Sunny Optical Technology (Group) Co., Ltd. Aktie

Good morning. Welcome to Sunny Optical Technology Group Company Limited's 2026 Interim Results Announcement. I am [ Crystal ] from the IR department of Sunny Optical. Thank you for your long-term interest and support for the company. Today, we have in attendance, Executive Director and Chairman; Mr. Tan Wang Jiong, Executive Director and CEO, Mr. Wang Wenjie; Director of Finance Center, Mr. Wang; Senior Director of IR Department and Company Secretary, Ms. Wong Pui Ling. Ms. Liu Yanfeng, Director of IR. So now we will invite Mr. Wang Tan Jiong to deliver opening remarks, please.

Honorable investors, analysts, good morning. Welcome to our results announcement. On behalf of Sunny Optical Technology, I would like to thank you all for your continuous interest and support for the company. In the first half of the year, given the very difficult industrial environment, we achieved expectation in terms of revenue and profit growth. So this shows that our strategic judgment is effective. And we have shown some operation results.

Looking into the future, we are confident in the future. So first of all, optical market is in structural growth cycle. And there is rapid release of demand for the relevant products. The overall logic in the industry development has not changed. In core verticals, our market position is very firm. So vehicle handset products as well as AI, these are all very good verticals for us. And then we also have very adequate resource guarantee. So the management had encountered different market cycles. So when the market is volatile, we have the capability to seize opportunities.

With optics and AI strategy, where we are implementing this strategy in an orderly way, we have confidence to be able to turn end-to-end optical capability into our growth momentum.

Now we'll defer to our CEO, Mr. Wang Wenjie, to present our interim results in detail. After that, our management team will answer questions that you have in mind. Thank you.

Friends from the investment community, good morning. So now I will present our interim results. In the first half of the year, global geopolitical uncertainties persisted, compounded by rising memory prices, impacting costs and intensifying competition in the vehicles market and handset product market, creating a turbulent internal environment. Despite this, Sunny Optical maintained steady progress. Our core businesses in handsets and vehicles with our leading positions remain solid and are key pillars of our revenue. XR and Pan-IoT businesses, 2 growth drivers continued to demonstrate that full chain vertical integration and hardware/software combination capabilities showing significant growth momentum across multiple areas. Furthermore, we actively develop our optical interconnect and embodied intelligent sectors, accelerating commercialization and creating new growth engines. Overall, all business segments made steady progress in the first half of the year, solidifying the presence and anchoring the future.

Next, I will share with you in greater detail. A review of our performance, business highlights, future outlook and ESG achievements. First, business performance review. In the first half of the year, our company achieved revenue of RMB 21.9 billion, up 11.5% year-on-year, with revenue growth coming from the combined effort of the 3 major segments: Vehicle products, XR and IoT.

Gross profit side, our gross profit margin in the first half was 19.5%, down 0.3 percentage point year-on-year. On the profit side, net profit attributable to shareholders was RMB 1.81 billion, up 9% year-on-year. Despite increasing pressure of rising memory prices, we still achieved double-digit growth in both revenue and profit, demonstrating our resilience through economic cycles and validating our operational capabilities. In the first half of the year, I said that revenue growth and profit growth will not be lower than 7%. And some people asked why 7%. So I just said that it is roughly around well, 7 is -- means up and then 8 means down, okay? So in the first half of the year, we have achieved our mission, and we have not changed our full year guidance.

So on this slide, Here, you can see other products centered around Pan-IoT. So the revenue share of other products has increased from 10.9% in the same period last year to 18.4%. So you can see from this pie chart, the change in the share of this segment. So well, this is a part where we need investors understanding more than in other areas. So there are actual changes in the overall gross profit structure. Besides handsets, vehicles and XR products, revenue share of other products in the broader Pan-IoT sector has increased from 10.9% in the same period last year to 18.4%, gross profit share has risen from 18.2% to 32.6%, making it the company's second largest source of gross profit.

The market's perception of Sunny Optical is largely limited to the handset industry. But today's data shows that businesses such as Pan-IoT sector have not only contributed to revenue growth, but have also played a major role in profit generation, indicating our diversified strategy is rapidly entering a harvest period. So as Mr. Wang just mentioned, so this is a structural change in the optical industry. And overall speaking, the trend is a very positive favorable one.

On this slide, so it is about management efficiency, solidifying the foundation for long-term development. Regarding cost control, total operating expenses was down 0.2% year-on-year in the first half of the year. Expense ratio decreased by 1.3 percentage points from 12.3% in the same period last year to 11%, offsetting external pressures through improved management efficiency. It is important to note that the decrease in expense ratio while revenue growth was achieved were not due to a reduction in R&D expenses. R&D expenses reached RMB 1.65 billion in the first half, a year-on-year increase of 1%. Sales and distribution expenses and administrative expenses both decreased while effectively controlling non-R&D expenses, we continued to maintain future oriented R&D investment, balancing current operating results with long-term capacity building.

Rise in operating quality can be testified in the following areas. First, we have very good asset liquidity, strong debt repayment ability, and we maintain a low interest-bearing debt ratio. Our return on net assets has steadily increased for 4 consecutive years and profitability has continued to improve. Two, net cash flow from operating activities increased by 45% year-on-year. Quality of profits continued to improve. CapEx was up 10.6% year-on-year with continued investment in strategic initiatives, mainly directed towards major overseas clients, XR, Pan-IoT and production-based construction, providing strong support for future revenue growth.

Now let me talk about our business highlights. Handset products. Global smartphone shipments declined by about 6% to 8% year-on-year in the first half of the year. So in the second half of the year, the number will even be bigger. So well, at least in the first half of the year, there was the impact from memory costs in the second half of the year, I think that this number is going to be even bigger. Facing this downward pressure, our company accurately identified industry trends focused on high end market demand and delivered strong results. Handset products revenue remained generally stable with slight year-on-year decrease of 0.8%, leveraging our industry-leading 5 group AOA technology and comprehensive miniaturized packaging processes, we achieved mass production and delivery of multiple high-end products.

Periscope prism products supported by core capabilities in ultra-precision, optical processing and molded glass have undergone continuous iteration and upgrades, achieving breakthroughs in optical performance and structural design. Market share of high-value main cameras and periscope steadily increased and supply share of high-end product lines several key customers further expanded. Furthermore, substantial progress was made in expanding the lens sets business with related products successfully entering mass production and being delivered, establishing our benchmark position in the portable telephoto lens field.

