Spend a lot of money for 7 nanometer, 5 nanometer, and also package related. R and D investment. Yeah. We are one of the TSNC VCM member value chain aggregator. Yeah.
We are owning a few VCA can do the service worldwide, for TSNC. Yeah. Next page. Yeah. Alchi is doing the AC business since we found the company.
Yeah. AC market is very big and unique. I don't think I need to explain, into detail anymore. Yeah. Currently, companies focus the HPC and air and AI area.
We consider the entry barrier for HBC and AI are higher than most of our applications. Yeah. Since the design are huge and complicated technology, Yeah. Currently, HPC and AI using Seeking nanometer or 7 nanometer solution. Eventually, they will use a 5 or 3 or even below.
Yeah. For the first half of this year, HPC and AI, occupy more than 70% of our total revenue. We truly believe HBC and AI application will continuously grow and sustain even with a very reasonable margins at next page. Okay. Yeah.
Let me give you a very quick recap for the first half. Yeah. First half, I think, we have we have a record breaking first half in all numbers, revenue, net income, and EPS. Yeah. Compared to last year, we have a significant growth.
Revenue is 105, 65% Y oy. Supposed to design and production post a very strong momentum. Yeah. We have a, we tape out 7 nanometer, fuel design, last quarter. The HPC demand from chai China customer is getting stronger.
Yeah. We did we did receive more older Yeah. Every week, we receive additional order from the from China customer. Yeah. First half on gross margins, so 34.1%.
I think the the revenue the gross margin still maintained to a very reasonable number. Even the production revenue will grow grow up quite a bit. For the q 2, our revenue is, record high quarterly, like, a high, 55,000,000. Yeah. Yeah.
Yeah. Up to 88 per 8.8 percent qoq. So company doing the very detail, the the revenue recognition and, we have a record breaking Yoy, QOQ, and revenue, and even the MON issue of a month, we're showing a steady growth. Operating income reached 88,700,000. Yeah.
Compared to last year, increased quite a bit. The revenue, way between NRE and mass production, I think, pretty much you have similar to the 1st 1st half. Yeah. 1, you said, what, another drawback is, to be conservative for we being right off 400 k from one of our investment. I think later on, Daniel can explain into detail.
So that's a re a quick recap for the first half. The rest of the section, detailed number, and table, I would like Daniel to to expand. And later on, I'll come back for the future outlook.
And for this page, this is the 2nd quarter result and the first half numbers for the 2nd quarter, the total revenue as you already know, the the total revenue is, single quarter record high. The revenue is 54,900,000 in the second quarter. The gross margin, as Johnny mentioned, compared to the second quarter last year, the gross margin is, relatively lower, but that's because of the product mix. For last year, the skin quarters, NII percentage accounts for more than, close to 60% of our total revenue. For this year, the second quarter, the NIE revenue accounts for about 45 to 50 percent of our total revenue.
So, as a result, the operating income for the 2nd quarter alone is 8,700,000. And the net income is 6,400,000. By breaking down into detail, for the non operating income, you may see that our non operating income for this quarter is -1 80 k US dollars. That's because we've got off, one of our one portfolio, the Virgin airline. And the, total position is about 400 k.
According to the news and according to the private banker, version, Australia, now it's take now it's taking over by Ben, Capital. So if, there the future outlook and now looks, better right now. So if, if the bank price goes up or if there is any, debt restructuring plan. The write off amount will, reverse to our operating income in the future. Well, the first I have, the revenue is 105,000,000, up 65% year on year.
And that the operating income is 15,700,000, up 165% year on year. So in terms of the EPS, the first half EPS is 6.01, NT dollars. So the revenue breakdown, you can see that, the HPC and the networking, actually, most of the networking still within the HPC, field. So still still account for the majority part of our total revenue. In the second quarter, HBC accounts for 56% of our total revenue and the networking account for 14%.
For the niche market, the niche market, our product is mainly the potential. Mentioned, in 2nd quarter, it accounts for 14% of our total our total revenue. So in first, in first half of this year, HPC total accounts for 72% of our of our total revenue and, networking is 9% and, the niche market is 13%. The consumer has been, decreased, has been decreasing to 6% for the first half of this year. And for the technology breakdown, you may see it's getting, more and more obvious that the 7 nanometer technology has already become our mainstream technology.
For the second quarter, due to some, the DMP design revenue, recon commission, of course, there are some 7 nanometer tables. So the 7 the 7 nanometer revenue accounts for 38 percent of our total revenue in the 2nd quarter. So, if you combine the 7 nanometer 16 nanometer and the 28 nanometer. These 3 technology nodes combined accounted for more than 90% of our total revenue. For both second quarter and for the first half this year.
