Good afternoon, everyone. Welcome to In laws Second Half Investor Conference. Participants will be listen only mode during the presentation. You may download the Chinese and English conference materials at InnoLog website. Please take a moment to read the disclaimer notice line.
Today's meeting, we will have Mr Jim Hong, InnoLog's Chairman and CEO and Mr Jeffrey Young, our President to provide us information on market overview, corporate strategies and financial result. After that, we will conduct a question and answer session. Now I will hand it over to Jim.
Good afternoon, ladies and gentlemen. Thanks for taking time to join us today. I will start with today's analyst meeting with a macro quick overview. I think the reason market volatility has caused a lot of the concerns and turbulence to the company's operation, particularly on the tariff and FX volatility. On the tariff side, we have been working closely with our customers.
As a component maker, we actually receive a very positive feedback from our clients on our flexibility and the actual shipping routes changes and also the timing of delivery. While on the FX side, due to our business nature, our revenue are mainly denominated in The US Dollar, while our expense and the costs are also divert into local currency from NT to renminbi to Japanese yen. So this mismatch has caused the FX loss. So even with our efforts on the hedging efforts, we still incur the pressure of the strong currency. The best way we believe to cope with this kind of the macro volatility is still to improve our overall products value.
So we will continue steadily to push forward to our more than panel strategy. And we strongly believe that while we continue to transform to the higher value products, our resiliency on our revenue, on our earnings will be able to cope with the the macro volatilities. So, also, I think in today's analyst conference, we will talk about our key subsidiary, CarUX, recently has made the announcement of a major m and a. But before all of this, I think we also like to introduce you our newly appointed president, Jeffrey Yang. He has over two decades experience on the panel industry, and he will basically in charge all the fab all the this pan the panel business for Interlux. So I hand it to you, Jeffrey.
Good afternoon, everyone. I'm Jeffrey. Today, I'm going to share with you the market outlook. TV and notebook are the main source of revenue of for InnoLux. In terms of TV shipment, the growth of average size outperformed the growth of shipment.
In 02/2025, the average size increased point seven inch year over year. The biggest growth is in extra large TV, which means over 85 inches or more. We think it is an upside since it could digest production capacity to help balance the overall supply demand balance. For notebook product, there is an upgrade in specification both in general and AIPC. Expect ratio sixteen ten was originally for high end product.
Now it has penetrated to more general products to occupy a market share of over 50%. For AIPC, there is a new consensus. Its MPU has to be at least 40 TUPS. Usually, such device come with full HD IPS panels to meet user expectation. For notebook, both in display size and computing performance give you room for higher ASP.
Non commodity product including industrial avionics and other commercial applications they are fully customized for customer. They come in many versions shipped in small volume but bring in better margin. Inelux is not only growing the customer base but also adding value by integrating systems. For example, we use unsell technology originally for phones and tablet in industry product to improve performance and reduce cost. Overall, we believe non standard product will give us better profit margins.
H AI is changing how industry applications work. It puts smart computing close to where the data is created. For InnoLogs, this create new chance to upgrade product and grow. We are focusing on smart factory and smart transportation. The smart manufacturing market is expected to grow six percent by 2026 and marine by 4%.
We have been doing industry business for years. Marine and military are newer market for us and we have more for growth. They belong to the transportation type and the whole very high standard in high brightness, visibility across different lighting condition, and also reliability. InnoLast is a key supply here, and we plan to keep expanding. I'm going to wrap up my part with the development of microLED.
MicroLED is agreed as the next generation display technology. It has feature outperforming LCD and OLED, like low power consumption, better vision under sunlight, and better transparency. Our strategy is to focus on unique product that show what micro LED can really do. The first product we are working on is a transparent display. OLED can do this too, but micro LED does it better.
We aim to make it 1.3 times brightly smaller than OLED. Another product is for car, the head up display, which show image on the windshield. MicroLED has a brightness needed to be clear vision visible even in strong sunlight, but OLED and LCD cannot match that. Our first goal is to make it 1.25 times brighter than our current prototype. We have a road map to keep it make it better.
In the last belief, micro LED has more potential than only an upgrade of LCD and OLED. But it also need more investment and research to optimize the cost efficiency be before it can further go into other commodity product. I will stop here and hand it over to Jim.
Thanks, Jeffrey. As you can see on the presentation slides, there are four diamond pillars. These four pillars covers from facility to capacity and the profitability, also the return. This is internally we often use to review our key core competence and how also how we reallocate our resource. For example, on the facility side, we are looking for optimize our asset utilization.
We want to keep our most competitive co fab for the our most valuable clients use. And on the capacity side, we are also looking for the agile product mix in order to meet the best capacities converge. So all in all, our ultimate goal is to deliver the best results, also the returns for our shareholders, our stakeholders, as well as our employee. One of the demonstration we did is last year, we follow this kind of the review process and decide to divest our Feb five Feb four last year. We turn our commodity asset into a value creation for our shareholders.