Regarding major overseas clients, the revenue there from handset optical lenses has increased significantly. And introduction of new product categories will also contribute new growth, laying a solid foundation for achieving our annual growth targets.

So for overseas key clients last year in the first half of this year. So actually, the guidance is more than 100%. We won't change this guidance. Actually, the pace will even be faster. For vehicle products business, first of all, let me update you on the latest progress of the spin-off listing. The company submitted application on 26th January 2026, and we're currently awaiting regulatory review. Due to the large number of IPO applications at present, we're updating the prospectus and financial data until 30 June 2026, while awaiting regulatory review. After the end of June, they will have to start whole cycle of data.

Regarding performance, although the overall vehicle product market face pressure in the first half of the year, we achieved a 10.6% year-on-year revenue increase by driving technological breakthrough and product launches, further consolidating our leading position. XR business. Revenue was up 11% year-on-year, with SG and AR glasses related products growing by over 50%, serving as the core engine for our company's XR business revenue growth. Meanwhile, addressing the core demand for lightweight and highly integrated AR glasses. The company leveraged advanced optical design and ultra-precision mode processing capabilities to achieve breakthroughs in products such as high-performance lightweight prisms and ultrathin VID lenses.

With industry-leading miniaturization packaging technology and large-scale, high-precision assembly processes, we achieved a due improvement in performance and size of optomechanical products, accelerating mass production and delivery and relying on industry-leading assembly and testing processes, we achieved a small batch mass production of lightweight full-color AR display modules.

Next year, there will be even bigger production. So this is a business that is very positive in the future. For AR glasses in the first half of the year in our report, at that time, we were not very optimistic because comparing last year and this year, the revenue will decline further slightly. But right now, revenue will not fall. But when it comes to big explosive growth, that has to be next year. So for Pan-IoT business, this is a better area, optical components are our core underlying capability. We have built a complete technology chain, including optical design, optical processing, mode processing and optical coating. This change serves as the common technological foundation for all business areas, and it's the fundamental support for our expansion into forward-looking directions.

In the field of robotics, our full stack vision solutions cover a variety of technical routes, including monocular DOF or DOF binocular and multiview fusion and the entire process from camera modules system solutions to complete our whole device JDM is completed independently. Lawn mower vision system solution integrates computing power based on multiple well-known chip platforms natively supports complete functions such as depth engine neuron network engine visual accelerating engine and ISP and has been much produced and deployed by several leading global brands, achieving end-to-end delivery of optics, algorithms, computing power, platform and whole device integration.

In terms of warehousing and logistics, the full stack mission solution has covered a scenario such as AG VR/MR and warehouse management and has been applied in the logistics scenarios of leading overseas companies. The active binocular depth camera has been extended to industrial scenarios such as robotic arm positioning and grasping. High-end microscopy instrument market is showing strong growth momentum. AI medical microscopy products have achieved breakthrough in pathological testing, gene diagnosis and other scenarios, resulting in significant increase in orders.

Semiconductor wafer defect detection equipment has achieved a major breakthrough with leading industry clients and has expanded horizontally to fields such as glass waivers. The concentrated Implementation of these achievements, strongly demonstrates our integrated vertical integration capabilities, leveraging technological accumulation and continuous innovation in the broader IoT food, our advantages in combining software and hardware and in optics plus intelligent manufacturing of complete systems will continue to be strengthened, further solidifying the foundation for a multi-scenario expansion and complete system business. This summarizes the achievements and progress of our various business units in the first half of the year.

Future outlook. So this is so about handset products. Rising memory prices. And also there is a shortage of capacitors. So there is a delay and return of semiconductors. So all these factors continue to impact the handset industry with overall shipments expected to decline 13.9% year-on-year for the year. This is an estimate. So perhaps it will be even bigger and continued pressure expected next year. However, amidst this pressure, structural opportunities are also clear. The trend towards high-end products continues to strengthen and the direction of optical upgrades remains definite. For our company, the fundamentals of our handset business remain solid, we'll continue to cultivate the high end market strengthen core capabilities such as actuator technology and multigroup AOA technology, delver deeper into vertically integrated module solutions and further enhance product coverage and supply share with core customers.

At the same time, more and more handset customers are extending into new areas such as handheld imaging and extend lenses. The demand for optical capabilities, these new scenarios is highly compatible with our underlying capabilities, which will bring more growth opportunities to us. Furthermore, revenue from major overseas clients is projected to grow by over 100% in 2026. I mentioned this point earlier. So this brings substantial revenue and profit increase to our handset business. Full year handset product business revenue is expected to remain flat year-on-year.

In the vehicle business sector, the trend of autonomous-driving upgrades remains clear. In 2026, the global L3 regulatory framework will be implemented more rapidly, and robotaxi will launch commercial operations in multiple cities, and there would be an increase in the number of cameras in vehicles. And then there is a faster iteration in functions and then multi-sensor fusion solutions combining vision and LiDAR are gradually becoming mainstream, which will be an opportunity for our vehicle product business to grow in the future, leveraging our long-standing market proven innovation capabilities, diversified product portfolio and cross-business synergy advantages, we have established deep partnership with global customers.

So when it comes to Sunny Smart Optical Tech Co. Limited, we are now in the quiet period of IPO process. And we are not able to provide specific revenue and gross margin guidance at this time. But overall speaking, for vehicle products, that would be very good prospects. So apart from handsets, lens and also AR. So there would be quite a good enhancement in prosect for LiDAR and so on. So all these need our optical core capabilities and other module capabilities as foundation.

XR. The focus of the XR market is shifting entirely from traditional head-mounted displays to smart glasses. Among them, smart glasses without this place have already achieved large-scale demand, mainly driving demand for lenses camera modules and overall system integration. While AI glasses with display functions are in the accelerated product verification stage, which places higher demands on optical wave guys, display optical engines, spatial perception and system integration and significantly increases optical value of individual units. Behind these 2 product lines lies our deep expertise in optics, precision manufacturing and mass production delivery. We have built a vertically integrated system-level capability across the entire XR value chain, encompassing optical-based components, multi-element optical modules, optomechanical systems, integrated hardware and software systems, and enabling it to flexibly seize market opportunities based on different technology routes and customer needs. Leveraging this foundation, we have established deep partnership with leading global brands and have successfully secured large-scale AR product orders from top players, which will contribute significantly to growth starting next year.

