Good afternoon, and welcome to eMemory's second quarter 2022 webcast investor conference. Present today, we have our chairman, Dr. Charles Hsu, President, Mr. Michael Ho, Head of IR, Miss Li-Jeng Chen, and the Director of the Finance Department, Miss Teresa Kuo. The format of today's event will be as follows. First, eMemory's chairman, Dr. Charles Hsu, will give an opening remark. Afterwards, President Mr. Michael Ho will summarize our operations in the second quarter of 2022, followed by the outlook of our business. Next, Dr. Charles Hsu will introduce the topic titled Why Is Random Number Generation Important in Gaming? Then we will go into the Q&A session, where our management team will be ready to answer your questions. Please feel free to submit your questions in the input box on the webcast window throughout the conference.
As a reminder, this conference is being recorded and a webcast replay will be available within three hours after the conference is finished. Please visit the company's website at www.ememory.com.tw under the Investor Relations section. As usual, before we begin, we would like to remind everyone that today's presentation may contain forward-looking statements that are subject to the risk factors associated with the semiconductor and IP business. Please refer to the cautionary statement as shown on page three of today's presentation. Now, I would like to give the floor over to eMemory's chairman, Dr. Charles Hsu.
Good afternoon, everyone, and thank you for attending our conference call today. Our second quarter operating results hit a record high, reflecting our continuous efforts to invent new technologies and develop new application areas. Although the semiconductor industry has entered several quarters of inventory adjustment, we remain confident in our long-term growth. The reason are as follows. The first is because over the past two years, we have accumulated over 1,000 tape outs with more than 200 new applications in 28 nm and below. These new products will enter mass production to drive the growth of our royalties. Furthermore, our technology development has reached 4 and 5 nm, with customers' production in 6 and 7 nm This new process platform are new market for our future growth.
The second reason is, the customers are accelerating their product development. No matter high-performance computing, AIOT, autonomous driving or industrial automation, security will be a must. We are seeing this trend from our PUF-based licensing revenue, which has grown more than 10x compared to the previous year. All in all, we remain confident in the company growth in the future. Next, I would like to invite our president, Michael Ho, to share our second quarter performance and the future outlook.
Thank you, Charles. Good afternoon, everyone. Now, let's begin with our 2022 second quarter financial result. The second quarter revenue was TWD 796 million, up 9.5% sequentially and up 47.1% year-over-year. Operating expenses were TWD 336 million, up 7.1% sequentially and up 30% year-over-year. Mainly attributable to the increase in salary and other related human resources expenses, such as increase in bonuses and rewards. Operating income is TWD 460 million with an increase of 11.3% sequentially and 62.7% year-over-year. The operating margin increased by one percentage point sequentially and increased by 5.6 percentage points year-over-year to 57.8%. EPS for the quarter was TWD 5.48 and ROE was 69.5%.
Next, let's move on to revenue contributions by licensing and royalty. Licensing in the second quarter accounted for 25.2% of the total revenue, up 4.8% sequentially and up 15% year-over-year. In US dollars, the licensing was the same as last quarter and up 10.6% year-over-year. Royalties in the second quarter contributed 74.8% of the total revenue, increasing 11.2% sequentially and increasing 62.3% year-over-year or up 5.4% sequentially and up 57% year-over-year in US dollars. Total revenue in the first half of 2022 grew 33.8% as compared to the previous year. In terms of US dollars, the total revenue increased 33% compared to previous year.
With that, I will comment more specifically on our revenue contribution by specific IPs. For NeoBit, accounted for 22% of the total licensing revenue in the second quarter, increasing 26.4% sequentially, but decreasing 11.4% year-over-year. Its royalty accounted for 40% of the total royalty, up 14.6% sequentially and up 38.2% year-over-year. For NeoFuse, accounted for the 46.9% of the total licensing revenue in the second quarter, down 24.2% sequentially and down 8% year-over-year. The main reason is that many of our customers who originally only used NeoFuse have adopted our PUF-based security solutions, such as Root of Trust, to improve their security application levels.
In addition to the existing NeoFuse royalty, PUF-based royalty will double the total royalties, driving the growth of our future royalty revenue. In terms of total royalty revenue, NeoFuse royalties increased 9.7% sequentially and 84.5% year-over-year, accounting for 56.4% of total royalties. For PUF-based security IPs, contributed to 23.4% of licensing revenue, increasing 576.4% sequentially, up 2,163% year-over-year as the result of strong demand for our security IPs. Its royalty accounted for 0.1% of the total royalties, which is up 47.6% compared to the previous quarter and up 100% compared to the previous year. We anticipate PUF-based security IPs to continue its growth momentum in H2 and beyond.
For MTP technology, accounted for 7.7% of total licensing revenue, decreasing 39.3% sequentially and decreasing 23.7% year-over-year. Royalty from MTP decreased 1.1% sequentially, but increased 67.7% year-over-year. In the first half of 2022, the licensing and revenues are as follows. NeoBit licensing revenue increased 2.6% year-over-year, and royalty increased 15.7%, accounting for 34.5% of the total revenue. NeoFuse licensing and royalty revenue grew 13.1% and 69.8% year-over-year, respectively, contributing to 56.5% of the total revenue. PUF-based security IP licensing revenue increased 609.9% year-over-year, while royalty revenue increased 100%, accounting for 3.6% of the total revenue.
