Welcome to eMemory's first quarter 2021 webcast investor conference. Present today we have Chairman, Dr. Charles Hsu, President, Dr. Rick Shen, Vice President of Business Development and Spokesman, Mr. Michael Ho, Director, Ms. Li Yingqin, and Director of Finance Department, Ms. Teresa Kuo. The format for today's event will be as follows. First, eMemory's Chairman, Dr. Charles Hsu, will give an opening remark. Afterwards, eMemory's President, Dr. Rick Shen, will summarize our operations in the first quarter of 2021, followed by an outlook of our business. Next, Chairman, Dr. Charles Hsu, will introduce the topic entitled, "PUF is the Key for Zero Trust Security." 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 two 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 risk factors associated with the semiconductor and IT 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.
Okay. Thank you. Good afternoon, everyone. Thank you for attending our conference call today. As mentioned previously, we have entered a multi-year growth cycle. According to the royalty report received in the first quarter, the contribution of the 12-inch is accelerating, and its contribution will exceed 8-inch by the end of this year. Following the application of 28 nanometer process node, the applications of 60 nanometer and beyond are entering into productions, which will contribute to our royalty in the future. As for our new technology, we are very confident with the development and adoption across various markets. I will explain more about the importance of PUF for the security application in a short while. I will invite Rick to report our first quarter operating results and the outlook of our business. Rick, please.
Thank you, Charles. Good afternoon, everyone. I will first begin with our first quarter results. First quarter revenue was TWD 597 million, a sequential increase of 20.1% and 43.6% year-over-year, or up 22.2% sequentially and 51.5% year-over-year in U.S. dollars. The operating expenses were TWD 259 million, down 0.9% sequentially, but up 17% year-over-year, mainly attributable to expenditure increase, such as human resources expenses, rewards, bonuses, and the compensation of employees and the directors. This brings us to the operating income of TWD 338 million, with an increase of 43.5% sequentially and 74.1% year-over-year. Therefore, the operating margin increased by 9.2 percentage points sequentially, and then 9.9 percentage points year-over-year to 56.6%. Overall, our first quarter EPS was TWD 3.93, and the ROE was 54.6%. Now, let's move on to the revenue contribution by licensing and the royalty.
Licensing in the first quarter accounted for 29.7% of that revenue, up 14.6% sequentially and 56.3% year-over-year, or up 16.7% sequentially and 76.2% year-over-year in U.S. dollars. Royalties in the first quarter contributed 70.3% of the total revenue, increase at 22.7% sequentially and 35.8% year-over-year. Up 24.7% sequentially and 43.1% year-over-year in U.S. dollars. In terms of the revenue contribution by technologies, the results are as follows. NeoBit accounted for 15.4% of the total licensing revenue in the first quarter, increased at 3.3% sequentially and 13.4% year-over-year. Other royalty accounted for 50.8% of the total royalty, up 8.9% sequentially and 7.1% year-over-year. Mainly due to the demand and the content increases of the applications such as PMIC, MCU, and the sensor related.
NeoFuse accounted for 51.3% of the total licensing revenue in the first quarter, down 17.6% sequentially, but up 21.6% year-over-year. Its royalties increased 44.5% sequentially and 99.4% year-over-year due to the continuous production of existing and new product applications such as TDDI, OLED, ISP, multimedia, networking related. This brings the royalty of a NeoFuse to 46.7% of total royalties. Our PUF-based security IP contributed to 3.1% of licensing revenue in the first quarter. Although this technology has not contributed to any royalty, engagement with industrial leaders is still actively ongoing, thus we expect more significant contribution from PUF this year. As for MTP technology, licensing revenue increased twofold sequentially and a six-fold year-over-year to account for 30.2% of licensing revenue in the first quarter. Royalty from MTP decreased 3.2% sequentially and 8.2% year-over-year to contribute 2.5% of total royalty.
Currently, our MTP team is working with partners on developing MRAM, ReRAM, and AI memory. Both ReRAM and AI memory have been verified with proven results. Now, looking at the royalty from eight-inch and the 12-inch wafers. Eight-inch wafers, which accounted for 54.8% of the royalties, increased 10.2% sequentially and 15.2% year-over-year due to the demand and the content increases of the applications such as PMIC, MCU, and the sensor related. 12-inch wafers contributes to 45.2% of the royalties, increased 42.1% sequentially and 70.9% year-over-year due to the continuous production of DDI, OLED, ISP, DRAM, multimedia, networking related such as DTV, set-top box, Wi-Fi 6, Bluetooth, Ethernet, switch, and TWS. There were 155 product tapeouts completed in the first quarter, a record high quarterly numbers, reflecting increasing demand of our IPs. We will provide more information in the management report later today.