For the regional breakdown. In 2nd quarter, you see, the Japan from 14% to 21%, because we, realized some, DMP milestone and, of course, pachinko shipment keeps on doing very well. For China, it comes for 51%, mainly contribute by the HPC products. And then for the others, you may see the others keep on growing. I would say, North America is the major is the is the major region for, for for for this item to grow.
So in the first half, we think, our, regional mix is quite the China account for 56% and, Japan account for 18% and, Taiwan account for 5% while the other region accounts for total 21 percent of our revenue. And the whole industry and the company outlook. Again, I guess many of you have already read it from the report or you already, have, conversation with me as the China HBCIC demands feel strong. The China IC localization trend are going, with increasing demand for from the HDPC customers. Our our biggest and the 2nd largest customer, we see picking up momentum from their demand.
And, therefore, we expect the HPC related IC projects coupled with the 7 nanometer shipment to start in the fourth quarter. We'll drive our 2nd quarter revenue. So all in all, for this year, HPC for the process of project, they are a major growth driver for the whole year. And, in addition to existing customers, we see many, many opportunities from new customers. We, as Johnny mentioned, we almost receive RFQ every week.
So we are now enclosed discussion with our potential customers to see, to, to pick up the projects And, of course, we have a priorities, for those projects. And, we don't see the demand to to be weak, in in the near future. And then for AI demand in North American, it's still it still remains good. But even the coronavirus pandemic, the business development phase is kinda slow. So we are trying to we are trying very hard to to to get more, business opportunities and to speed up the pace of our business.
And, the good news is we expect our, 1st 7 nanometer project from new customers in North America region to tape out in the second half this year. And, that's confirmed that we, we want a 5 nanometer 5 nanometer design for 1 big North American customers. And, that's the quick briefing about our 2nd quarter. So now we would like to, I would like to enter into the second section. So please use the raise hand function, and, I can unmute you over or you can unmute yourself.
But please, because it's a online, conference meeting. So please use the raise hand. Okay. See how, please.
Oh, hi, hi, gentlemen. Two questions from my side for the first one regarding your overseas, ASIC customer. I think a very strong, NRE momentum, but can we share with us the a volume prospect for those customers?
Oh, okay. For the Warren, I would say for the quarterly guidance, I I told that, we will have, slightly to mount a quota quarter growth for the first quarter to 3rd quarter. Now, this guidance remains unchanged. We would, our 3rd quarter total revenue will still post, reasonable growth. The mass production demand is quite strong, especially for the server.
So, I would say the momentum in the quarter is still maintained. For the fourth quarter, we may see relatively, significant, quota growth in the fourth quarter because our 2nd largest customer, will start shipment the 7 nanometer, process the shipment in the first quarter. So the momentum is good.
Right. Okay. But are you going to, raise your full year guidance because it looks very conservative, right, based on the first have momentum, and then we just extrapolate it and easily achieve your full year target.
Okay. Yeah. Yeah. Actually, we would like to, but this, they still have a sound dependency. Actually, the most challenge is 7 nanometer design capacity.
Yeah. As long as so we can get a reason continuously receive reasonable capacity from TSMC. We love to increase guidance drastically. But right now, I think that's the biggest uncertainty and drawback for us. Luckily, even with the 16 nanometer, demand, we still augment, our guidance, the number of guidance Yeah.
Recently TSMC gradually give us some capacity on 7 nanometer. I think that's a good news. Once we confirm receive. I think I will work with Daniel. Maybe we can increase the guidance accordingly.
Yeah. Yeah. Of course, I understand that, 200 1,000,000 yearly revenue. Now it seems very conservative. And according to our guidance, we are very confident that we will
overachieve.
Tell you overachieve the 200,000,000. But how high we can achieve? I would say, I would say, 10% is a reasonable guess, but it's it has dependencies. So we, work with Johnny to to to set up a a new guidance for the investors.
Oh, okay. Great. Yeah. And for the 5 nano design, could you, give us more color, what type of products are you working on and when we should see the NRE, kicking stock. Okay.
Okay.
So fine nanometer, as you know, the whoever doing the fine nanometer are very, very big com company. Yeah. We are on the strictly end, NDA do not escrow, their projects back and also schedule and those kind of things. I apologize for that. For this, the North America, 5 nanometer design 1, we have to keep for ourselves for a while.
But just share another, good news with you. I think we are working with, we are about to win another 5 nanometer. So this customer is, is, is, is, relatively open yeah, once we want, we can share more about that design too. So by nanometer, I think in terms of NRE compared to 7, Yeah. We we're seeing the significant amount increase.
Oh, you mean the project value. Right? Right. Oh, okay. Great.
And and for the second five nano, project you're talking about, is it a a a Chinese customer or also? No.
No. No. It's, in the EU region, European customer.
Oh, okay. Okay. And and what type of product can share?
I think it's HBC and AI also. Okay.
Alright. Okay. Great. Congratulations. Yeah.
Thank you.