MTP technology licensing revenue decreased 44.6% year-over-year, but royalty revenue increased 82.1%, accounting for 5.4% of the total revenue. Now, let's look at the royalties for 8 in and 12 in wafers. For 8 in wafers, which accounted for 51.1% of royalties, increased 12.1% sequentially and 56.3% year-over-year due to the growth in wafer shipment and ASP from the increasing penetration rate for of various applications. For 12 in wafers, contributed to 48.9% of royalties, increasing 10.3% sequentially and 69.1% year-over-year due to the increasing penetration rate for 28 nm and below. In total, 177 product tape-outs were completed in the second quarter, with 76 tape-out increasing significantly. We will provide more information in the management report.
In the next section, I will address our future outlook. We expect the growth of revenue to continue in the third quarter. For licensing revenue, licensing revenue will grow due to the continued strong demand for our IPs, especially NeoFuse and the PUF-based security solutions. For royalty revenues, 8 in and 12 in royalties will continue their growth momentum from the increasing penetration rate in various applications. Increasing new tape-out from 6 and 7 nm will also drive higher ASP and the royalty growth further. Moving on to the new business development. PUF-RT, Root of Trust IP, and PUFcc, Security Co-Processor IP, continue to be adopted by applications in IoT, industrial IoT, FPGA, data processor unit, DPU, CPU, set-top box, mobile storage, UFS, and automotive.
Our cooperation with Arm is progressing very successfully, and we anticipate more joint marketing activities before the end of this year. For new IP technology development, 22 nm eNVM IP is adopted by wearable and IoT applications. For NeoFuse, it's being licensed to multiple foundries as embedded flash solutions in security in specialty processes, targeting smart power and smart MCU-related applications. PUF-based IPs have tape out in N5 and are developing in N4 and N3. We successfully developed PUF-based embedded flash solutions to protect digital assets. This concludes my comments. Next, I will pass the time to Charles. Thank you.
The next section, I'm going to talk about why is random number generation important in gaming? Actually, random number generation is also very important in security, but today I was specifically talking about application in gaming. You might recall that, in my last talk, I talked about metaverse security and gave a brief overview of the seven layers of the metaverse. To refresh your brains, the conceptual framework of the metaverse consists of seven layers. The first layer is what consumer will be experiencing and goes all the way to the backbone of the metaverse, such as the service and equipment providers. Today I will be diving deeper into how PUF-based technology can apply to the experience layer of the metaverse, in particular, the role of random number generation in gaming. Okay.
Please turn to page 14. Okay, random number generator, abbreviation is RNG, are algorithms or hardware components that create random values. In gaming, random numbers determine random events, such as your chances of picking up a rare item or even which shape of a block you get on Tetris. Video games obtain their variables from naturally changing local values. For example, a game console's internal clock or the sequence of buttons you pressed. Sometimes these numbers are easy to hack, especially for seasoned gamers. Please turn to page 15. Using role-playing games, abbreviation is RPG, as an example, players typically complete missions by slaying monsters, challenging bosses, and acquiring powerful items. As you play through the game, the monsters you kill will randomly drop new equipment where it can then be looted.
Every item has a quality level. For simplification purposes, we will talk about the common items and the legendary items. When the monster drop an item, the game randomly determines its quality, with chances for a legendary item being extremely low. In mobile RPGs, while the game is free to play, micro transaction option allow gamer to buy in-game items that supposedly guarantee certain weapon drops. The drive to acquire better items keep people addicted to games, and they're spending a lot of money. Okay, please turn to page 16. About the software versus hardware random number. In software random numbers, when developing computer games, programmer usually use seeded software-based random numbers, which use a seed number to create their numbers through a mathematical algorithm.
Each time a new number is generated, it is built upon the seed number and the past values, resulting in a sequence of random numbers. However, the seemingly random output sequence is deterministic because the seed is a fixed number, so the sequence is reproducible. A good real-life example is programmers who use a certain logic or patterns to determine random numbers. Typically, software-based random numbers are good enough for and often used in games to offset players' chances and they keep the game exciting. In the role-playing game example's case, the random number will determine the weapon revealed during a drop or micro transaction purchase. About hardware-based random number generator, I previously mentioned that computers need the physical world's randomness to generate true random number. A good real-life example is leaves that fall from a tree.
The location where the leaves land will be truly random and unpredictable. Similarly, silicon devices themselves generate noises that are random in nature. While those noises are smaller, we can design circuit to amplify or accumulate these noises, then we can digitize the analog noise signal into digital random numbers. Please turn to page 17. While software-based random numbers keep game unpredictable and fresh, they are criticized for their lack of true randomness. A computer cannot just put out a random number as easily as rolling a dice, which is why today's gaming world often uses software-based random number generators, because not all system platforms have entropy harvested from the physical world. Moreover, if the random numbers are generated with a specific platform, they could potentially be controlled, compromising the fairness of the random numbers.
Because of this, many question if in-game purchases guarantee anything. Many players spend thousands of dollars on in-game purchases, and the certain micro transactions have been compared to a game-gambling simulator, leading to controversies in the gaming industry. Some countries have even banned certain games since it violates anti-gambling law, as seen in these articles. In fact, Taiwan's Ministry of Economic Affairs recently announced that they will require game companies to disclose their odds of winning in the face of these unfair game practices. Thus, replacing software-based random number with true hardware random number is an inevitable trend to create a gaming ecosystem with better fairness. Please turn to page 18. What does the true random numbers affect the game industry? First of all, let's look about the player.