As AR glasses move from technology verification to mass production, we can expect more and more end-user brands to establish comprehensive collaborations with Sunny Optical. Full year XR business revenue is expected to exceed RMB 2 billion and is expected to achieve year-on-year growth. In the first half of the year, it is around RMB 8 billion.

So looking at the current progress, I think there are a lot of opportunities. AI is moving from cloud-based question and answer to on-device interaction and from virtual world into real-world scenarios, and devices need to continuously receive their environment, understand their space and then translate judgments into actions. Visual perception has therefore become an indispensable foundational capability for AI hardware.

I think you all know this -- and this trend presents 2 types of opportunities. One is the emergence of new hardware driven by AI, such as smart glasses, wearable devices, not only wearable devices. Some companies in terms of some box stage lights and also pans, well, they have added AI to all these different items or devices. So these are new categories that have grown from scratch. The other is the reshaping of traditional optical equipment by AI, intelligent imaging, industrial vision, microscoping instruments and high-end testing equipments are moving from simply capturing and seeing clearly to automatic analysis and decision support. Imaging equipment is transforming into intelligent decision-making equipment.

These 2 types of opportunities mature at different paces. Our strategy is very clear. So the demand is clear, and we prioritize opportunities with clear demand and the conditions mass production and scale up quickly. At the same time, we continuously validate commercial value of areas such as robot vision, data acquisition and intelligent industry devices through real projects.

So if there is the opportunity for mass production, then we'll prioritize it. At the same time, we'll continue to invest into further R&D. These will present important opportunities for the future. To seize these opportunities, we will deeply integrate our 3 capabilities, optical sensing, hardware and software collaboration and large-scale manufacturing. Technically, we possess complete capabilities from optical design and ultraprecision machining to imaging, display and spatial perception modules.

In terms of products, we focus on image enhancement, multisensor fusion, 3D vision and etch intelligence, strengthening algorithm hardware synergy and extending towards system and complete device integration. In terms of industrialization, we collaborate with customers to define products, streamlining the entire process from verification, quality control, cost optimization to large-scale delivery. This capability has already been validated in smart glasses and smart imaging products.

Next, leverage customer projects and mass production results to replicate this capability in areas such as robot vision data acquisition, industrial inspection and intelligence microscopy. The significant growth in Pan-IoT and related businesses that you've seen earlier is a direct result of this strategic move as AI hardware is deployed in more scenarios, our value as a comprehensive optical component and system solution provider will become increasingly prominent. This growth curve has only just begun to rise. Revenue from Pan-IoT business within other products grew by about 50% throughout the year. The group maintains our original guidance for full year revenue and net profit growth, with revenue and net profit, excluding the share swap transaction expected to grow by no less than 7% year-on-year. We will continue to develop new sectors and verticals. So there are 2 clear directions already. One approach is to enter the optical interconnect field by focusing on core optical components, our precision optical design manufacturing processes and large-scale mass production capabilities are highly aligned with optical requirements of optical interconnect, its core capabilities such as glass molding technology and precision structural component processing enable us to undertake the production of key optical components for optical modules such as lenses, isolators and FAUs.

On the left, these are already been produced. Second, we'll focus on embodied intelligence and build a full dimensional perception product matrix. The core of embodied intelligence is a complete closed loop of possession decision execution. We will take vision perception as the core, leverage our advantages in sensor hardware and coordinate multidimensional capabilities such as visual algorithms and joint encoders to gradually extend from industrial and commercial robots to humanoid robots providing full stack vision solution that integrates software and hardware and deeply empowering the embodied intelligent industrial chain.

Regarding these 2 directions, we will increase resource investment to transform our technological capabilities into commercial results. The new track is not a crossover, but a natural extension of the same core competencies. In the optical area with core components being our entry point, we will expand the area and develop the area. That is our capabilities and assets.

So next, ESG achievements. In 2026, we also made solid progress in ESG governance. In terms of external ratings, the FTSE Russell ESG score improved from 4.0 to 4.5, reflecting the recognition of Sunny Optical's sustainable development practice by international authoritative institutions.

Regarding internal objectives, the 2025 performance target for sustainability-linked bonds was successfully achieved. Greenhouse gas emission intensity decreased by 32% in 2025 compared to the 2021 baseline year, exceeding the established target of a 20% reduction. This is not merely an improvement in data, but also approved that the company has indicated the concept of sustainable development into our long-term strategy.

In the second half of the year, we'll continue to maintain a steady and progressive development of our core businesses, deepen the cultivation of our common technology platform capabilities, continue to consolidate our leading decision in existing businesses, seize the industry opportunities brought about by expansion of AI industry, accelerate commercialization of emerging tracks and repay the market's long-term trust with certain growth.

This concludes my presentation. Thank you.

Thank you, CEO, for the presentation. Now we will move on to Q&A. [Operator Instructions] Maybe on the second row, please, the lady in white.

Thank you, management. I am Kyna from Citi. I have 2 questions. So looking at your results and the resilience of your results, well, we feel very encouraged. In the second half of the year, can you elaborate on which businesses will exceed original expectations. So for pressure in the second half of the year, which businesses will be more resilient. For gross profit margin in the second half, what would be [indiscernible] Product structure will continue to see changes. So that's my first question.

Second question, just now regarding progress in the associates or affiliated companies, there has been some progress. And there is investment from Beijing on the company. So it seems that in terms of spare parts and components, you have accumulated some achievements. So for customer resources, you had mentioned a bit. So can you share more? Regarding customer resources, penetration and strategies, can you share more information?

So you asked 2 questions, right? The first question is regarding gross margin in the second half of the year of the old products. So how can we improve it further? The second question is about optical communication area, right? You are talking about optical technology. The lady is not using microphone, the interpreter can't hear her. Okay. So how are we acquiring customers? How can we develop business? Okay. So one is a question on gross margin. The other is about customer development.

For gross profit margin, for mature and stable gross margin, our direction is very clear. We can only do it by enhancing our own production capabilities. As you know, no matter whether we talk about handsets or vehicles. Looking at the current condition, there would be a big change in gross margin because the demand and supply relationship will determine the basic price already. Technological innovation is the major direction. And we have to go through our -- we have to enhance our overall internal production capability to enhance cost control. In the Wednesday meeting for the first half this year, I said already that competency enhancement must be our internal core direction. So AI and also our internal intelligence or smart production and cost control should be closely integrated so that our overall efficiency, product quality and cost and be effectively controlled. So that is the only way.