In the next section, I will address our future outlook. We expect the growth of the revenue to continue in the second quarter of 2021 and beyond. For licensing revenue, there is continuing strong demand from NeoFuse, PUF-based solutions, and MTP. We expect licensing revenue to continue its growth this year. For the royalty revenues, eight-inch and 12-inch royalties will continue their growth momentum. Eight-inch royalties will grow due to demand and the content increase for PMIC, MCU, and sensor related in 5G, automotive, and IoT related applications. 12-inch royalties will have strong growth as customer production are increasing for DDIC, OLED, ISP, DTV, set-top box, Wi-Fi 6, Bluetooth, Ethernet, and switch, TWS, DRAM, and others. In addition, royalty from 16 nanometer and below will start to kick in. We expect to see seven nanometer customer move into production and start contributing to royalty.
I'm so sorry that we had some technical issue. We are back. Sorry to keep you waiting. I will restart from the update in terms of our new business developments. For our new applications are centered on the business development of the hardware security. The NeoFuse in the advanced process nodes is being adopted by secure key storage and seeking the replacement of conventional eFuses. We expect that there will be a turn for the hardware security as applications are moving into more advanced process nodes. Our efforts in the past is gradually being seen with a higher adoption and penetration rate. The business activities of PUF-based security solutions are in progress in the applications of the IoT, industrial IoT, AI, blockchain, FPGA, data processor unit, that is so-called DPU, and mobile storage, UFS, and automotive.
In addition, our PUFrt and the PUFiot have been adopted by several customers across various applications. As for the collaboration with Arm, since the customer adoption cases have been very successful, we intend to expand the collaboration to more product applications in the future. For the new IP technology development, our six-nanometer OTP has demonstrated successfully silicon results and is going into qualification smoothly. As for the five-nanometer plus, it's the so-called N5P, it's on the way to characterization, and we expect to have good results in this quarter. In Q1, we have announced the adoption of our IP by Achronix for the FPGA hardware root of trust to enhance security at the semiconductor chip level. We also continue to develop our PUF-based solution to implement HSM. That is, hardware security module, which can be embedded in the chip to provide a security function for network applications.
Now, I will pass the time to Charles Hsu.
Okay. Sorry for the interruption just now. There will be a recording you can listen if you missed some of the information, and let us know if you have any question later on. Okay. I would like to share with everybody about how PUF is to be used in the so-called zero trust security. If you can turn to page 15, I would like to introduce the subject of zero trust, which has received significant attention recently as the security risk of the IoT becomes increasingly consequential and more widely reported. Basically, zero trust security has the following features as shown in page 15. The first is for the zero trust, it is never trust everybody, anybody, okay? It always verify. The second feature is only authenticated and authorized devices are permitted. The third feature is de-perimeterization security protection.
I will explain what is de-perimeterization security protection. The fourth feature, it is identity-centric policy. Let me explain what they are. The traditional security strategies and principles are based on castle and the moat or the so-called security parameter strategy. In a traditional network, employees who work inside the enterprise network are protected by Internet firewalls within the security parameters and are trusted by default. However, for those employees working remotely are left outside the security parameters and remain untrusted. Requiring them to provide, if they want to access back to the enterprise, we have to provide very strong verification for them to access the internal network. However, as many edge devices are being connected directly to the Internet, it is very difficult to provide a secure perimeter or boundary to protect everything inside the security network.
However, each device should utilize a mixture of encryption, secure computer protocols, secure computer system, and the device-level authentications, rather than the reliance of an organization on its network boundary to the Internet. This is the so-called zero trust security strategy, in which the device trusts only itself, they will always verify the accessing parties. A zero trust security model creates de-perimeterization of the traditional security boundary within a network, as the existing defenses are no longer effective. The defense wall transforms from a single large perimeter to a small perimeter for each device individually. The device relies on its unique ID for verification each time for access during authorization or to be accessed during authentications. Please turn to page 16. In a short summary, zero trust security is needed as the following situation increases.