From the player's perspective, well, it's an RPG or speed game or gambling game, et cetera. Credibility is important. Players want assurance that there is some form of fairness in their games. Many people go so far as to look at the data and the percentages around games to determine if the results they are getting and the money they are spending will have a fair outcome. For the game providers, it is vital to have a verifiable, quantifiable RNG that provides necessary transparency to players. About the digital asset perhaps an overlooked aspect is the potential item purchased in these games. As the world transforms, items used and purchased in-game, such as the weapon we mentioned in RPG games, can evolve to NFT.
With the involvement of the virtual assets, the credibility of NFTs have become more important than ever. Assets need to be traceable from their origin to determine their authenticity. Furthermore, NFTs also require security protections. Please turn to page 19. How do you generate those random numbers and how do you protect the assets? With our PUF-based TRNG, this become possible because it uses an on-chip physical entropy source to produce a secure and systematic numbers. Generating random numbers on the blockchain decentralize the process of generating random numbers from the providers to the third party, bringing more transparency, fairness, verifiability, and the tamper resistance to the random number generation process. Since game play requires massive data and is played by numerous players worldwide, many random numbers are needed.
Implementing PUF TRNG on blockchain nodes will produce enough random numbers on the chain to accommodate the volume of random numbers required. The game servers will request random number from the blockchain nodes, which operate in games. Once produced, the random number will be uploaded to the blockchain. Since blockchain is an open database, it maintains a public record of the random number used in gaming. Given this record, everyone can check the random number used in each micro transaction to verify whether the random result is fair or not. The application of our PUF TRNG can further extend to creating secure private keys that encrypt online data. The PUF-based OTP can even store these secret keys as a result. Every time a transaction takes place, such as sending cryptocurrency, the key pair can be used to secure your transactions.
Security is critical in the future when game-based transaction promote the exchange of NFTs and other valuable assets. Our PUF-based security solution can be easily and widely used in gaming applications, which is an important part in the experience layer of the metaverse. This conclude my presentation on this random number generation. Thank you.
Thank you, Charles. This concludes our prepared statement. We will now begin the Q&A session. Please submit your questions in the input box on the webcast window and you will enter a queue. Should you wish to raise your question in Chinese, we will translate it to English before our management team answers your questions. We will now collect the questions and begin our Q&A session. This quarter, we have prepared a Q&A brief opening statement. Li-Jeng will first begin the statement in Chinese before I translate it to English.
谢谢大家来参加。那还是一样，就是说从上个上季开始，我们会开始有这个中文的回答。那我想大家比较care的还是在QA的部分。好，那上次法说的问答部分，我们花很多的时间解释这个半导体下行循环中对公司的影响，主要是公司的营运呢不涉及制造跟成品，所以没有库存跟折旧的费用。那在不景气，客户更会加速研发，是我们导入新的IP最好的时候。这个大致上是上次法说我们所deliver的一个讯息。那从上次法说到现在呢，客户的、晶片的客户已经开始库存修正了，那晶圆厂的影响也陆续显现，当然是从三线、二线到一线，陆续会开始。那从客户法说透露的信息看来呢，这个库存调整可能会长达数个季度。当然有人说两个季度，有人说三个季度，有人说四个季度，我想大家都是还在看当中。那投资人很多问题都跟这个有关，那因为我们每年在晶圆厂生产的产品种类相当的多，至少超过五百个以上。那制程分布呢也涉及全世界二十家代工厂，基本上就是所有代工厂，那跟数百个制程平台。所以我们没有办法就投资人讲的一个单独产品去做分析，我想神都没有办法，OK。况且我们在主要的应用呢都是持续增加渗透率，不管是新的客户呢，或者是新的更多的产品的导入，特别是在过去两年累积超过一千多个产品的订单，那这些还没有量产的新产品是不会有库存的问题。所以我们现在能够做的给投资人呢，就是把我们公司所有的资料都捞出来，OK，历史的资料，希望呢让大家对我们公司未来会有一个大略上的了解。那现在我就请这个Michael呢先就这部分说明，用中文，那等一下Mini我们会再有英文版。好，那请Michael开始。谢谢。
好，谢谢。那请各位看一下我们这张表，这是我们从2009年以来的营收数字来做统计，是以美金来做计价。NTO所指的就是每年的这个新的设计订单的数量，也就是导入公司IP的晶片产品数。营业额含的授权金以及权利金。一般来讲，权利金占了70%以上。当年tapeout的贡献设计授权金至少要经过一到两年之后才能贡献权利金。所以当年主要的营业贡献是来自于一到两年前或更久以前客户的tapeout。以我们最近的技术NeoBit为例，主要的应用在于八寸以及少数的十二寸，像是九零跟五五奈米的应用，例如DDI。在过去几年陆续有客户往更先进的制程移动而转用了NeoFuse，但同时每年还是有两百多个新的产品导入NeoBit。这些新的产品有些是现有客户导入越来越多的产品，或是同样的产品有更多的客户导入，或者是新的客户、新的产品。这种新的tapeout刚开始的时候不会有库存的问题。NeoBit一直是我们ROE最高的技术，因为大部分的制程开发都已经完成，客户使用的IP很大的部分是来自于现有的library，需要的RD资源相对来讲少了很多，这个是一个很稳定的现金流。以NeoBit为例，从第一个客户导入到到达主要代工厂八寸晶圆20%的渗透率，这个大概花了十年的时间，之后就一直很稳定地在一定的区间内。接下来我们来看第二个技术NeoFuse，我们在2010年发明，在2013年拿到了专利之后，正式授权给晶圆代工厂，开始贡献少量的授权金。在2015年，第一个晶片客户瑞昱开始导入产品，到了2019年，量产的晶圆达到一百万片之后，开始有了显著的成长。NeoFuse的市场主要应用在十二寸以及DRAM。我们认为可以应用的市场至少是NeoBit的十倍以上。现在技术开发已经来到了四奈米跟五奈米，客户导入到六到七奈米跟七奈米，而二八、十六、十二、七奈米的量产贡献也才刚开始。另外，我们第三个成长动能相关应用，在第二季各位也看到了，授权金有大幅的上扬，还有MTP也开始导入一些比较量大的应用，这些新的技术与应用所带来的授权金以及权利金的贡献，可以减缓既有客户产品因为库存调整而降低投片量可能带来的冲击。另外，客户库存调整并不会改变我们公司的本质与竞争力。公司的设计授权案需求仍旧相当的强劲，新技术的拓展也很顺利。我们对未来长期成长仍旧很有信心。谢谢。
Thank you, Michael. I will now do the statement in English and this will be the format of our Q&A session. In our Q&A session of the previous quarter, we spent a lot of time explaining the impact on the company during the semiconductor down cycle. Since our company operations do not involve manufacturing processes and finished products, we face no inventory and depreciation costs. In fact, the downturn is accelerating our customers' R&D, which is the best time for us to license our IPs to these customers. Since the last quarter, the industries have begun inventory digestion, and the impact on chip and foundry customers has emerged. According to the information disclosed during our customers' earnings calls, the inventory adjustments will last for several quarters. Investors have a lot of questions related to this.