Uh-huh. Yeah. China customer, I think our current 7 nanometer my old has a low max go to 5, for sure, not this year.
Oh, okay. But next year, any any chance? Yeah.
Next year, I think they to kick off. They they have to kick off. Oh,
okay. Okay. No. But but do we have enough, engineering in place? Yeah.
Because seems like That's, one of our bottleneck. Right?
Yes. You mentioned about the the 2 biggest one is a TSMC wafer capacity. The other is our defect capacity. Yes. So we try to, increase our capacity as much as we can.
But but right now, I think the design is successful. I think supporting customer well is the number one priority. Increasing design efficiency and try to utilize our design capacity. I think that that's the the the thing we are doing almost every day. And also build the contest for whatever the the project coming, sales going in, we have to we we have to select wisely right now because our capacity is kind of limited.
Yeah. Right.
Yeah. True. Okay. Okay. Now I'll go back to the queue.
Thank you very much. Yeah.
Alright. Thank you very much. Okay.
Charlie, please. Ah, yes.
Hi. Good afternoon, gentlemen, and, congratulations for a very strong result in execution as well. So I guess Yeah. So I I guess you are now getting some, a good problem. Right?
I mean, customers not knocking your door, but, you may not be able to service all of them. So my question is, where can they go? I mean, do you see any other industry peers, competitors, they can get these projects. And if that's the case, does that mean that you're in those peers will also grow and then learn, from those, HPC projects in in the future. Can you, comment down on this front?
Uh-huh. Yes. To to answer your question, yes, capacity, we are facing, very challenging, limitation I agree with you. I don't think customer were waiting for us. If you cannot take a lay, have to find other solutions, And at this moment, our priority will be the same.
Serving the existing customer is the number one priority and serving the big NAND, whoever has a, bright future, sustainable business is our 2nd priority. And other than that, I think, if a customer want to, we do not have enough capacity for that. In usual case, we will refer, we consider it's a more reliable partner or a competitor for them. Yeah. The AC market grow quite a bit.
I don't think, for sure. I think, our competitor or other commerce, other partner will receive some business. Yeah. Follow over from us. Not the reality.
Yes. Mhmm.
Okay. Thank you. And and next question, I I guess, for new investors, overly concerned about your customer concentration. I I guess now your top customer may may account for maybe 40%, even 50% of your revenue. So I guess, uh-uh, 2 2 part of questions.
So first of all, how does company come first investors set, those, you know, local CPU or supercomputer projects within, regular rule of the US X-uh, export, regulation. And second second question is more long term, right, when that China CPU customer become, larger and larger, whether they want to build their own design team and become TSMC's direct accounts or vice versa, TSMC, everyone to open to them to service this account directly and skip the design service. Can you address those concerns Thank you.
Okay. Uh-huh. So then, Daniel, do you wanna go first?
Okay. Sure. For, customer concentration, Of course, you know, that, phase 10 is is now our biggest customer and is the most important customer accounts for like, around 40% of our total revenue. This customer we expect in the second half or in next year, the revenue contribution will still be strong, but our 2nd largest customers, As long as the 7 nanometer start to begin the shipment, we believe the percentage for the 2nd largest customer will quickly, pick up. So, if you consider the first one and the second one, I think the percentage in percentage wise, we don't worry about too much the concentration to And, you you may also think that for the AI customers, as I mentioned many, many times that, we believe the 7 nanometer will be the major battlefield for the AI application.
We have multiple application customers. And, there's 7 nanometer projects. Most likely, we'll start to shoot in the second half of next year as low as low AI customers, human begin. I think our custom customer mix will be more balanced, in terms of the the the the growing pace for each of them.
Okay. Thanks. And and I guess, does it, yeah, Johnny, for the please go ahead. Yep.
Alright. I I think Daniel is right. I see stronger and stronger forecast from this particular customer But we're also doing the calculation starting from next year, even this, customer's demand increase, but the the weight overall percentage concentration will decrease starting from next year. Yeah. In the other words, just like Daniel mentioned about other account, production pickup.
I think it's, it's also very significant. Yeah. Another few customer in China and also few customer in in other region. I think Pika acquired a bit. So next year, you can see the concentration for a specific customer will decrease even their revenue increase.
So to to answer your second question is, ex US, export control, and also TSMC's con consent. I think this one, this this company focused on the data center and also the CPU is a pure consumer related product. We're being comfort over, over again. It's very clean. But everybody know the trade war attention keep increasing.
Yeah. To to be honest, that's better for the company. Yeah. Both, from from our point of view, also from customer point of view, o also from TSNC point of view, the current call operation scheme, is much better. Yeah.
We we draw less attention. Yeah. I think that the balance, failure and play, go through l chip to do the physical design. And then we place the order to TSMC. This kind of relationship, I think, for sure, we also stand.
Yeah. I don't think customer at the least this stage, well, try to approach to take TSMC directly.