First is work from home during COVID-19 has become normal practice. The second is remote working is set to continue for many enterprises. The third is increase the deployment of cloud-based services. There's no way to maintain the old security perimeter anymore in this zero trust era. Instead, a new borderless or de-perimeterization approach is urgently needed. Okay, please turn to page 17. Zero trust networking is based on the principle of never trust and always verify, and therefore requires authenticated verification. PUF is best suited to perform this function and is set to become essential for creating a zero trust network. Because our PUF-based technology can provide a self-generated ID for unique identification and a self-generated key, both of which are inherently created in the PUF.
This set us apart from the conventional method, which is shown in the left-hand side of page 17. Both ID and key is injected from the outside, while in the right-hand side of page 17, for PUF, internally, it is a self-generated PUF ID and PUF keys. By using PUF, this set us apart from the conventional method and which require an injected ID and a key from outside the device, as I presented in page 17, and which will expose the attack service before the key is injected into the device. In addition, the injected key and ID, which are stored as the key storage memory and which is not as safe as those ID and key stored in the PUF.
In page 18, the key in the PUF can be used with a crypto engine to provide comprehensive security services as shown in page 18, such as unique identity generation, authenticity, confidentiality, integrity, and non-repudiation, which are essential for a zero trust network. In conclusion, as security become more of a concern for electronic devices, zero trust networking will push the secure boundary from a single large perimeter into a device itself. Because PUF is the basis of the root of trust, it will play a very important role and become essential to the success of the zero trust security model. Okay. Thank you.
Thank you, Charles. This concludes our prepared statement. We 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 answers your question. We are now going to collect questions, and we'll get back to you in a minute. Please stay with us. We already have many questions, so we're starting from the first question. The first question is: What is your strategy to increase your IP adoption rate in 16 nanometer and below? Please, Rick. Yeah.
I think this is a very big question. Currently, the technology, whether it is used, adopted in the 16 nanometer and below is eFuse, which is offered by foundry as a standard cell. In comparison to the eFuse, our technology's performance is superior in terms of the small feature size and the lower power consumption for the operation and the higher security protection for the data storage. Since our OTP, the so-called NeoFuse, issued its patent in 2013, we have developed more than 200 process platforms and have designed a solution for more than, say, 500 products. As customers move into production, they will be contributing significantly to our loading. Most importantly is the accumulation of our production record. We can also see the increased adoption rate for 16 nanometer and below. This implies that the 28-nanometer customers are migrating into leading-edge process nodes.
As this happens.
We predict the new customers and the new applications will shift from the generic eFuses to our solutions due to the performance and the security concerns. As we mentioned previously, conventional eFuses is no longer secure and cannot offer higher density for customer use. Together with eMemory's new PUF technology and our security IPs, we are happy to see our IP deployment become faster. As you all learned from recent news, hacker attack is getting severe. I believe the chip makers, especially for those who provide the complex SoC chips in the advanced process nodes, for sure, they consider the necessity to enhance its product security level and to deploy hardware security function to against the increasing security risk. I think this is our strategy to enhance and increase our IP adoption in the leading-edge process nodes.
Thank you, Rick. There are one question regarding the hacker. Recently, international hackers have been rampant, and the issue of information security has evolved into a national security issue. Can eMemory hardware security IP protect against such a hacker attack? Will the adoption of the application be accelerated? Charles, please.
Now so many attack is from attack on the software, the software security is no longer enough to protect the system. The adoption of the high-level security will be accelerated, eMemory's PUF-based security offers a unique identity, secure storage authentication, and anti-counterfeit features, and can protect against such attacks. The largest system companies are focusing on creating zero trust network solutions that requires every device to perform verification, authorization, and authentication. This could be provided by a hardware, a PUF key, which can be easily self-generated by the PUF in the device to protect the system security through the hardware.
Okay. Another regarding security question: Can quantum computing be able to crack eMemory's PUF? Is a new PUF still useful for future quantum computing? Charles.
Okay. I think the quantum computing cannot crack down eMemory's PUF, because quantum computing offers super computation power and can only use brute force to try every combination from a huge pool of numbers to find the right numbers. As I explained in previous investors' conference call, eMemory's new PUF technology is based on existing CMOS process, and it features 100% randomness and robustness. Because it's a unique feature, product designer can easily have sufficient security key bit strength, that is so-called a large key strength. This will be very harder than identifying a single grain of sand across the whole Earth in a very short time. I think it is very unlikely that even with the quantum computing, they are able to crack down PUF.