More than 500 products embedded with our IPs are manufactured in more than 20 foundries and hundreds of process platforms every year. Because of this, it's very difficult to analyze it in a very simple way. In addition, there are more than 1,000 new tape outs accumulating over the past two years in the pipeline ready for production. These new tape out products have no inventory issues. To begin our Q&A section, let's invite Michael to explain this further, and hopefully, we can provide a rough picture for you.
Please turn your attention toward the slide. The table is the statistics of our revenue since 2009 in US dollars. The NTO in this table refers to the number of new tape out each year. In other words, the number of chip products that have adopt our IPs. The revenue includes both licensing and royalties, with royalty accounting for more than 70% of our total revenue. Tape out will include design licensing fee for that year. We typically receive royalties at least 1-2 years when this new tape out move to production. Then, we can receive royalty based on the wafer volume and the wafer ASP. Primary business contribution for each year is the result of customer tape out from 1-2 years ago or before. Let's take our first technology, NeoBit, for example.
Mainly used in 8 in and some 12 in 90 and 55 nm for DDI application. In the past, customers have migrate to more advanced process and switch to NeoFuse. At the same time, there are still more than 200 new product adopting our IP each year. NeoBit actually took about 10 years from the first customer adoption to achieving a penetration rate of 20% for 8 in at the major foundries and the country, continuing to perform steadily. NeoBit is our highest ROE technology, as most of the IPs adopted by customers are from existing library, requiring less R&D maintenance. Let's look at the NeoFuse, which kick off in 2013 and reached 1 million wafer shipment in 2019. NeoFuse is mainly used in 12 in and DRAM. We believe that the potential market is at least 10x that of NeoBit.
The technology development for NeoFuse has already reached 4 and 5 nm and the customers have started mass production in 6 and 7 nm, still with very big potential for growth. In addition, our third growth driver, PUF-based related technologies, also saw a sharp increase in licensing fees during the second quarter, and the growth momentum is just at the beginning. MTP has also been introduced to large volume applications like PMIC and SPD for DDR5 module. In addition, customers' inventory correction will not change our fundamental and core competence. Our design activities still remain very strong. All in all, we remain confident in our long-term growth despite the current industry headwinds. Thank you.
我们现在已经开始有很多问题进来，那我们就一一，先中文，然后再英文，回答。那第一题呢，是已经听到二线跟三线的晶圆代工厂开始降价，那请问这一部分对公司的影响为何？Michael。
去年主要都是二线的晶圆厂在调整价格，而且对标售的少量急单涨幅非常的大，这类的涨价在景气下滑的时候影响是最大的。我们去年平均的ASP上涨大概为4.9%，有很大的比例是因为二八奈米所占的比重增加所带动的。今年上半年，因为最大代工厂正式涨价，加上我们12跟16奈米以下的产品开始量产，带动平均每片权利金上涨大概9.5%。所以二线代工厂涨价或跌价，对公司平均的权利金影响不大。我们对公司未来每片权利金上涨趋势的看法并没有改变，原因是会由先进制程比重上升来带动。另外，MTP跟PUF-based solution的权利金会比OTP高很多，随着这两类技术量产比重的增加，也会带动整个ASP的成长。谢谢。
The question is, second-tier foundries may start to reduce their wafer price. What impact does this have on eMemory?
Average ASP increased by 4.9% last year when the second tier foundries increased their wafer price the most. Part of the reason behind last year ASP growth was driven by more contributions from 28 nm and below. During the first half of this year, our ASP royalty per wafer increased 9.5%. Part of the reason was due to the wafer price increase from our largest foundry customers. In addition to continuous increase of more leading edge contribution. Therefore, the price increase, decrease of the second tier foundries have less effect on our average royalty per wafer. Our view on the growth of our royalties per wafer has not changed as we will see increasing contribution from more advanced processes. Furthermore, increasing adoption of MTP technology and the PUF-based solutions will also enhance our ASP.
Since the royalty rate or royalty per wafer are much higher for those technologies compared to OTP. Thank you.