And, also, we will continue to do this kind of the review and try to unlock the asset value and to prove ourself. This page, you can see that we our key subsidiary, UX, recently announced the major m and a of Pioneer. CarUX is already positioned well as a tier one smart carpet provider, and they have a strong client's exposure and also the product profile. On the other hand, Pioneer is a well known brand name by many people on the audio system. Also, what people didn't realize is that Pioneer also has a strong HMI, the human machine interface.
Also, their visionary system is also the ecosystem is also very strong. Both company has the different exposure, while CarUX is focused more on The US and European clients. Pioneer has a strong exposure to the Japan's local branded OEMs as well as the global OEMs. So we strongly believe that the combination of the two companies could create a synergy on the product side on the different production base, thus to provide a better resilience for our customers. Currently, the transaction is subject to the legal approval, so we will update you in the appropriate timing of the progress.
Next page, you can see that AI is obviously a major trend, continue to drive for the revolution across the different technology industries. Used to be people well, Google for the information, but nowadays, people are more used to JGPT or DIPsicket. The reason being is that it's faster and probably even the more fit answer for what people want. And no matter which application people are use, one of the major support for the AI's improvement is the strong computing power. So we believe that with the AI continue to evolve, the demand for the strong computing power will only grow.
So the challenge for us is how to catch on this macro trend, and that is why we start to invest on the Fan Out POP or advanced packaging. On this slide, you can see that people all recognize that InnoVox has been very committed on the phenol PLP's investment through the chip first and all the way to RDL and TGV, the through glass VR. With this part of the investment, we can enhance the speed of the optical transceiver's module. While on the other hand, people also know that as a panel company, we have been working on the micro LED for long time. I think as Jeffrey earlier mentioned that we believe that micro LED is not only an advanced display technology.
It is also become a useful and more energy efficient light source compared with laser. So if you combine the two together, basically, you have photon photonics combined with the traditional electronics components into one same chip, and that can enable the faster speed with much less energy consumption. So this is one of the future trend we are strongly believe and committed. So all our investment basically circle around this AI thing. Next page shows that the Fan Out PLP, the three major technology trend from chip first, which is more entry level on the 10 micrometers, and that is useful for a lot of the high bandwidth or high frequencies customer demand.
And then to RDL or the chip RAS as well as TGV, Those are the relatively advanced technology which has higher energy barriers on the two micrometers fine pitch and also the through glass via. So this is the continued efforts we are working on the PLP. Again, this page is a recap of why we believe that phenol PLP has a strong advantage to contribute to the semiconductor industry. It's not only on the overall area size. For example, our fab one, the gen 3.5 can covers, like, 6.6 times of the 12 inch wafer in one time.
And, also, if you compare with the utilization or the throughput From the reticle size of two times, the 12 inch wafer, you can have, like, 28 units. While when that size start to grow up to now, it's like a five times reticle size, you can still handle on the 12 inch wafer. Once it's go beyond the five six times radical size, the ugly area will become wasted too much. So the efficiency we believe the panel substrate can bring to the industry has become much more valuable when the AI trend or HPC trend evolves. And all in all, you combine the two together on the area advantage as well as the throughput advantage is become a tremendous cost advantage compared with the original wafer based production.
On the financial performance side, in the second quarter, we announced a mild growth on the top line and the revenue. But more important on this page, we want to share with you is that our noncommodity as well as nondisplay together has contribute 44% of our total revenue Compared with q one's 40%, we have a good improvement. While the non commodity margin in the previous range in between 20 to 25 For the first half, it was deteriorate a bit to 16 to 20% due to the different product profile. But all in all, it's still better than the commodity business, so we continue to devote our resource into noncommodity and nondisplay. On our detailed financial results, second second quarter, we post a mild revenue growth on the top line, but the most important we want to show you on this page is our gross margin in q two of 8.4% continue to improve from q one's 7.6%.
This again demonstrate that our strategy of focus on the high end or better margin products has demonstrate a better resilience on the margin label. Although on the bottom line, on the net loss, we reported six point six hundred seventy seven million loss due to the 2,800,000,000.0 2.9 billion's FX loss in second quarter. This stopped our four consequent quarter's profit. But I think the whole team, we are working extremely hard and put all the efforts to bring the company back to the profitable level. Last page, I believe, this is our balance sheet in q two.
In second in the first half, continually, we are a very low debt to equity of 10% while our still incur a net cash position. So we believe these strong financial arms can help the company in the future turbulence of the macro environment to continue to looking for the good investment target and also can be used to deliver back to the shareholders as a good return. I will stop here to take any questions. Thank you.
Now is the q a session. We will have two parts to date. In the first part, we will answer the questions collect from investor in earlier time. After that, we will take online questions.
Revenue share dynamic
Now let's take the online questions. You may raise your questions in English or Mandarin via telephone or message box of the website. Please state your cooperation and your name before question. If you would like to ask a question, please press star key and number one on your telephone keypad and you will enter the queue. After you are announced, please ask your question.
And to cancel your question, please press star key and number two. Thank you.
Thank you for joining us today. We are going to conclude the call now. Conference replay will be available in an hour from now at company's website, www.inelux.com. Goodbye, and have a great day.