This is a question for Rick.
What is the impact on foundry aggressively increasing CapEx to build more capacity?
I think this is a very hot topic recently. We're considering the return of the CapEx increase. Frankly speaking, most foundries were very conservative in past years, as you know. The fact is, not only for the advanced process node, due to the increasing demands from the specialty and the mature process technologies, like the CMOS image sensors, power management, and the connectivity IC for IoT. As you all learned, the increasing capacity across foundries covers a wide process node. The current shortage of the foundry capacity creates opportunity for us. It's the fact. As our competing technology is foundry-based internal solution, eFuses. Customers require multiple foundry strategy solutions more than ever to diversify their supply chain. Our technologies are widely deployed across most foundries, from the legacy nodes to leading process nodes.
By adopting our IPs, I think the customer can guarantee a higher level of flexibility in terms of their production plan. Allowing them to move from one set to another. In addition, the current foundry pricing is favorable to us as our royalties are based on a percentage of the wafer price.
This increasing capacity leads to more foundry capacity, also an increase to our total addressable market. I think this is our perspective.
This is for Rick too. The latest seven nanometer chips from global FPGA manufacturer have announced their collaboration with eMemory. Does this mean eMemory higher level of data security protection IP will reach the mainstream market?
Okay. Yes, I believe so. Our security solutions, combined with NeoFuse and NeoPUF, are set to be fully introduced in the advanced process node that will impact, and expanding their application. We are confident that our PUF-based solutions provide the highest level of security when compared to the competition. Where we are placed to cross the chasm into the mainstream market as customers ship their production. Many potential customers that are waiting for a clear leader to emerge before adopting solutions. Our growing production rates and superior benchmarking lead us to believe that this will likely be our IPs.
Okay. Another question regarding the April revenues. All foundry have a full capacity, and the wafer price have also increased. Why is it your April revenue dropped compared to January revenue?
Okay. I think this is the major focus in this investor conference call. Thank you for this question so that we can have the chance to respond to everyone. If you look at our revenue pattern every year, the April is always lower than January. There are two reasons behind this. The first one is our largest end customer provide U.S. smartphone-related chips, which have very obvious seasonality. Q1 is always the low season for wafer shipment, which contributes to our April royalties. The second reason is the semi-annual royalty recognitions of one of our Chinese foundry partners, making the quarterly revenue comparison unequal.
This is the security question. Okay. The data process unit of most AI chips is responsible for the security function. How does the company introduce new products into the design architect of the DPU, data process unit? How is the growth momentum of the DPU? Charles?
Okay. Yes, I think, in the IoT era, a lot of data need to be taken care of, and also many cloud-based applications will be realized in the 5G regimes. If you depend on CPU alone, the CPU efficiency will be low because it has to take care of the network services and also application service and also the data storage. That's why recently, the DPU start to become very popular. DPU will share with the CPU. DPU will take care of the data storage and also all the security activities. We have integrated our NeoFuse and the NeoPUF with a digital design to perform our root of trust functions to be embedded into DPU. With NeoPUF, we have innovated a new security architecture for root of trust, which can achieve a high level of security in DPU.
Another question is, what are the difference in architecture between Apple's security chip, T2, and our NeoPUF? What are the advantage and disadvantage? Charles.
Apple's T2 is actually used in a separate secure element chip. It is not PUF-based to perform the security functions. The trend to high security is to embed secure element into SoC. Our PUF, root of trust, and the secure element are the key security IP for embedded solution to facilitate higher security solutions. In the future, security functions will be all embedded into the SoC. I think that will be our advantage as security solutions, because we provide the embedded into the SoC, which is different from the current T2 is using, which is using the separate secure element chips.
This question for Rick. The UMC wafer price continue to increase from each quarter. What is the impact on company profitability?
This is a very interesting question. Our royalties are based on the % of the wafer price. Naturally, it is correlated to the foundry pricing movement.
Yes.
The wafer price increase, it will make a lot of help to the company's profitability.
Okay. Does there remain any room for the eight-inch penetration rate to grow from the current 20%? Are there any applications still growing their market share in eight-inch?