再来一题是，请问公司的技术能否进到最先进的制程？为什么最先进的制程进展这么的慢？为什么客户不用？那大部分先进制程的客户用什么？Michael。
这是一个很好的问题哦。因为在晶圆厂开发最新的制程的时候，一般都是用晶圆厂内部的元件库，叫做基础IP，其中一定会有OTP，基本上就是foundry自己的这个所谓的eFuse，就是polyfuse。所以过去以来，最先进的制程都是先使用eFuse来作为客户对一些参数的设定，ID或者是其他需要OTP功能的一个使用。我们的话是会在制程稳定之后，通过晶圆厂长达一到两年的各种验证，才会提供给客户来使用，这时候才能够catch到的市场，通常就是到第二代或是第三代的产品应用，就像现在的六奈米跟七奈米，客户大部分是从12奈米跟16奈米migrate过来的，而这一类的客户在前一代的产品制程大部分都还是使用eFuse，会换成我们的OTP IP都是因为density或是security的需求。因为eFuse一般来讲最多只能写入像4K或8K b。我们的IP能够写入的density大概有100倍以上。还有因为安全等级的需求越来越高，过去使用eFuse写入的密码会被反向工程而被害，而必须使用更高等级的安全储存，所以就会换成是我们的IP。由于客户储存的density，还有安全上的需求，我们一直都有在最先进的制程的客户的要求，希望我们能够用我们的IP。加上我们最近跟Arm合作的机密运算新的Armv9的架构，很多最先进制程的客户会有这方面的需求，所以我们正密切跟主要代工厂讨论如何加速我们的IP在最先进制程的验证开展。谢谢。
This question was can eMemory IPs work for 2 and 3 nm? Why is the progress for advanced process adoption slower? Why haven't customers started adopting it? What do the most advanced processes customers currently use?
Foundry usually begins its development for the most leading process with its own foundation IP, typically with its own OTP solution called eFuse. Most advanced processes in the past have used the eFuse for parameter setting, ID or other functions that required OTP. For our IPs to be provided to customers, we need to pass all the verifications foundry required, which typically take 1- 2 years. Once our IPs are qualified, it's usually already too late for the most leading edge customers. For example, our design activities just significantly increased in 6 and 7 nm after our IPs were qualified with customer production records. Most customers' applications we engage now migrate from 12 and 16 nm, and most use eFuse in their previous generations.
The reason customers replace eFuse with our IPs is to meet their density or security requirements. Because eFuse can only write 4K b at the most, while our IPs can accommodate density 100x or higher. Even worse, eFuse can be easily hacked by reverse engineering. Due to the increasing demand for security and much higher storage density requirements, customers are constantly requesting our IP solution in the most leading-edge process. Moreover, our cooperation with Arm's confidential computing architecture can be adopted by the most leading-edge customers. We are working with customers and foundries to accelerate our qualification progress and hope we can catch up in the future. Thank you.
请问公司在车用相关的应用有哪些？那成长的空间为何？Michael。
有很多既有的客户事实上都已经往车用的方向去发展，譬如说driver、MCU、CIS、ISP、网通跟PMIC，这边会把公司的IP带进车用的领域。举例来说，像Dialog是我们第一个design house的客户，从2003年开始就已经导入我们的IP，到现在几乎所有的产品都有使用我们的IP。在去年Dialog被Renesas并购之后，也就大幅地跨入了车用的领域。所以目前除了PMIC以外，还有像车联网、网通、Bluetooth等的相关晶片。另外，我们第一个NeoFuse的客户Realtek，也在它的一些车规的产品导入我们的IP，现在更进一步准备导入PUF，加强安全等级。我们的IP已经导入了国际大厂七奈米的ADAS，目前已经也开始做量产。随着车用半导体晶片对于良率、效能以及安全等级的要求越来越高，我们很有信心在车用领域的渗透率也会加速进展。谢谢。
The question that was asked was, what are eMemory's automotive related applications? What is the room for growth?
Many of our existing customers are developing or already in automotive, such as driver, MCU, CIS, ISP, networking, and PMIC, which bring our IPs into automotive applications. For example, Dialog Semiconductor is our first design house customers. They start adopting our IP in 2003. Now almost all their products have our IPs. After being acquired by Renesas last year, their target is to extensively expand into the automotive field, taking all our IPs along with their expansion. Our first NeoFuse customer, Realtek, also adopt our IPs in all their automotive solutions. Realtek also start to adopt our PUF Root of Trust to upgrade their security function. Besides existing customers and applications, we have 7 nm ADAS customer already in mass production.
We believe the penetration rate in automotive related application have a big potential for growth as our IP provide chip customers with better yield, higher functionality, and counterfeit protection and safety for car connection. Thank you.
台積電提到要擴充二十八奈米特殊製程的產能，請問這類特殊製程跟公司的IP有關嗎？Michael。
谢谢。以目前晶圆厂提供的这个特殊制程，譬如说MEMS、CMOS image sensor、embedded non-volatile memory、RF analog、high voltage跟这些BCD power process，这些很多都跟我们的IP有关系。我们可以预期，随着更多的特殊制程产能扩展，我们会持续提高我们在晶圆厂的渗透率。谢谢。
The question was, TSMC mentioned that they would expand their capacity for specialty processes, especially for 28 nm. What is the impact to eMemory IPs?
Foundry's specialty process are MEMS, CMOS image sensor, embedded non-volatile memory, RF, analog, high-voltage, and BCD process. All are related to our IPs, like a high-V for driver, BCD for PMIC, and the MEMS, CIS, RF, analog, and the embedded emerging memory. This will speed up penetration rate in foundries. Thank you.