It is not possible to see a substantial increase in gross profit. The next question is about new product direction. Actually, I made very clear points in my presentation already. You want me to share more specifics on development of some specific areas. Well, it is difficult to answer this question.

Now changes very fast, and there are many changes. In the first half, we thought about the road map of a certain industry. But when Trump made some remarks, the situation will all of a sudden change. So the situation is very complicated. So despite that, we will further solidify our core competencies. We are talking about sharing the competencies. We're not trying to find a brand new large area to invest. So I think we should be able to seize this direction.

So core optical components and large parts and so on. These are all needed. There's the need for them. And when it comes to development direction of interconnect, now there are many different technologies emerging. And we are also following up these new technologies, definitely, we will have to understand them. But when it comes to actual product use, I think our core optical components and optical instruments will be the core things.

So from this perspective, most of our optical communication top vendors will be our customers. So I think this is a very reasonable ecosystem structure. And you talked about investment, right? Now [indiscernible]. Well, there is no relationship with optical communication, where the technology may be related. But -- so we are -- their products are multi-spectrum chips. So we hope that in the handset area, we can see a new product innovation.

Every day, we want to see new product innovation. So of course, it can be used in other areas. Just now we talked about optical perception and etch AI. So that can be -- there will be the need of the optical chips. And now we mostly talk about RGB and RGB-D for such acquisition. So internally, we try to develop binocular RGB, spectrum information and infrared information for the whole wavelengths, there's different information that can be obtained. So we are talking about multidimensional information, and we want to integrate it to make our products. So I think this is the perspective or direction of investment. Thank you, Kyna for the question. Next question please.

The gentleman on the first row.

I'm Huang Leping from Huatai. I have 2 questions. First, just now, when I looked at the handset business, well, in the second half of the year with the growth rates of handset modules business because for whole device manufacturers and upstream vendors in the first half of the year, they differ a lot. So whole device manufacturers decline rate is still okay, but staff manufacturers experienced a 30% decline in business results. So in the second half of the year regarding handset product volume, is it going to be flat with the first half? Or is it because of inventory then the decline in the second half of the year would be bigger? Will that be the case? And what is the opportunity of turnaround.

Now for memory, according to market expectation, it seems that the increase is slowing down. So for handset manufacturers, when it comes to specifications and also the mentality in the second half of the year, will specification stabilize? My second question is about optical communications. You just said clearly that you would work on optical components and optical instruments side, I think this is very in line with your strategy. When it comes to optical module, how big will be the room for market development. So of course, for optical components, well, revenue growth is going to be slower. So in one module, how much value is it -- is there?

So first question is about handsets. Right. In first half this year, there was some past inventory. So relatively speaking, things are slower for CIS, I think there is a clear decline in subsequent orders. If you look at the situation in different markets, there are some dilemmas or conflicts, but in fact, there is none. So there is a single-digit decline only. This is surprising, but that's the fact. The number is indeed. So at first, I thought that was not possible. But in fact, this is reflected in the data. And then in the second half, there will still be a decline, and the decline will continue next year.

And then as you all know, for sure, it won't be good. So at first, we thought that in the second half of the year, there won't be increase in memory price, then the situation will improve later. But no, that would not happen. There is no volume. There is no volume anyway. So the core is about quantity of volume. And it's not only about memory. So if you look at circuits and other components, there is the same situation. So of course, there are also some like lithium batteries for handsets. So there are now small manufacturers it's not that they don't have production capacity or production capabilities, but then there may not be any supply to them. So if there is no supply for them, then what can you do? They may not even have power supply, okay.

When it comes to memory, there is increase in price. So can you choose not to buy memory? Well, for them, it doesn't matter. The ratio, the proportion is more. So handsets will definitely not be good. When our company was -- well, last time I said that we had overseas key customers, and there is a big increase in the business, and so that can offset the decline in other areas. Of course, there will be individual differences. Our high-end business is relatively better, but the overall is still falling. I can still see some supplementary business or replenishment. So there is like single-digit change only if we can maintain this level, then we are already very lucky. So the situation is indeed not very positive.

Then you talked about optical communication. So we will move on to -- we will center around optical components and big parts and so on. So basically, as you said, that is our strategy. And this is also in line with the capabilities. This is more reasonable. Otherwise, from LPO NTO to CPU, the CWU and VCO, MLD micro LED, so short-range, medium-range, long-range where I have reviewed all of them. They are very complicated. Yes, we can talk about them. But if we want to work on it, well, we need more capabilities. Our components are in line with the direction.

Well, FAU is of this shape now. So when can there be a transition to glass. If we do not understand this, then we may make mistakes, right? Overall speaking, there are not many companies working on components besides there are very few companies which can achieve very big scale. So I think our positioning is reasonable. You talked about the ratio of weight. Well, this is a matter of data. I think the weight is also changing.

For optical engines, PIC or EOS. In that area, the weight is increasing. How big is the overall volume? Well, that is a big market. I think we are talking about over RMB 100 billion. If we can have a share, well, if we enter, it is not right for us not to be in top 3, then I think there would be a share of at least like 10% to 20%. We're talking about a scale of a few RMB 10 billion. So there is room for us. But of course, investment won't be small. So my overall conclusion is that we can look forward to it, but there won't be certain explosive growth. In the past, I was driven by emotions. I thought that would be explosive growth, but in fact, there is not going to be one. So it has to be gradual.

Okay. The lady on the second row please.

Mr. [indiscernible], I have a few questions. First, to follow up on handsets. You just said that there is a shortage of many things and prices high, some manufacturers want to use overseas chips starting next year. Will there be some higher-tier projects. So in order to maintain stability, will they use some cheaper, made in China chips, CIS, so that your handset module ASP will be under pressure? That's my first question.

Second, semiconductor wafer testing machine. So you mentioned that in your presentation in the past, I seldom heard you talking about this. So can you elaborate, what does this engine do and what is the new market like? And what is the room for development in the future? Then for R&D resources allocation in the first half, your gross profit increase, all of it is from Pan-IoT. So for new products, R&D, resource distribution, how is it going to be like?

China-made CIS chips and overseas modules. So I think this is a matter about configuration of modules. So what you said is the fact price is now more expensive. So people will tend to use cheaper substitutes. And for us, I think we are not the main players here. We work on mid- to high-end business. So for the large companies, for the big companies, there isn't much impact. So we want to get into Korea because we think that Samsung will not decline. Samsung semiconductors and Samsung handsets belong to the same Samsung Group, they internally can do their own distribution and allocation. So they earn a lot of money from memory, and they don't care that there is a small loss for handsets, so they won't lower price.