Okay. I think this is the question always asked in every quarter. Our penetration will still have room to grow in eight-inch. Recently, we have developed NeoPUF in an embedded Flash process. We call that is the secure Flash, which can increase our market share across the embedded Flash platforms. There are some legacy chips, like power-related ICs, that still use conventional laser trimming or eFuse. We are seeing these customer shifts to our IP solutions for their new products. The increasing demand for automotive and IoT applications is eight-inch, which require higher level of security and better reliability, will also increase the adoption rate of our IPs.
Okay. Your IP on DDIC and the PMIC is already used as an industry standard. Are there other applications where potentially eMemory's IP could also achieve this position? Rick, please.
Okay. I think then, as we reported in every quarter, there are many applications with the adoption of our IPs. For example, the IP image signal processor, DRAM, digital TV, set-top box, Bluetooth, Wi-Fi, and et cetera. Typically, once a customer adopts our IP, then they will achieve better performance over their competitors, leading to a market share gain. We expect their competitors will follow on by adopting our IPs. We have seen this scenario in the past with the applications such as DDI and the PMIC, and the fingerprint sensors. Therefore, we believe that it is just a matter of time for our IP to be widely used in those applications.
What are your opportunity in automotive applications?
Okay. I think in addition to the PMIC, our IP can be applied to various applications, including the advanced driver assistance systems, that is the ADAS. First begin, which we already have customers tape out in seven nanometer and 15 nanometer. Also the sensors, microcontrollers, Power Management IC, and the Display Driver IC for infotainment. In addition, autonomous driving requires the highest standard of security. Therefore, our PUF related solution will be widely adopted.
Will the collection of royalty from design company be the same as the foundry in the first month of the following quarter after production? How are royalties paid, and what are the payment methods?
Okay. I think this is a very interesting question. I think currently, the eMemory collects royalty from foundries and the IDM. Only when design houses adopt our subsidiary PUFsecurity solutions, there will be extra royalty incurred. The payment will be the same time as their wafer shipments through the foundry. We also charge by percentage of wafer price.
Will customer who use the NeoPUF platform also use NeoFuse simultaneously?
Oh, yes. Yeah. First thing, the NeoPUF is based on our NeoFuse process platform, as we reported previously. Second, when customer use NeoPUF for security key and UID generation, in general, customers also need the OTP IP together with, for the security usage. In general, whenever a customer uses the NeoPUF, yeah, they will use the NeoFuse simultaneously.
What's your progress on seven, six and the five nanometer process node?
Okay. As I reported just now that the IP development in six and five nanometer are running smoothly as scheduled. The six nanometer is in qualification stage, and we expect to complete the whole qualification procedure in Q3 this year. Regarding the five nanometer node, that is N5P. We just received the test wafers from the leading foundry partner, and we expect to complete the cost verification in Q3 as well.
How many technology tape outs are there, and when will production be expected?
Oh, I think this is a topic that everyone wants to know. Up to now, we already have five products tape out in seven nanometer, and we expect the production with royalty contribution later this year.
Okay. Since the revenue disclosed each quarter, can you further subdivide the proportion of 8-inch and 12-inch ?
Okay. I think as we just reported, and please refer to page nine in our presentation material. The royalty from eight inch and 12 in accounted for 54.8% and 45.2% of all royalties respectively.
Okay. Please explain the competition and the collaboration relationships with Armv9.
Okay. Yeah, good question. I think that has nothing to do with the competition. Arm offers CPU IP, whereas eMemory offers large MVM and hardware security IP. For the increasing demands in higher computing performance as well as security level, the collaboration between Arm and eMemory will become closer. Armv9 is a CPU solution, and we can support Armv9 to have a better security level.
Okay. Has DRAM customers started production? When will there be royalty contributions?
Okay. Yes. DRAM customers are ramping up the production now, and will contribute a royalty more significantly starting from July this year.
Okay. Can you provide the outlook for AMOLED DDI, ISP, DRAM, Wi-Fi, and DTV for this and the next year?
Okay. These applications indeed are the main growth driver for this year. For OLED DDI, we are gaining the new OLED customers, which are dominating play in the OLED DDI. OLED ISP and the DRAM and the Wi-Fi will manufacture in 28 nanometers, which have much higher ASP, and will contribute significantly to our royalty. We expect their production volume will increase significantly next year and drive our royalty growth further. DTV, digital TV customers are migrating into 16 nanometer, and will be in production in second half, which will have higher ASP and higher royalty contribution.