在不景气的时候，客户都会 cost down，都会要求供应商供给时间降价。那因为公司的毛利是 100%，那公司是否会被要求降价？Michael。
好，谢谢。这是一个很好的问题哦。我们知道说我们的公司毛利是100%，这是因为我们不涉及生产制造，没有销货的成本，这个是一个产业的特性，跟降不降价是没有关系的。对我们的生意模式来说，就是跟晶片客户收取相对低的设计授权费，特别是很多大客户都是采用这个年费制，他只要付很少的年费，就可以无限地给报，使用既有的已开发的IP。只有这种特殊客制化的IP才需要额外的付费。这种模式对晶片客户在不景气的时候就很有吸引力，因为在不景气的时候，客户既要加速新的产品研发，同时又要控制费用，这就是我们跟客户共体时间的一个方法。只有在成功的design win之下，我们才能进入量产阶段，然后从晶圆厂收取相对应的权利金。而对于晶圆代工客户，在产能相对没有那么满的时候，就会在既有的制程开发特殊制程，加入制程的应用面。譬如前面所提到的这些特殊制程，不论是新型的eNVM、MEMS、CIS、RF、BCD、FinFET mixed-signal、High-voltage，这些都是我们公司的强项，等于我们投入更多的RD资源，跟客户一起帮产品跟技术平台来做加值。谢谢。
The question was, in times of downturn, customers will cost down and ask suppliers to reduce prices. Since eMemory's gross profit is 100%, are you facing the pressure from your customers?
At 100% gross profit because we don't have the cost of goods sold. That is our business nature and has nothing to do with the pricing. Our business model charges a relatively low design license fee from chip customers. Many large customers are annual fee based. As long as they pay a small amount of annual fee, they can tape out as many as they can by using our existing and developed IP library. Only customized IPs require extra payment, but it's still very low compared to other IP vendors. Our main business relies on royalty, which only occur when customer successfully design win and move into production stage. This business model is very attractive for chip customers, especially during the downturn, when they need to speed up R&D and control expenses at the same time.
For foundry customers, we work even more closely with them to provide our R&D support to help develop specialty process for added value when utilization rates are relatively low and still with a relatively low license fee. Thank you.
公司有没有并购或者是筹资的计划？
这边我也要特别来说明一下，因为前一阵子有冒充力旺的公司名义来做增资，然后欺骗投资人要求汇款的一个事件，那我们在此也做特别的声明，我们没有任何的募资的一个活动。我们公司从2001年以来，一直都是靠着新的发明的技术，扩大应用的市场的有机地成长。从2005年赚钱以来，也一直维持90%以上配息率来回馈给股东。这有别于国际大厂的这个，这些IP公司，很多都是靠并购来增加IP的portfolio跟维持成长。我们所开发的新的技术应用，一定都是跟既有的核心技术有关的，目前发展空间还相当的大，所以没有考虑向外并购。谢谢。
The question was, does eMemory have any plans for M&A or raising capital?
There was an incident in Taiwan involving some fraud company using eMemory's name to raise capital. This company defrauded individual investors by asking for a money transfer. We are formally answering this question and clarifying that we do not have any fundraising activities. Since 2000, eMemory has relied on organic growth by inventing new technologies one after another. Since turning profitable in 2005, we have maintained a more than 90% dividend payout policy, which is different from most large international IP companies' buyout growth strategy to increase their IP portfolios. Our technology development strategies are all based on our core competence related to our existing technology and platform. There is still considerable room for future growth, so we don't consider any mergers and acquisitions. Thank you.
刚跟 Arm 的合作上面，这个 PUF-based，OK，不只是 NeoPUF，OK，PUF-based，因为我们是一个整个 solution，OK，是否为 reference design 还是 recommendation？
Charles。
目前跟 Arm 的合作还在合作验证阶段，目前算是 reference design，那之后会跟 Arm 开始 joint promotion 的时候，Arm 就会直接 recommend 客户采用我们的方案，因为里面所用到的属于 PUF 跟 OTP 的部分，是属于 hard macro，是需要在制程上 qualified 的。那目前市场上也只有力旺有这样的一个 solution。
The question that was asked was, in the cooperation with Arm, is NeoPUF or PUF- based IP a reference design or a recommendation? Charles will answer this question.
Currently, our cooperation with Arm is still at the verification stage, which is considered as a reference design. When joint promotion starts with Arm, they will directly recommend customers to adopt our solution. Because the PUF and the OTP belong to eMemory and they need to be qualified on foundry processes in advance. Only eMemory solutions are available.
要通过Arm的PSA Certified，每个不同的core都需要重新认证一次吗？比如说Cortex-M3、Cortex-M0、Cortex-A9，就需要分别认证三次吗？Charles。
不需要重复认证。我们的 PUF crypto coprocessor IP 已经通过 security IP 所需要的所有认证。一旦客户在 Arm 的架构上使用我们的 IP，就可以帮助客户快速通过 device 在 security 方面所需要的认证。
That question was to pass Arm's PSA certification, does each core need to be recertified? For example, does Cortex-M3, Cortex-M0, Cortex-A9 need to be certified three times separately? Charles will answer this question.
Okay, let me remind everybody PSA means platform for security architecture. Basically, this certification is basically for the security functions. Again, there's no need to recertify. Our PUFcc crypto coprocessor IP has passed all certifications required. We are cooperating with Arm by combining PUF crypto coprocessor with Arm's Corstone and the Mbed ecosystem. We will help customers quickly pass level three device certifications.
