Good afternoon, everyone. Welcome to Innolux Second Half Investor Conference. Participants will be in listen-only mode during the presentation. You may download the Chinese and English conference materials at Innolux's website. Please take a moment to read the disclaimer notice online. Today's meeting, we will have Mr. Jim Hung, Innolux Chairman and CEO, and Mr. James Yang, our President, to provide us information on market overview, corporate strategies, and financial results. 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 joining us today. In today's call, we would like to share with you our view on the display market as well as the automotive. Also, we will share with you our whole more-than-panel strategy in the whole transformation process. We will also be very happy to share with you our turnaround result in the second quarter. I will let James lead the whole presentation first.
Thanks, Jim. Good afternoon, everyone. It's James. I will walk you through the overall display industry status in near-term and short-term. A healthy market is supported by balanced supply and demand. Based on continuous practice on made-to-order discipline and a low inventory level, we see both the price and shipment frontier with market demand and also component cost. When the component cost increases, it could mean either our supply is optimistic about market sentiment or a reflection on inflation. Either way for Innolux, it could be a factor to support our price getting stable and higher. Number two, quarter-on-quarter fluctuation with shipment and price is normal. A structure plus side, we observe the growth of average shipment size across all the product types. Larger size usually means a higher price and a faster consumption of capacity.
Number three, in the overall market view, we don't see any upcoming new capacity for larger-sized products in two years, on top of a few phased-out or transformed original factories. We expect the display market is healthy in a structured way for a manufacturing factor to focus and compete in quality and more innovation. Next page, please. Talking about the products, TV first. The international sports events pushed for some restocking order in the beginning of the second quarter. It paid the foundation and supported a moderate improvement for TV, especially in price. In last June 18th's promotion in China, the shipment of total sales was not as good as last year, but the major improvement mark was the average selling price. Our interpretation is that consumers are looking for larger size and better visual quality products.
With the growth of average shipment size, it will consume the panel capacity at a faster pace, and better visual quality means more room for value-added products. We see it was a healthy development of the TV industries. And then IT products. Notebook product sales were flat, but we expect a growing momentum will happen in next year, 2024. The end of life of Windows 10 will push for replacement of commercial notebooks, followed by consumer level by estimations. The growth of average size in IT products is also noticed. AI PC and the notebook are no doubt the most trendy topics. We believe the market will accept both the high-end and entry-level products. Innolux could provide flex product combination, from an LCD for entry-level to mini LED for high-end products. For our experiences, cost competitiveness is one of the key factors for new commodities to become more popular.
And then talking about automotives. Automotive belongs to Innolux's non-display domain since we serve tier one role to offer display modules with system integrations. The shipment and the average size of automotive panels mark a break through the new vehicle shipment goals in 2024. Innolux's automotive display could serve both a fuel car or the EV car. Both the importance of a display in EV car is irreplaceable since it's the most major control interface. Countries around the world continue to offer subsidies to encourage the shift from fuel car to EV, including both original or luxurious models. The market scale will go bigger and bigger. Innolux's approach is to offer modules with integrated systems for high-end value.
Number four, for next-generation display technology. If a customer is looking for better visual solutions, Innolux is ready to compact our products with mini LED and micro LED solutions. And next page, talking about the long-term product mix and the technology. First, the panel industry evolved. It's not a game of capacity expansion right now. Instead of flexibility in the product mix, value creation is the key. The business model is also different. We need to provide different products and services to secure and meet customers' orders. The definition of a premium product will change at a very fast speed. The correct approach for now is to identify our capability and realize the best value across all fields to meet clients' demand. AI, no doubt, the growth driver powering the whole industry value chain.
From software to hardware, from the IC component to end products like the AI PC, notebook, or high-performance servers. Number four, Innolux regards our core competitors in trends to provide different classes of display for high-end products and also serves as a service provider in advanced IC packages. Especially, our experiences in glass handling could be an effective painkiller to enable and help our clients to overcome glass-related pain points. I will stop here and hand over it to Jim. Thanks.