Now our person in charge for Opto Electronics is in Korea. So there is going to be big opportunity there. We are working seriously on it. Domestic CIS chips do not cause much impact on our modules. So Sony, Samsung, we -- there are many other companies. So we have got a normal competitive landscape already.

As regards testing, you talked about our testing equipment, wafer testing, so our microscope. So how can it be used in semiconductor testing? I think you can understand. What we are doing, well, we saw them talk about it in the past. So microscopes are used for testing in the future for this testing, when our lens for microscope is enhanced, then we will be able to get into a lot of testing scenarios for semiconductors.

Well, in the first half of this year, our equipment company achieved quite good results. What about R&D expenses distribution? Well, this is a very good question. So for our original layout and also handset vehicle business R&D, when projects are being adjusted, this will also be adjusted. So investment will be -- will be strengthened when there is the need for capabilities. So we can use the same group of people in other module design. So we are enhancing our overall system solution algorithms, software capabilities. So this is what we are doing constantly. Of course, every year, we will increase the weight of new areas. So I think in the new categories, of course, product sales is rising. Profit is also rising. So of course, we have to do R&D in order to make things happen. So the system R&D people will increase in number. system solutions, R&D people.

Okay. Next, this gentleman first.

I'm Jimmy from UBS. First question is related to handsets. Wafer manufacturers are lowering price. And they are increasing prices. So will there be some impact on your modules? What is the impact on your gross profit? Second, inventory. Just now, you said that in the first half, there is a mismatch because of handset inventory. Actual procurement and delivery or shipment has mismatched. So now do you have a match between shipments and procurement? And then for suppliers, even though demand is still weak, but for suppliers, will there be some marginal improvement?

Then the next question is about glass packaging and so on. So will there be opportunities for the future? I think that is going to be for the long term. What is your entry point?

Gross profit about modules, price increased. So does that mean that gross margin will change? Well, gross margin will not improve. Yes, it is possible that price will increase because chip prices increase. So we have to increase price, but gross margin will not go up. I can say for sure. Gross margin improvement relies on or is determined by supply chain control. And we are not positive about it. So the only way is vertical integration that will give positive contribution. But that involves actuator landed, module assembly, prisms. So if all these are integrated, then we can lower wastage, then a gross profit margin can go up. There are no other ways. Single product price may increase but there is no way to change it.

Procurement and inventory. Now there is no inventory already. No. Now the situation is tight. So every day, people don't know -- companies don't know when there will be a shortage of products. And when products are out of stock, well, it is difficult to handle the situation. So the focus is turned to other areas. So let's say, if there is continued shortage of capacitor, then many consumer electronic companies will experience problem. So they can't face up to the situation. For domestic capacitor manufacturers, there will be opportunities for them, but some capacitors cannot be replaced. So this is also another big trouble. Jimmy, what's your third question?

This gentleman is not coming through. The interpreter can't hear him.

Semiconductor testing, right?

The interpreter can't hear him because he is not using a microphone.

For semiconductors, many of our optical technologies are used, but then this is rather fragmented. We do not elaborate much on it. The value isn't huge. But then yes, you are very sensitive. You realized this issue. But now the volume is small, so we did not talk too much about it. Next question, please.

The gentleman on the first row.

I am Tony Zhang from CLSA. Two questions. In the first half this year, you have other products business, which grew strongly 100% growth. So right, 100%, right? Other products, RMB 2 billion, RMB 2.1 billion last year and this time, RMB 4 billion, right? So my question is, what products are included under this segment?? What is the momentum that drove such growth? And then secondly, XR products may be better than expected. Is the reason related to the industry or other changes in the customer? So the situation differs from expectation.

Let me answer your first question. There is adjustment in the customers' processes. And I think this is quite positive. Well, originally, last year, all of a sudden, they increased volume, all of a sudden, they decreased volume. But now the progress has been more substantial. And then in the -- in 2028, they have adjusted downward the number. And this adjustment or revision is reasonable. Looking at the data, I think that is the really reasonable rhythm. The person in-charge of that business is experienced in being CEO and other companies. So I think the overall grasp of the situation is better than before. There is not a very big adjustment. It is just that they have accelerated things a bit. And they have sent a lot of people to our site.

So next year, there would be a big increase. But definitely, you have to deliver small batches, EVT, DVT, I think all these are according to certain rhythm. So I think this is adjustment on top clients and at the beginning of the year, we said less than RMB 2 billion. Now we exceeded RMB 2 billion. I think, well, that will be even more. So next year, it will also increase their increase will be fast, and it may not be like RMB 1 billion and so on.

The growth will be even bigger next year. I will not cheat him or receive him. Please rest assured, but there may be some special black swan incidents, then it's difficult to tell. But if everything is normal, then we will see normal rhythm. Then your next question is right, this is complicated. Because actually, in the past, when volume was 10 plus, well, some business might be good this year, other products or other business growth is significant. It is related to the overall optical cycle. Theoretically speaking, it is optics plus AI plus -- optics plus AI so optical perception development. Starting last year, since 2025, I have been saying that in the future, one very effective development will be in our system solution, Pan-IoT system solution. So it is very fragmented. So you talked about robots and so on. Well, it is going to be like RMB 1 billion. It is possible to achieve RMB 5 billion or RMB 10 billion. So Amazon warehouse, for example, yes, it is very big, but it's not like handsets and vehicle categories. So it is very fragmented. And customer groups. Well, there are quite good customer groups, they are not purchases made by domestic customers. They are big overseas customers from Europe and U.S. for startups, it will not be -- for start-up customers that will not be reliable because there will be business today but not tomorrow. So we're talking about very big customers. So this is normal. There will be subsequent growth. And now there are emerging new technologies, and these will be related to PV area with new connection methods that would be far-reaching impacts.

For example, in terms of assembly. So we are talking about use of new structure and also components. You may not have noticed that recently, NVIDIA and other big companies have launched new structures, no latency directions and so on. So these are all related with communication, opto electro conversion and so on. I think the prospect is going to be good.

Okay. Because of time, we will now take the last question. The gentleman there.

I'm Andy from Morgan Stanley. My question is about exchange gain and loss, just no. No question was asked. In the first half, concerning exchange rates, is there an impact on your operation in the second half of this year or next year regarding pricing of new products, will you consider exchange rate impact, will you raise price? Will you do some hedging or other solutions to alleviate impact on your business because of exchange rate?