Okay. Fair enough. And last question and I will get back to the queue. So Johnny, you know, we we've never seen the, ethic consensus business model can grow so fast. Right?
So long term, you know, what was the kind of, the revenue scale you can envision, based on the current trends. And and what what what would be, kind of a key risk for you to get there. So I I know is your, company is shooting for maybe, slightly above a 200,000,000 US dollars, but let's talk about what what what what what need to happen for you to get you, like, 1 PDN US dollars US dollars revenue scale, and what would be the key risk? Thank you.
Okay. Yeah. I I think right now, when we talk to customer, we always said thinking about the win win situation. Yeah. To be honestly, customer also doing the very detailed calculation.
They're only doing a 1 or 2 chip a year. If they want to build out a very strong team, and acquire a very expensive EDA tool and also try to sustain all the employee And it's it's very costly, and we always tell they they they also agree and also intensive design capability and our account, our company take out 22, 30 design every year compared to a customer doing by themselves, like, owning capability and also knowledge of your accommodation, is an is totally unmatched Yeah. So as long as our margin, a reasonable customer in a, in a safe zone, I believe our business will sustain and grow. Yeah. Because of HPC and AI, unlike a consumer, most of our customer are highly profitable.
So even with, certain margin to to l chip, they still have to maintain significant growth. On on their on their side. So, obviously, the, whoever doing HPC and AI are giant company. Social media company or the very big company in China. I think our even with our margin, they're still thinking about the value we provide, it's justified.
So, if we can keep accumulate the customer, maintaining the existing customer. So that's why I say number one priority is existing customer. If you can continuously adding more customer, so revenue growth, I think, is expected.
And Okay. Mhmm.
Yeah. And HPC and AI demand, we can say, the the it's getting higher and higher. Yeah. Hopefully, I I'm not saying shooting 1,000,000,000 very soon, but we we can say we are year over year. We we have a, reasonable growth.
Okay. Fair enough. Thank you.
Alright. Thank you, Charlie.
Okay. From, Credit Suisse. Please.
Hello. Can you hear me?
Yes. I can hear you.
Yeah. Hi. Hi. Hi, Johnny and Daniel. Congratulations on the good results.
I just have a couple of questions. And the first one is regarding your existing customer in China for the CPO business. Recently, they have the product launch events and mentioned that they have the goal to launch on 14 nanometer project products, by the end of this year. Will those projects outside TSMC still be your business with this customer, or do you think there's any risk that you could share in this customer? Thank you.
Okay. Yeah. Hassan, I I, I think you are you're doing your homework. You're doing very good homework. Yes.
This customer has recently have a big announced announcement on their future future roadmaps. 14 nanometer, yes, it's not belong to TSMC, Yeah. As you know, the due to the trade war attention, most of our China customers thinking about their local supply chain. So I think, they all consider. Most of them, they have to consider, the local, foundry.
So for this particular customer, we have a very tight relationship of more than 10 years based on, labeling approach to us many times based on our suggestion, in terms of PPA or even if in terms of a cost using TSMC solution is the best. They understand. And if due to any reason, they have to go to other foundry, Yeah. For sure. That will be also our business.
Yeah. We we will recommend the best solution for our customer far, we we always consider TSNC in terms of PPA and price. If they if they insist, go to other foundry for other due to certain reason, I I think serving the customer is our number one priority. Yeah. I hope that answer your question.
Okay. I would say in this way that, I know, Nathan announced this role. For the 40 nanometer, they announced the 4 projects for 40 nanometer. 2 of them are for no longer PC and 2 of them are for embedded embedded use, embedded, application. For embedded application, that's for, I would say, that's that is also a new area for.
And, due to some reasons, we may not we may not consider to, take this budget. But for the 14 nanometer, we're seeing the PC at the Noble category. We leave because of the technology because maybe of the year rate and because maybe of the trip efficiency, their plot online in TSMC will still be their major And, there will also be the next generation ship to pay by in TSMC for 16 nanometer and the 7 nanometer. So, we don't worry too much about, the current chip announced by our customer. In the future, as long as, smakes technology picks up, I think, of course, we have the ability and, we have good relationship with our customers.
And, of course, we have opportunity to get involved in this business.
Yeah. That's very clear. So with China foundries limited access in the events notes, you don't think at this point of time, you don't think too much concern that they will data and will shift mainstream serving PC business to other countries. And even in a future that SMIC can pick up the advanced capacity. You still have the, capability to design in that boundary and working with video on other projects as well.
Right?
Yes. We have a, yeah, we have liability. And, okay. You know, Our stance, we are not, we are not in a good position to comment on the foundries. I can just tell you that, TSMC is a very respectable company.
Their support, their flexibility, all of those categories are the best in the industry. So, of course, TSMC still will be our major foundry there in the in the future.