Thanks, James. As we talk about the more-than-panel strategy in our last analyst conference, usually to our customers, we will provide them with our whole technology roadmap. In this investor conference, I also want to offer you our whole diversification roadmap. As you can see on the presentation slides, we used to be a more linear business model, which we take the orders, we make it through into the array and the CF, the whole TFT process, and send it to the customers. What we are trying to do is we review back again our core competence, which we believe is our over two decades' experience on the TFT process on the glass substrate. We take that as a core and make a twist of it. When we do this planning, that's how we do it.
We take what people usually take for granted on saying the TFT only for panel. We divert it out from the original way. It's a totally unexpected change. That's how the whole Fan-out PLP falls into our radar screen. Of course, the production process similarity of over 60% to our array process is only the initial, is only the beginning. We also did a lot of the market review, the feasibility study, and even internally, our employees' capability and IP, and so forth. By now, we can be very sure to share with you that Fan-out PLP is a confirmed direction for Innolux. Next page, please.
On this page, you can see that we are simplifying on saying that on the whole semiconductor process, from IC design to IC manufacturing, packaging, and testing. What we are positioned very clearly from day one is that we aim to perform the high-end IC packaging. That includes good heat dispersion, which is also coupled with the ESG theme, and also the low signal interference, and also power consumption, and so forth. We believe that we leverage our current 3.5 generation fab into the whole packaging process. That is equal to about seven times of the 12-inch wafer. In that kind of a size, you can easily see that our yield rate and our productivity will be significantly improved. That's where the initial competitive advantage we believe, and that also shows on our chip first process.
In combining of that, we believe that the power IC and some of the computing IC will be our key target. Our next step is the RDL first, which we are also in the process of getting the certification from the clients. The RDL can further reduce the thickness of the substrate compared with the ABF, and also with the fine pitch patterning that also improves the whole performance of the IC. Also in the lab stage, we are doing the research on the TGV, which we make the micro holes on the glass substrate. That is prepared for the following metalization process. Obviously, that is the key process for the 3D IC manufacturing. All in all, we believe that with our new direction on Fan-out PLP, we will be able to reposition the company and transform to help the whole Taiwan's semiconductor value chain in a global value chain and build Taiwan with an even stronger foundation.
We are also offering great feasibility on the various kinds of the products. We can work with the customers, including IDM and then other companies. We are happy to work with existing OSAT companies to provide the glass substrate. We are all open on the various kinds of the business model. On the next page, here you can see that we also offer the great area utilization when we do the simple comparison on the Fan-out PLP versus the conventional packaging way. That is one of the key advantages we believe that Innolux Fan-out PLP would have. Other than that, our direct copper interconnection also can shorter the trace, which means the lower resistance and the lower signal interference. These will be our key advantage. The next page, please.
On our overall operation performance, you can see that we categorize our revenue in three different categories from non-display to non-commodity, and then the commodity. Even with the last six months' improvement on the TV market, as James mentioned, the gross margin is ranged in between 6% to 10%, while the non-commodity, which is a much higher margin, is in between 20% to 25%. The non-display has enjoyed the margin premium versus the commodity somewhere around 11% to 15% in the first half of this year. You can easily see from this page that when we continue to devote our resources into the non-display and the non-commodity, on one hand, we enjoy the benefit on the margin's improvement. On the other hand, we also enjoy the longer-term sustainability or less deviation on our margin's volatility. That's one thing we want to commit to the shareholders and the investors on the longer-term operating performance. Next page, please. Overall, our second quarter revenue has announced where we reached the revenue of $56.8 billion, which is about 12.6% QoQ growth. Our gross margin of 10% in Q2 also sees a significant improvement from the second quarter's 4%. Our bottom line has improved from first quarter's operating loss to $1.18 billion. That is thanks to the whole team efforts and also great support from our suppliers, a lot of the customers. Looking ahead into the Q3, we see some headwinds, and also the sentiment is still unclear. However, we are confident that with our lean management team, as well as our flexibility to offer to the clients on the various display products, we'll be able to cope with it and continue to deliver a good financial result to the investors. I will stop here to take any further questions on the Q&A session. Thank you.
[Foreign language] Now is the QA session. We will have two parts today. In the first part, we will answer the questions collected from investors in earlier time. After that, we will take online questions. [Foreign language]，
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language] James.
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language] 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 the company's website, www.innolux.com . Goodbye and have a great day.
Thank you.
Thank you.