherboard and graphics card shipments in the second half. Actually, we talked about this earlier.
In terms of motherboards, based on what we've seen and the orders that we've had, In the first half, I think the growth will be 15% to 20% and the second half at least 10%. As for new GPU and ComicFake, well, whenever new platforms are launched, we, of course, want to be one of the first adopters whenever there's a new product. All competitors want to have a piece of the pie. Because with a new product, you enjoy a high margin. So to pursue profitability, we need to align ourselves with the launch of new products.
Next question comes from Digit Times. It was mentioned that demand is outstripping supply. Do we also experience shortage on AMD CPU platform in terms of high, mid and low end PC model, which one has more shortage problem and how big is the supply gap? In terms of CPU shortage, yes, the shortage is there, as I mentioned earlier. The demand is far outstripping supply.
So we also experienced some Intel, shortage mainly lies with entry models. I think we talked about this in our last earnings call and that situation will continue in the second half. Shortage with small core CPU, this is related to Chromebook. With AMD, it's the other way around. The AMD shortage is with their mid to high products.
As for notebook and desktop, I think, yes, the situation is as I mentioned. Thank you. Thank you. I think we have addressed all the questions that you've submitted. In the interest of time, we will now conclude the earnings call very soon.
Now before we do that, I'd like to invite our co CEOs to give us the concluding remarks. Well, I would like to thank you all for paying attention to us. And here I would like to wish all of you health and happiness. Let me give you a brief summary of our earnings call today. First, for the past two years, we at ASUS, we've been focusing on targeted segments and we will continue to do that.
We will further enhance our product experience and further lift up our brand position. These will help our gross margin and our profitability structure. That is the most important thing. Second, as I mentioned earlier, demand will remain very strong in the second half. Compared able to keep up.
I think that's a nice problem to have or what I call a happy headache, because we can expect good Y o Y growth. And I call this headache because, yeah, it's a shame that we cannot meet the strong demand 100%. Otherwise, we may deliver even higher growth in the second half. That is my summary. And here I would like to thank your support over the years.
And here I would also like to wish you health and happiness. Thank you. Thank you all for participating.