Well, let me take this question. In the first half of the year, exchange loss was RMB 126 million. This is because in the first half of the year, USD against RMB rate had changed. Well, our sales structure is that USD assets exposure is bigger than USD payables. So foreign exchange rates, in the vehicle area, our revenue scale is almost RMB 20 billion. In the first half, exchange loss and gain is 7 points. Last year is negative RMB 1.4 billion, now is RMB 122 million. Now we are using some tools for hedging. Thank you.

Thank you for all the questions. We will conclude the session here. Thank you for joining. Goodbye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Dear investors and analysts, good afternoon. I am the Head of IR Department, Liu Yanfeng; and the host of today's event. Our Annual Investor Day creates a platform for a candid and sincere communication with the capital market. Your presence makes this event all the more valuable. On behalf of Sunny Optical Technology, I would like to extend a warm welcome and sincere gratitude to all of you. We hope through this event, we can jointly analyze industry trends discuss the company's growth from a new perspective and witness brand new opportunities for the optical industry in the AI era.

Today's agenda consists of two sessions. Session 1 is the corporate presentation, where our core business leaders will share market opportunities and the business layout with all presentation materials available on our official website. Section 2 is the Q&A, during which senior management and the business heads will address all your concerns one by one. After the meeting, we have prepared a dinner for everyone, offering you more chances to interact with the management team over dinner.

Now please allow me to introduce the company representatives attending today's event. They are Executive Director and Chairman, Mr. Wang Tan Jiong; Executive Director and CEO, Mr. Wang Wenjie; Vice President and CTO, Mr. Gu Bo; Vice President and Joint Company Secretary, Mr. Ma Jianfeng ; Vice President and General Manager of Sunny Optical Intelligence Technologies and Injunction Optics & Instruments, Mr. Wang Zhongwei; Co-President of Ningbo Sunny Smart Auto Tanker Company Limited, Mr. [indiscernible]; Deputy General Manager of Sunny Optics, Mr. [indiscernible]; Senior IR Director and Joint Company Secretary, Ms. Wong Pui Lin.

First, let's invite Mr. Tan Jiong Wang, Chairman, to deliver the opening remarks. Welcome.

Dear investors, analysts and distinguished partners from all sectors, good afternoon. Thank you for taking time out of your busy schedule to visit Sunny Optical Technology and to join our Annual Investor Day on behalf of the Board Director of Sunny Optical Technology to extend the warmest welcome and a sincerest gratitude to all of you. It has been less than three months since our 2025 full year result briefing. Frankly speaking, the external macro environment has not seen fundamental improvement, yet a series of internal transformation at Sunny merit to our close attention. First, following the renewal of our management team, the outcomes of organizational reform are emerging and our platform plus business metrics management model has greatly optimized resource allocation and utilization efficiency, which will ultimately be reflected in our operating performance.

Second, we have entered a new strategic phase driven by dual engines. They are product value and capital value. We have set up a brand-new investment platform in Hong Kong, Sunny Capital to systematically build our capital market ecosystem. This platform helps us seize industrial high ground, secure supply chain stability and incubate new growth drivers.

Third, we have further ramped up R&D investment and built a global innovation network. We have established a diverse research institute branches in domestic innovation hubs, including Shenzhen and Ningbo as well as Europe, the first place of modern optics. We have formally appointed fellow of the Canadian Academy of Engineering, Mr. Gu Bo, as Group Vice President and CTO. This will remarkably accelerate the commercialization of Sunny Optical's cutting-edge technologies and elevate our core competitiveness. Later, our management team will walk you through the latest progress of each core business segment and fellow Gu Bo will deliver a thematic presentation focusing on how the company leverages core optical capabilities to embrace the era of AI computing power.

We sincerely appreciate the long-standing attention and support from all investors and analysts. We hope today's communication will help you gain a clearer picture of our strategic planning for navigating industry shifts, our latest business progress and our layout plans for the future. We look forward to hearing your valuable insights to help us refine our development direction and optimize our strategies. As we enter the AI era, constant emergence of new scenarios and demands across the optical industry bring both challenges and far broader room for growth.

We firmly believe that with our long-established optical expertise and open collaborative development mindset, Sunny Optical will seize the historic opportunities brought by the AI computing revolution and share the dividends of this era with all our investors. Thank you all.

Thank you, Chairman, Wang Tan Jiong for your wonderful speech. And next up is our core foundational business. The handset products serve as a cornerstone for Sunny Optical's anchor business, and it is an incubation hub for technological innovation amid headwinds from rising memory chip prices and the weigh on the overall mobile market, high-end flagship phone keep expanding market share through iteration.

And next, let's welcome Mr. Zhongwei to give us the updates of the headset business. Welcome.

Dear investors, analysts and industry partners, good afternoon. Welcome to our Investor Day. And I am Zhongwei Wang from Sunny Optical and Sunny Optical has cultivated the optical industry for years. We consolidate our long-term development foundation through a profound technological accumulation, abundant customer sources and a differentiated product capabilities. While consolidating our core headset imaging business, we fully deploy various emerging imaging tracks to capture the incremental growth opportunities.

Today, themed with Master Light, expand boundaries, intelligent imaging for all scenarios, I would like to talk about the corporate strategic layout combining the industry trends. And I will comprehensively analyze Sunny's full-scale layout in intelligent imaging from four dimensions: the intelligent imaging trends, product upgrading trends, core platform technologies and premium intelligent manufacturing and thoroughly interpret our core competitiveness.

First, let's analyze the underlying development logic of the current intelligent imaging industry. As the core carrier for perceiving the physical world, imaging delivers two key values to AI. First, it acts as a visual perception medium to help AI interpret the real physical world. Second, deep integration of imaging hardware and AI algorithms really optimize shooting performance across all scenarios. On this basis, carriers of user interaction portals keep iterating. The industry has gone through eras dominated by TVs, PCs and smartphones as mainstream interaction portals and is now entering a diversified new stage, featuring smartphones paired with wearable devices.

We believe the competitive landscape of terminal handset makers will shift in the future with AI manufacturers accelerating in the ecosystems and further promote the development of this industry. And in the mobile phone images, right now, we have faced two pressures. And in the supply chain, we have seen the imbalance of the supply chain and the cost that has been high, and there have been more and more companies coming into the game and the competition had been more ferocious and this had required the industry to accelerate its differentiated innovation. And in terms of the market scale, the shipment had been dropped. However, the structure of the product has been more and more premium. And it has effectively offset the slowdown of the shipments especially it's reduction of the revenues from '26 to '30 and the premium cameras percentage would be increased from [ 48.8% ] to 55%.