Okay. That's very clear. My follow-up question on the China customer would be your new opportunity. Could you discuss more in detail on the new customer opportunity in addition to the current CPU customer in China, which applications and which nodes? Could you also share what is the time frame for the for those those new Thank you.
Tanya, you go $50 per month. Oh, okay.
Yeah. This particular customer, I think they they are do doing the, data center and HPC related application. Yeah. Yeah. For sure.
It's a 100%. Yeah. It's very clean, but but due to the trouble attention, they try to keep a low profile. Yeah. So, please bear with us.
I know the volume will increase. We are on the NDA. We don't we cannot scross too much about this customer. But since the number pick up quite a bit, and so, Daniel, I has to share, and this, existence of this customer because that will be that become our number 2 very quick. If a 7 nanometer con capacity is not the issue Then starting from next year, I think they are they are quite closer to Fagan.
Unfortunately, us might not share too much about this customer.
Okay. And, Hassid, for your question, I'll I'll I'll say okay, you may you may, you may, pay a little bit attention to, the trend that in addition to HPC, the processor, the CPUs and the the networking ASIC, you may you may think about what, China wants the most. First of all, the CPU and maybe the storage IP. And, of course, the DRAM, those ICs are, accounts for the majority part of the see consumption. And there is another missing part, the GPU.
I would say, maybe, in the near future, there are some this opportunity for us to get into the GPU supply chain.
Okay. Yeah. That's very clear. And then my follow-up question is on the, like, the MRE contents, the value you can get from a 5 millimeter project versus 7 nanometer project? Would you qualify it, or just a, like, a, a percentage increase for 5 nanometer versus 7 nanometer?
Thank you.
Okay. To be honest, at least moment, the VCA, O VCA member hasn't doing any format table for 5 nanometer yet. T s r TSMC also working on the program with us on the fine and 5 nanometer on IE. We don't know the precise number, but based on the trend, from 16 to 7, from 28 to 16, initially, 5 nanometer will be very expensive. I'm not surprised.
It will be 2 x compared to 7 nanometer.
Okay. Well, it turns into, like, mainstream, how much accounting game would you, you you can get? Or, compared with the historical experience. Thank you.
Oh, yeah. TSMC, we are doing the NIE reduction every year So the precise, number, I'm not, yeah, it's it's a pro it's not appropriate to to share at least at this stage. Yeah.
Okay. Okay. Over your range, but the range is very wide. I would say 7 nanometer, the total 9 comes from
Uh-huh.
Will be around 20,000,000 to 40,000,000.
Yeah. That's not including the IP and also how many layer of a mask, customer need to use.
Okay. 20 to 40,000,000 per per project run.
7 nanometer. Yes.
No. No. 55 nanometer.
Okay. Yeah. Just a few more follow ups. On the margin outlook, Could you share more detail on the NRE versus turnkey, trend for the full year in the second half and for your full year the margin, gross margin outlook, could you also provide any updates since, it seems it seems that you will have multiple NRE, outside the limiter reaching milestone and you can re recognize, more, and I wrap it while the server of shipment is also going to wrap important or So I'm just wondering if you're updating any margins on guidance. Thank you.
Okay. For margins, the, the guidance remain the same. We this year, most likely, our gross margin will be in the middle of thirties. And then you can see the 1st quarter and the, 2nd quarter. And for the 3rd quarter, the NIE percentage will be a little bit higher.
So we expect the 3rd quarter gross margin will be higher compared to the 2nd quarter. For the fourth quarter, as mentioned, the 7 nanometer shipment begins and the production, revenue percentage will account for even higher. So all in all, I will say the gross margin percentage will peak in the 3rd quarter. And then for 4th quarter, we'll be a little bit lower but for all in all the mix, the gross margin for the whole year will be the middle service.
Yeah. That's fair to hear. My last question would be on the investment right off. Could you share more detail on that? Thank you.
Okay. Uh-huh. Okay. Labbound is a version Australia. The portfolio that's the private banking provide to us.
As you know, because of the coronavirus, all the airline companies are now in that shape. So, for Virgin Australia, we actually we we invest in a very conservative approach. So, for this bond. Usually, we bought a bond for we bought a bond for, 1,000,000 each. But for this bond, we only bought for for 50 k.
So, in a conservative purpose, we write down all the amount, we hope. On Virgin, you know, Virgin Australia. So, yeah, that's that's that's the that's the detail.
Yeah. This is very helpful. I'll be back in the queue. Thank you.
Okay. Sorry. Please.
Yeah. Hi. So which, private banking? No. No.
No. I am just kidding. Oh, so so my question is actually about your, supercomputer projects. I I know computing when, several awards, for your customer, those have to have 500 supercomputer, competition. So I'm not sure how we can, predict those, you know, supercomputing you know, revenue stream, because it seems like, comes like every 1 or 2 year or 2 to 3 years.