第二季的时候，NeoPUF 或 PUF-based 的 license 大增，主要是哪些应用的案子呢？那这些案子大概会在什么时候量产？谢谢。
主要产品是 AI、SoC、FPGA、Secure MCU、Set-top Box，还有 HPC 相关的 CPU 跟 DPU。今年 design in，预计快的话，明年下半年就会量产，贡献权益金。
The question was, the license fee for NeoPUF increased significantly in the second quarter. What kind of applications contributed to this progress? When will these applications start to mass produce?
There are AI, SoC, FPGA, secure MCU, set-top box, and HPC related CPU and the DPU. We expect these products will enter mass production in the second half of the next year and contribute to royalties. Thank you.
怎么看那个MediaTek，就是联发科，它去这个Intel Foundry下单，这对eMemory影响为何？请Michael回答。
这部分我们是中性的来看待，因为这两家都是我们的客户。
The question was, what is the impact of MediaTek's IFS order placement on eMemory's future? Can you explain from both the foundries and fabless point of view? Michael will answer.
There are little impact to us, as TSMC and Intel are all our foundry partners. Thank you.
eMemory 的 IP 商 业 模 式 ， 或 者 是 它 做 的 事 情 ， 跟 其 他 IP 公 司 有 什 么 差 别 ？ 因 为 我 想 大 概 没 有 投 资 人 搞 清 楚 。 好 ， 那 我 们 请 Charles 来 回 答 这 个 问 题 。
现在的IP公司基本上有两种，一种就是纯IP设计公司，我们称它为纯IP设计公司。这些公司使用晶圆厂现有的电晶体来设计特殊功能的IP，比如说像standard cell、像SRAM，还有高速的IO等这些IP，那他们直接授权给晶片设计公司，像Arm、Synopsys、和M31，还有RISC-V相关的公司。那另外一种呢，是除了设计IP之外，它还有自己的半导体技术，那这些公司有自己的电晶体技术，然后授权给晶圆代工厂去开发，那像我们的OTP，还有MTP，还有Flash。这些公司呢，也会用自己发明的技术呢，帮这个fabless的公司设计IP。那像这些公司就比如说像eMemory、利旺，还有SST，就是属于这类型的公司。那SST的Flash，SST主要的IP是embedded Flash，它只是使用在——它的IP只用在嵌入式的Flash，也就是embedded Flash。但是eMemory的OTP呢，涵盖所有的制程，所以我们的OTP的市场会比这个embedded Flash的市场大很多。
The question is, what is the difference between eMemory's IP business and other IP companies' IP business?
Okay, there are two types of IP companies. One is pure design IP company. These companies use existing transistors to design specific functional IP, such as standard cell, SRAM, high speed IO etc. They license to fabless companies directly, and our companies, those company are like Arm, Synopsys, M31, and RISC-V related companies. The second type of companies which has technology by its own and also designed the IP for the fabless companies. This company have their own device technology developed at the foundry, and they license the technology to foundries, such as OTP, MTP, and the flash. They also use the device they invented to design IP for fabless company.
This company are, for example, eMemory and SST. SST's Flash sale is only on the embedded Flash process, while eMemory's OTP sale covers all the processes. Therefore, the OTP's market size is much bigger than Flash.
另外，为什么 PUF 的授权金是到最近，或者是突然间会开始成长？那请 Charles 回答。
主要是因为我们推出了使用上简单但又安全等级很高的安全加密方案。安全性能是现在这个 edge device 连接到这个云端服务的一个基础。随着安全成为这个 edge 和云端设备应用的必要条件呢，大家就会想要一个可以简单实现高安全性能的解决方案。那我们用这个 PUF 的这个 IP 呢来解决这样的一个安全方案，那它包含了结合了安全储存，还有这个信任根。那在过去要从头建一个安全的系统，是需要很复杂的这个加密运算才能完成，但是我们用我们的 PUF，它可以产生这个天生的乱数，那晶片可以更容易也更快地这个得到安全的功能，不需要这个复杂的加密处理，那这样就能够让晶片不会增加额外的面积，也不会消耗太多的功率，跟牺牲这个运算的速度。
The question was what is the reason why PUF's license fees began to increase recently?
Okay, the reason for the fast growing demand of our PUF-based security IPs is because a high security architecture can be simply implemented by using the PUF- based solution. The security is now a required element to be connected to cloud service. As security becomes necessary for application in edge and cloud device, high security solution that can be easily implemented are preferred. Our PUF-based solution provide integrated secure storage and secure root of trust, are becoming a popular choice for security applications. In the past, creating a security system require complicated cryptographic processing; with our perfect randomness PUF IP, security function can be implemented much easier and faster into chip functions without complicated crypto processing, which typically increase chip size, sacrificing speed and power consumptions.
跟其他公司比起来，eMemory 跟 PUFsecurity 的加密处理器有什么特别？
以前如果有安全需求的时候，晶片公司必须找不同的IP供应商来提供这个安全储存，还有第二个信任根，还有第三个加密处理器。那这些晶片公司在拿到这三个不同的IP之后，他们还需要想办法把这三个IP整合起来，然后去通过各项安全认证。另外他们还需要implement这相关的软体韧体，才能整合到系统端的界面。但是我们的这个PUF crypto coprocessor将这所有的三个元素整合在一个安全的解决方案，也就是说，eMemory我们有这个安全储存的IP，我们有这个PUF做信任根的IP，那我们自己也开发了这个加密处理器，所以我们可以把这三个重要的security的元素整合成一个安全的解决方案。同时我们也有自己做这个，提供这个额外的所需要的这个软韧体，然后跟API，然后方便客户整合到系统端。那因为我们的解决方案是建立在我们现有的OTP平台上，那我们能够快速提供解决方案在我们目前拥有的这个六百多个OTP的平台上，我相信目前没有其他security的IP公司能够做到这一点。目前其他的security IP的公司主要都是在做这个加密处理器的设计，但是最重要的信任根，还有安全储存，他们并没办法做到这一点。所以即使像这些
做加密处理器的IP公司，它的客户要用这个安全的解决方案的时候，它除了跟这些加密的处理器的公司取得IP之后，它还是要来跟eMemory取得这个安全储存的OTP跟信任根。
The question is, how is eMemory and PUFsecurity's crypto coprocessor unique compared to others?