And at the same time, for the mobile phone companies with the accumulation of the imaging. Technologies would accelerate their deployment in handset, extended lens and smart glasses and some other smart hardwares. So in terms of the industry growth data, we expect that from '26 to '30 in the new tracks of the smart images, it will have a CAGR of 35% it is a very strong momentum.

So generally speaking, we believe that in the handset industries, we still have a greater room for expansion for smart imaging, and we are very optimistic about the fundamentals of the company. And we have formed a dual competitiveness, very effectively offset the pressure on the cost in the industry. So on the one hand, based on our optical technologies, we can build a moat. And on the other hand, with AI-empowered manufacturing, we are able to improve the quality and increase efficiency. And next, based on the demand of the smart imaging technologies in the market, I'd like to analyze our four scenario solutions, technologies and manufacturing capabilities.

So combined with the variations and changes of the market, right now, we have seen four different development trends. And on the left-hand side, you can see the extreme miniaturization and the ultrathin handset as well as the folding handset is pushing the imaging modules into thinner, smaller and stronger. And at the same time, we need to expand the battery capacities and there are more numbers of the components the XY dimensions need to be further small. And it's not an option, instead, both of them are necessary.

And the second trend is professional imaging. The flagship handset is benchmarking against the professional cameras. So we have multiple functions such as the multiple identification. And in terms of the videos, we have the video symbolization capabilities with increased speed and precision and combined with the wide dynamic range and the low noise point, we are able to produce the cinematic portrait video.

And third will be our overhaul full focal length experience. So from the mobile imaging has now evolved from single telephoto to dual telephoto and to continuous optical zoom and now even the external attachable lenses, expandable lenses is also demoed outside our venue today and enabling the seamless switching between portrait and ultra-telephoto shots across the full focal range. Large image sensor and large aperture telephoto lenses enhance the texture of our telephoto portrait shots, while telephoto micro capabilities fill the gaps in the professional micro photography. Full focal range imaging is moving from functional enough to premium user-friendly.

And then fourth is the high integration. Our modules footprint has now come from continuous with integrated motor lenses, design and lens make bonding solutions, accelerating mass adoptions to enhance the integrations to deliver more functionality within less space. So for all these market trends, we have now a full solution provided by Sunny Optical Tech. And now I would like to expand more to address our four industry trends outlined above to talk about our solutions and technology. So first is our main camera business segment. In 2026, the ASP of our main camera product has a notable year-on-year increase alongside a sharp expansion in shipments of large image sensor main camera modules.

So that has bring us a lot of contribution. So as we can see, our main camera business is, therefore, achieving both rising shipment volume and higher unit prices driven by product mix optimization. We offer three core upgrade main camera solution. One is variable aperture plus Quad-curve ultra-miniaturized lens module. So this product's core value lies in the drastically shrinking in XY dimensions without compromising optical performance. Technologically, our self-developed QuadCard edge technology is combined with our hybrid lens solution has now entered mass production at KK volume scale. Supported by high-precision AOA assembly technology, Sunny Flow-Tech has mastered integrated assembly of variable apertures, motors and lenses.

The second one is -- the second one is our ultra-wide large dynamic gimbal OIS module and that can help us to achieve a flagship image level. The OIS stability has multiple features such as big angle, low noise. It has surpassed our mainstream performance in the OIS systems major in the market. And the next one is the non-gold linear system. So that can shrink the XY sizes. Our self (sic) [ MOB ] ultra-low size architecture with the molding technology, packaging balance, stability and cost effectiveness. And the next one is the periscope telephoto product. Another driver of lifting our overall ASP. It serves as the growth engine of Sunny's imaging business. So we're going to talk about three of the segments. The left one is the large sensor, large-aperture cemented prism periscope module. It use the cemented prism module with large aperture, large image size. It accelerates the incoming of the light accepting. And for large periscope miniaturized has been accomplished by this module and also we also achieved KK production to ensure that at the same size of the product, we can receive the most of the light.

The second solution is the integrated module actuator multi-reflection periscope module. So this solution overcomes the challenges in complex optical path design. And so we have now fully stacked own R&D actuator, prism and system. So we can have an ultra-high zoom optical system. And by our own universal capabilities, SPIM packaging and SEF system, we have optimized the precision control of our actuator so we can shrink the height of the actuator.

And the next is ultra-high pixel, continuous zooming periscope module. This realized the high resolution of the overall focal length. And comparing to the double periscope solutions in the industry, we have lower power consumption with smaller size. Comparing with the double periscope system, we deducted 40% of the size takes inside the handset modules.

And besides that, we have our extended product solutions as well. We have 2 main solutions, which gives us a new growing point. On the left-hand right, we can see the long focal length expanded lens sets. On the left-hand side, 400-millimeter focal length, it reaches 17.4x of the zoom. We use GM+G solutions. So it can connect it to the handset camera sets. It can reach a DSLR level solution.

And on the right-hand side, we can see the 200-millimeter focal length one. It's the lightweight extended lens set. It's light, but without compromising its quality. So in this product solution, this is the new growing point in our handset long focal length solutions portfolio. So this is a new foundation for our new growing point and contribute a structural momentum to our business.

On the right-hand side, we can see the integrated component product. So here, we have offered the opto-mechatronic integrated solution, which helps our customer to iterate the products rapidly. So now we have already have the AA technology for G+P projects. And this optical design lenses is set with multiple group plus variable aperture plus large image size main camera.

On that basis, we have made our own deployment in this new technology with layout on multiple group continuous zoom and variable aperture. With all of these cannot leave our own pipeline of R&D in Sunny Opto Tech. First of all is our R&D capability for high-end optical material Phase 2 is faced with increasingly stringent imaging requirements. Together with our partners, we co-develop high-end optical resins with our own material suppliers, which are fully applied to our premium main and telephoto lenses. Many of these materials have breakthroughs in technical bottlenecks, including low stress, high refractive index, high temperature resistance and low dispersion, laying a solid foundation for higher resolution and manufacturing yield of high-end lenses.