So, you know, coming to the 3 years, do you expect, the more of this supercomputer project to to come? And, which region do you see more demand? Thank you.
Okay. So this company, receiving the green 500 award is called preferred network. The reason I can mention about the company, NAND, because we have a press release which then, a month ago. Yeah. The they are doing the HPC and also AI with a very talented people.
We find that we find that we find that world right now. It's a number 1, Japan AI company. To be honest, I don't think the volume, even they are received, receiving, number 1. I don't think the volume will be too big. And because of the cheap cheap size and also the Japan market, currently, we are working with this customer on the next generation 7 nanometer.
But because of this, winning a lot of a customer in US and also in Europe and also tight on China approach us because, press release that they know we can do. So I think the, winning this green 500 or type 500 does bring us a lot of a new opportunity. Yeah. Right now, we we have a more chance to select, the the right customer as in feeding, our goal. It's very, if if you have a chance to go through the details, I think that's a that's a very unique design.
Okay. So, so, thank you, Johnny. So I think you mentioned you want to prior prioritize the exceeding customer. So for a preferred network, since you are more open to talk about this, customer publicly, when do you think 7 nanometer can, start to kick in, contribute your NRE?
Yeah. In fact, 7 nanometer already start. And, well, we we plan to take out sometimes next year.
Okay. Mhmm. And then follow-up follow-up on this question. I I know your China opportunity is much bigger as you just described. It's a revenue size could be very huge next year.
How about those, Japan customer's turnkey for misproduction revenue. Why why it cannot be as big as the the China China customers?
I think because of, market demand, we frequently see some opportunity on supercomputer in pan, but based on the track record, the volume is not so significant. But Japan, we have other approaches I think later, if we have a chance, we can I can explain into detail for you? And, yeah, la last time we we announced one of the Ken Gan Council wing. I think that's a significant win, from Japan. And Japan, there's a 2 area.
I think it's, produced a very reasonable market share and volume. 1 is a camera. The other is a multi functional printer.
Mhmm.
So even they are not HPC and AI, but in fact, we do receive certain RFQ on that on these two areas. Hopefully, we can win.
Okay. And lastly also on this supercomputer project. I I know you, in the past, you also, did some project for a China customer and And next year, I would assume the 2nd largest customer is also related to supercomputer. But from what we can see, over the past 2 years, US, they kind of put those supercomputer as one of the items they will watch closely for the technology export. I think those are these including AI surveillance for computer, also quantum computer.
But since that supercomputer is in that list, do you concern it could be a big risk for you into next year?
Yeah. For sure, there's a there's a risk, but I think the the volume and also based on this trend, majority of our revenue is, from data center and also CPU type of a a design. And that will even for for those applications can give us, a revenue growth, into into certain degree. The supercomputer so far I think it's a R and D. We did we did not see the tie restriction from, from supplier and also from TSX, from for example, from TSNC, every time we receive the RFQ, we will sit down with, major foundry, with the TSNC, and make sure we can take those kind of projects.
So they have a they also have a, they also police, our design win. So I I don't think in the short time, in the short period, there's a certain tension on that area. Okay. Yeah. Daniel, do you have anything to add?
Yeah. Uh-uh. Yeah. I mentioned many, many times that, I would say TSMC is the gatekeeper. And, until now, we we don't hear anything about the concerning, the projects.
For our customer.
Mhmm. Yeah.
So yeah.
So in the real business pre practice, would you ask your foundry partner or a low year to consult the US Department of Commerce, proactively to to to have some clearance.
Actually, TSM should be that. Okay.
TSM. We will. We will. Uh-huh.
Okay. Okay. Okay. That's that's all I need to know. Thank you very much.
Okay. Are you ask asking trying to ask questions? No. Okay. Is anyone there want to ask questions about, Oh, company.
Okay. COO. COO. Please.
Hello. Hey. Can you hear me? Yes.
Yes. Yes. Yes.
The follow-up, actually, what the company considered to, start building up the internal IP library.
Yeah. Let me answer, let me try to answer your question. I think, we have, everything, team size is, is not small, but Again, my principal reminder saying, we are only doing the IP efencing. Yeah. As you know, a lot of leading edge technology, on the packaging side or even on the driver side, they don't, it's very difficult to sourcing the IP from existing partners.
We have to do it, we have to do it and customize it for customer. So we're doing the IP is to enable the business, but company will not get into the pure IP business. Right. Yeah. We are highly relied on partner.
Yeah. As I mentioned many times, the leading edge technology require request terms of IP is no way for the company like us to prepare OIP for our customer. We need to rely on partners. We don't want to compete with the partners.
Okay. True. Yeah. So you will be very selective even if you really want to, build some ITs
Yeah.
Right. Right.
Okay. I got you. Yeah. Okay. Thank you.
Thank you.