Okay, in the past, when people are seeking for the security solution, they have to look around and search for a couple of providers to provide number one security storage, number two Root of Trust, and number three crypto engines. After they have all these three IPs, they still need to figure out how to integrate all this into a solution to become a security coprocessor. SoC designers need to add firmware and API such that it can be easily embedded into SoC. But our PUF crypto coprocessor already integrates these three elements into one security solution, and is able to provide firmware and API to facilitate the design of SoC. Since our solution is built on our existing OTP process platform, we are able to provide our solution quickly, as we currently have more than 600 OTP process platforms ready. No other security IP company is able to do this.
请问 PUFsecurity 通过 Riscure Common Criteria 认证后，这个有点技术，是否可以更快速进入相关安全 IP 应用市场？Charles，嘿。
我们产品通过这个Riscure的认证，对客户带来的好处是客户在用我们的IP去做它的产品设计的时候呢，就可以让产品快速通过安全的认证，或是直接通过认证。客户就不用花额外的人力、研发人力和时间去开发，也不用再花额外的认证费用跟时间来取得认证。可以加速客户产品开发的认证时程，所以可以加速客户的这个产品上市的时程。而且能减少客户的研发人力跟研发费用。
The question was, PUFsecurity recently obtained the Riscure Common Criteria certification. Does this mean that PUFsecurity can enter the security IP application market more quickly?
Well, the benefits for customer are to use our crypto coprocessor. If customer adopt our solution for their product design, we can help customers pass security certifications without extra R&D and certification costs.
美国晶片法限制拿补助的公司不能去中国，那对公司是否有影响？Michael。
这个晶片法是补助在美国盖厂的晶圆厂。对于我们来讲，我们并没有拿到补助，而只是会授权给拿到补助盖厂的业者。所以我们并没有在这个被限制的范围。
The question was, the US CHIPS and Science Act restricts those who received subsidies from going to China. Will this affect eMemory?
The CHIPS and Science Act subsidize foundries that build fabs in the U.S. is only applicable to those who build fabs with the money from the subsidies. Since we didn't receive any subsidies, we are not within the restricted scope. Thank you.
请问七月授权金较之前有很明显的下滑，是否受到景气下滑的影响？Michael。
这个部分主要是因为有些客户的授权金，因为一些递延的关系，在我们八月跟九月就会看到明显的回升，这个部分是跟景气没有关系的。
The license fee in July has decreased significantly compared to previously. Was this because of the economic downturn?
The drop in our license fee was mainly referred to the deferred licensing from several customers, so we should see license up for August and September. Therefore, this part is unrelated to the economic downturn.
请问 MTP 相关进展为何？那大概什么应用是会用到 MTP？Michael。
在第二季MTP的授權金下滑，最主要是因為去年我們有一大筆的來自China AMEC的一個授權案，那授權之後還要花幾年的時間去做開發，才有辦法商用化，進而貢獻權利金。而在權利金的部分，因為前幾年導入的應用已經開始陸續量產，而且我們也看到了一些成長。此外，像NeoEE，我們這個也是其中的一個MTP的技術，已經導入像DDR5模塊的這個SPD跟PMIC，那這個部分會隨著DDR5在未來幾年放量之後，就會看到這個MTP的權利金有更顯著的一個成長。
Can you update us on the progress of MTP? What applications will require MTP?
The licensing of MTP dropped this year was mainly due to the one-time big license payment from China AMEC fab last year. It will take a few years to commercialize before it can contribute to royalty. In terms of royalties, we have already seen significant growth in MTP due to the mass production of applications over the previous years. In addition, our NeoEE, a kind of MTP related technology, was introduced to the SPD and PMIC for DDR5 module, which will drive MTP royalties grow further once the adoption for DDR5 increase. Thank you.
Uh,
前面有提到，我们的IP是这个原生的发明，没有依赖美国的技术，也在全世界主要地区都有专利权，我们也没有拿任何政府的补助，所以不受任何国家政府的限制。
In terms of time, this will be our last question. If we didn't get a chance to answer your question, please email us directly. The last question is, can the US government restrict eMemory's security related IPs from being licensed to a Chinese company if eMemory wants to do business with the US government? Charles will answer.
Okay, as mentioned before, our IPs are our original invention. We have patent rights for our IPs in major regions of the world. We also did not receive any subsidies from these governments, so we are not restricted by any national government. Thank you.
We will end the Q&A session. Charles, please proceed with the closing comment.
For more information about our PUF-based security IP, we encourage you to visit our PUFsecurity website at www.pufsecurity.com, and check out our articles and other materials. Thank you once again for your patience and the support for eMemory. We will continue to work hard on IP innovations and the security solutions for our customers and bringing higher return for our shareholders. Thank you.
Thank you, ladies and gentlemen. Before we conclude today's conference, please be advised that the recording of the conference will be accessible within the next three hours. Thank you everyone for joining us today. We hope you will join us again next quarter. You may now disconnect. Goodbye, and have a.