Okay, there are some security questions. Okay. Who is your competitor in zero trust security? Is it someone else other than this?
We actually are the root of trust provider for the zero trust security. Zero trust security is a huge regime, it's not a product. The competition in providing the hardware security to the security solution, there are a couple of them in the market now, which is basically competing on the, for example, on the PUF, will be Intrinsic ID, and on the security IP, will be Inside Secure or Secure-IC, those type of companies.
Okay. Can you please explain what HSM is?
I'd like to add a comment to the last question. Given there are a few competitors in the security providers, but only eMemory has the complete solution, with the PUF and the OTP and also with the solution digital design for the integrated, PUF, with OTP and with TRNG together. The question is on what is HSM. HSM, the full name is the hardware security module. It's basically to put the security into the hardware, and which can provide the security services, like encryption, like authentication, like authorization, like checking the data integrity and also the signature of the services.
The HSM basically can provide the key generation and the key storage, and together with the crypto engines, to provide all kinds of security services.
Oh, okay. Could you give an example how the security application in the remote working will impact the user? More possible?
Okay. Yes. Not more possible, for example, the FIDO Alliance, they already come out with the DevID standard, device ID standard, and they also promote that for the future IoT device ID. For the device ID, previously, ID is only the identity number. In the future, the ID becomes device ID, which will become the active ID, which not only provides a unique ID, but which also needs to perform the authentication functions. In the future, for the people working remotely, if their device want to work remotely, then it is better to have the active ID, I mean, the device ID, which can protect their asset and also their data very well.
I think that is the impact to the user is all the device connected to internet need to have more securities and the more high-level securities, not only provide ID, but they also need to provide authentication functions. This means, in the future, as more people working from home, doesn't matter whether it's because of the COVID-19 or because of the enterprise has a lot of employees working from home. The future, the security, particularly hardware security, will become increasingly demanded by the industry and also by all the people in the world who would like to use the device connected to the internet.
Okay. What safety measures are being taken to ensure the safety of your employee in this changing pandemic environment?
Okay. I thank you for your kindness to ask this question. Yeah. As you know that in Taiwan, we are facing the increasing pandemic, and the more infected cases in these days. Frankly speaking, we have a lot of care already done before, and we are always looking to the progress and actual pandemic situation domestically. Basically, we ask the employees to do the body temperature measure whenever they come to office. In the meantime, recently, we suggest all the employees to have the meetings online instead of to visit customer on-site, so that we can help not only for our employees, but also help our customers to be free from any risk. In the meantime, we're also looking to the latest progress, and we'll follow the government's suggestions for the related actions.
We also consider the possibility to restart the work from home project with our employees so that we can help to secure our business and also keep safe for our employees.
Okay. As we mentioned about the Arm cases, that seems to be a very good result for our corporation. Can you explain more about, or show us more progress about your project with Arm?
Okay. Yeah. I think everybody know that Arm is a very good company and a very successful company in providing the high computing CPU. For the security operations, in addition to CPU, you also need to have very good crypto engines for the computation, for the high speed calculation of those securities. Arm does provide those computation capabilities for the encryption and also for all the security services. eMemory has a complementary expertise with Arm because, as everybody knows that for security, the most important is how do you generate key and how do you store the key. eMemory provides the integrated PUF and OTP and also PUF-based TRNG to generate the key and also to provide a very secure key storage. Together with Arm, then we can provide the total solutions for the security processor and also security services.
I think that is why the both company work together will give customers a very high level and a very high-performance security solutions. We also get successful results from the customers we both engage. In the future, we will work more closely together to provide the IT security processor and also security solutions to customers.
Okay. You mentioned about the 16 nano and the five nano with very good result of verification. What's your customer application for the five nanometer?
Okay. This is a very good question. As we mentioned, for our IP in the leading process node, major applications is security related. When we move into the five and six nanometer, our customers are all in the FPGA data processor unit and also graphic chip segments. All these products are all high performance computing. That is so-called HPC related product segments. In five and six, and even for the three nanometer, we will work closely with those customers in the HPC segments.
In the interest of time, we now begin closing comments. Charles, please proceed.
Okay. Thank you very much for attending this quarter's conference report, also thank you for your patience and the support to eMemory. As eMemory, we will continue to work hard on IP innovations and also security solutions and innovations for our customers to bring a higher return for our shareholders. Thank you very much for the meeting. 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 two 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 good day.