Yes. Yeah. I want to follow, c c hoe's question. Sure. Yeah, because we I I think you guys also hear that, there's some concern about your HBM 2, implementation.
Because there's some not not something that EDA tool vendor, they can supply now. So you you have to be it it depends on the, design service capability to implement. So how confident are you on this, HBM 2, you know, this kind of, I IP, this kind of, a design service and also, so can you take this question first?
Okay. Yeah. I I know there's a sound saying about our HBM design capability.
Yeah.
I think talking to the customer, we never encountered this kind of problem. We have, few existing customer using HBM. Now one of them will be, is it will be taped out soon, and we have, at least a 425 pipeline customer, we are using the HBM solution. And I consider all of them satisfied with our solution and proposal. So I think the, once the HBM decide hitting volume, I think that And we will I will we will ease all the concern from our outside savings.
So right now, I don't see any show stopper, from our HBM 2 solution.
Okay.
Thanks. Yeah. China customer, euro customer, or US customer, we all have a HBM 2 customer there.
Okay. And and and, another follow-up is about your AI AC. I I still remember over the past 3 years, there has been some delay not just, at your company, but also your industry peers as well. Because those are as in a lot of time to verify to do those field tests. So do you think, you know, those, AI system customers, they will also see this delay risk in the coming years or or they already, figured it out.
So going forward, those projects, will be on track. Thank you.
Okay. Yeah, to be honest with you, the we're doing a lot of AI, but in terms of production, and AI does contribute just a little bit. And but even though, AI story, an AI drink is not gone. We see more and more demand, even without volume, but we see more and more demand. Appear.
Starting from from next year, I think the situation will be much better because one of our AI company in in US, already, in volume, in volume production. I think their their volume is is a reasonable. Another Europe company recently, they just sell to the US customer I think their their volume will be pick up next year. So, hopefully, the the AI contribution starting from next year will be, Well, increase, increase a lot, hopefully.
Okay. Here's a question from, you, you, borrowings. Could you please briefly comment on how you are constrained in terms of capacity and how you optimize the capacity allocation? Okay. Johnny, would you like to go first?
I believe the capacity is the for the design capacity. Right?
Yes.
Okay. Yeah. Like I mentioned before, our demand is much, much more than we can supply. At this moment, yes. So our priority remain the same.
Serving the existing customer is the number one priority. I don't think we have a problem to support our existing customer. The new customer, when they come in, we have to do the beauty contest. Beauty contest angle, I think it's a straightforward Either this customer has a future and business are sustainable, or they can immediately give us a certain profit. So that I think the selecting, selecting customer is very painful, but it's a straightforward word.
And in the other war, in the in the other way, we are in increased our party very aggressively. Like I mentioned before, by the end of this year, we'll have 500 people. We can support 20 project in parallel at, by the end of this year and also increase the design efficiency. We have a one platform yeah, can reduce, a lot of unnecessary re resource I think that's a one one of our area. We're doing, we can say we're doing better than our competitor.
These are efficiency. And I think, the detailed detailed distribution, I think, is a long story. I'm not going to discuss at, at least the stage. So right now, capacity is growing. In the meantime, we have to select our customer wisely.
Okay. Eunice, in simple talk, I think your question will conclude into, the engineering capacity, the engineering efficiency, and the engineering flexibility. So for the capacity, we are doing aggressive extension. As Jim mentioned, we will hire new engineers, our training to do the, to do the design for us and, for the efficiency. We are trying to, build up the platform, and we are trying to separate a high level design and the low and the low level block design.
And to allocate the low level to the entry level engineers and to allocate the more complicated budget leading, things to, senior engineers to improve the efficiency. And for the flexibility, also we, we are looking we are looking for and we already have some, outsourcing partners. We can, outsource or they can insource to our company to do the low level, design, drug design for us to expand our total capacity. Okay. That's, I think, the time is limited, this is this could be the last question.
And you can you can ask question now.
Hi, Daniel and Johnny, can you hear me? Oh, yes. Okay. Thanks for, taking my questions. My first question is regarding to your 2nd biggest company, because, I know I know you you cannot mention the the name, but, I remember I asked about the revenue contribution last time in the last, conference.
And, I believe that, Daniel, you guided for the 2nd comp 2nd biggest company will contribute around, 8,000,000 USD in 4th quarter I'm wondering, are you still seeing this number, or are you seeing a little bit more than a 1,000,000, in 4th quarter?
There will be upside, but depends on the capacity support by TSMC.
Okay. Got it. And, I just wanna double check that, you mentioned that, this company will, the the revenue contribution will, will get, like, We'll get, much, we'll get, like, equivalent to Faitan in next year.
I won't say equivalent, but the the percentage we teach and the absolute, contribution will pick up very quickly. In the first half next year.
Okay. Okay. Because you're you're a faitanya's contribute about 40% of your, total revenue. So this one, will reach around, like, 40. I mean, like, 20% maybe.
Yeah, 20% we're a pretty confident. Okay.
Got it. Okay. Thank you. And I also wanna about, ask about Fady Ten's, can you, provide any updates on the phase 10th Street project? I know it has server PC and you mentioned about HPC last time.
So can you provide any update on, features, especially in, 7 nanometers, in server and HPC? When will the the NRE kicking or when will the, mass production kicking?
Actually, recently, we received great pressure from our customers they don't like us to talk about too much about live budgets and especially with a schedule. The table schedule, the shipment schedule, we have been trying very hard to that investor understand the future trend. But for some, specified, projects and the schedules, now we it's it's it's difficult for us to go into detail. Yeah. Please understand.
Okay. I see. Also, another, my last question is regarding to, I'm just curious, like, who will be your 3rd biggest customer in next year. Because I'm, would it be China, Chinese customer? Will, or, would it be, US, customer like, Ontario lab, as you mentioned, that's, this year or Amazon.
Yeah. Hopefully, it will be US customer. It will be our our number 2 or number 3, yeah, next year.
Okay. Is it gonna be, a serial app? Because I know the company sees the chance, next year will be very great, regarding the PCIe gen client. Right?
Mhmm. Yeah. Yeah. I think they they have 2 particular customer you mentioned about. They a chance to contribute more to our company?
Yeah. We don't have the numbers of forecast for next year. Currently. So I we can only say that we put high expectation, several customers first one is the technological customer, China customer right now. We have pretty confidence.
His contribution will pick up very quickly. And, for the other customers, of course, for those AI companies, like the US AI customer and, the European AI customer. We do believe that in the second half of last year, the shipment contribution will be, will be good. The the expectation is high, but we cannot confirm the numbers right now.
Okay. Got it. Understood. Very clear. Thank you.
Alright. Thank you.
Okay. Last question. Really, the last question. Ethan, Uh-huh. Can you can you, can you say your name and the company first?
E s o o n.
Sorry. Hello. Can you hear me?
Oh, yes. Yes. Uh-huh.
Hi. Hi. Sorry. I forgot to unmute. It's Elizabeth Soon from Pinebridge.
Yes, I'd like to ask Raisen for questions. I understand the founders' shareholders that you're quite low in the firm. Any options for the either the engineers or the senior management? So there is less likelihood of them moving on to other competitors? And secondly, if I hear correctly, because I wasn't asleep to Dalen, I understand you're you had an investment.
Is it correct in Virgin Australia that you have you have made a loss? What is the the future investment rationale, in terms of usage of funds, and do we expect investment beyond their own businesses? Thank you.
A sign. I think, yeah, all Daniel can comment later. In terms of, employee royalty. I think that, that area is, our company, we've been the most proud in that area. I think I'd be, our company is 17 years, 17 years old, but we have, engineer working with us for more than 15 years, I think total, about fifty people.
And people working with us for more than 10 years is over hungry. So in terms of royalty, I, I don't think that's a, that's our biggest, concern. And they all satisfy with our current performance there. And also they own, they own all of them own piece of a company. So I think this trend will continually grow.
Yes, we do encounter some problem, when we, when we try to hire a new, a new car, but I think, in China, relatively, we are the only company we can do 5 nanometer and 7 nanometer. I think it's a it's a no we don't encounter much problem to to attract young girl. So I think employee royalty and stability, I don't have too much concern.
Okay. For your question for a bank investment, actually, we have done the bank investment since year 2015. The portfolio in the beginning is about it's about 20 something immediate for the whole portfolio. But, We are a conservative company. We keep on shrinking our portfolio, scale.
So far, the total portfolio scale is about 10,000,000 to eleven meeting. And, yeah, most of the target companies don't, are provided by the private bankers. And, of course, unfortunately, the airline company, the original spot is, Virgin Australia. It's a very famous company and, it's the 2nd largest airline company in Australia. So we think the this company is relatively safe, but, because of the awful virus, I guess, no airline companies safe right now.
But, fortunately, fortunately, the position is not high. And secondly, the bank capital has already taking over this company. We expect there will be, future, reverse amount of the write off
Okay. But do so do we assume that, there'll be more investments from the the 10,000,000 or 11,000,000?
No. No. No. No.
It'll be in other stocks. I mean, not not in virgin, right, other stocks?
Not stocks. We only invested in straight straight corporate bond.
Okay. Okay. Got it. Okay. We
don't have plan to to expand our portfolio in the future.
Okay. Great. Thank you very much.
Thank you.
And, I guess that's the, It's this general investor meeting, for today and for the second quarter. So if you have any questions, in the future, please, you're welcome to contact me And, if I have time, I'll I'll be more than glad to answer questions or have, come close with you. Thank you. Thank you for joining today's meeting.
Okay. Thank you very much. Thank you very much. Thank you.
K.