So meanwhile, driven by the growth of auxiliary lenses and communication business, we have entered strategic cooperations with CDGM for core glass raw materials to consolidate our material supply chain and support our -- the R&D and mass production of our new materials. And second is our in-house R&D capabilities for core prism components. Here, we'll talk about our two cutting-edge prism technologies. One is the single slotted and multi-slotted prism technology. We have realized the world's first mass production in the industry. It further shrinks our module size for folded optical paths to realize outline miniaturization and is compatible with lens OIS to enable larger aperture with [ angle ] achieved.

And number two is our optical power prism Technology. So we master the full core processing, including cementing, grinding and molding to boost system, light efficiency and optimize image quality. On the right-hand side, we can see the five reflection cemented prism technology. The industry first five-fold optical path architecture for extended optical path length, combine the low-reflection, low-transmission aperture and air-layer aperture to straight light can be suppressed at multiple levels.

The third is the precision glass molding capability. On one hand, we have -- we own the industry-first non-edging multi-cavity molding technology, enabling one-stop forming of multiple structural lenses to cut production cost and improve distillation position. On the other hand, we master special molding technology paired with glass thermal folding and exclusive release film processes to realize mass production of full spectrum optical lenses, including free form surface and micro-arrays. This capability also empowers our optical communication business across sectors with two unique strengths.

First, leveraging our profound optical system design and simulation expertise, we effectively miniaturize the lightweight optical modules. And second, with sub-micron high-precision assembly technology, it improves our processing accuracy and mass production efficiency simultaneously, delivering a solid support for scaled expansion of optical communication business. So beyond underlying the material and component capabilities, comprehensive in-house requirement R&D forms the core foundation of our differentiation.

So we provide one-stop solutions covering optical imaging, precision, mechanical design, AI technology platform, high-speed, high-precision motion control and equipment control, enabling equipment to support process design. So our equipment now features the core, including visualization product data modifying process and fully quality traceability for the improving product efficiency and yield of monetization list. Sunny is now fully building a premium intelligent manufacturing system centering the AI empowerment, digital twin business foundation across delivery and quality. AI intelligent platform and lean production. We independently built the [ Quantum ] AI platform to coordinate and optimize optical design, manufacturing process, quality control and equipment management to lift the yield and production efficiency.

Next one is our agile and customization, rapid response supported by parametric design and flexible production lines. We implemented a personalized customization product model with tailored solutions for each customer. Three is full chain traceability, quality assurance, unique codes run through the full product life cycle through AI visual quality, guarantee stability delivery and consistent high quality. The persistent pursuit of ultimate optical performance is the permanent underlying theme of industry development. So aimed at intensifying the industry component, AI will further empower the imaging industry, driving comprehensive progress in both R&D and manufacturing as a core pillar for competency improvement.

Master Light, Expand Boundaries: Intelligent Imaging for AI scenarios based on our major industry trends, Sunny will keep advancing optical innovation. While stabilizing our core mobile imaging business, we will accelerate market penetration of new imaging products, including handheld gimbals, action cameras and auxiliary lenses, deploy diversify synergy tracks for revenue growth and seize long-term dividends for image industry. Thank you.

Thank you, Mr. Zhongwei, for your insightful sharing. We now have a clear understanding that optical imaging acts as a critical medium for AI to perceive the physical world. Optical applications still [ bolster ] boast remarkable growth even in mature markets, yet Sunny Optical's vision stretches far beyond handset screens. Let's turn our attention to broader tracks. AI has penetrated all scenarios of intelligent driving, smart cabins and smart automotive lighting, bringing forth abundant new opportunities.

Next, let's welcome Mr. [ Xi ] to present under the theme of global leader in automotive optics. Let's welcome.

Dear investors and analysts, good afternoon. I am [ Xi ] from the Sunny Auto Tech, and we are preparing for the IPO, and we had handed in the A1 filing and due to the compliance issues, I cannot share with you a lot of the key indicators, including our product and technology trajectories or road maps. So I would like to share with you more about the macro technology development, including the industry trends. So first of all, I would like to talk about three aspects. The first is the intelligent driving systems especially the upgrade of the perception system. And the second one is intelligent cockpit with the HMI, the Human Machine Interaction and also the AI lighting systems that connect with the perception and the manifestation of the light and shadows.

So let me start with the intelligent driving, the perception layer. And 2026 is the first year of the L3 and L4 commercialization. And in '26, globally, the L3 legislation has been in the forming. And in China, some of the OEMs have gradually laid out the L3 vehicles for mass production. And '26 is also the L4 commercialization. Around the world, there are over 20 cities with the approval for the robot taxi commercial operation. For example, the top company in North America in 2026 has been operating and mass producing the robot taxi. And number three, the algorithm platforms had been switched from the hundreds TOPs to thousands of TOPs.

So this kind of upgrade also brought us with opportunities in the upgrade of the smart hardwares such as the pixel upgrade. So before, we could not increase the performance of the hardwares because it is limited by the computing power. But now once we have addressed the computing power issue, now the perception hardwares, such as the LiDAR, we will be able to greatly upgrade the pixels.

Well, first, in the vehicle cameras, there have been more numbers. So it's increased to 12 to 15 units per vehicle. And previously, in the L2+ level, we have the 3 meg to 8 meg combinations. But at the L3 level, it's more about 8 meg for coverage and even to over 17 meg. So in terms of LiDAR and the previous standardized spec is one main LiDAR. And in the L3 level, we will have 3 to 6 LiDAR and with one main LiDAR and some other black spot or short-range LiDAR. And in terms of the harness, so previously, we have 192 lines, gradually, we would upgrade to 896 units. So these are some of the upgrade in pixels. And another part is about the diversification of the features or the upgrade of the features. So at the L3 and L4 level, the intelligent driving system need to work all the time. So you may have a sense that when you are driving at high speed in the expressways, there might be some bugs hitting the surface of the LiDAR or the cameras, which will affect the performance.

So how can we get rid of those things and the bugs in real time and the optical systems in some extreme environment may have a faux -- so with the faux and dust on the surface of the camera, how can we get rid of it? So for both the camera and the LiDAR, we would have a lot of self-cleaning systems and the active heating functions to make sure that the smart driving system can work properly all the time. And this is adding the value to the smart driving hardwares. And next, I'd like to talk about -- another important part of the perception layer that is LiDAR.

And right now, the industry trend is OEM self-development. So this is the key I will talk about today in LiDAR. So if it is developed independently by the OEMs, then we would have the satellite cluster of the LiDAR. That means we will have the restructure of the division of the work in the industry. So on the left-hand side, you can see some traditional types of the LiDAR, some short range, some long-range LiDAR and the hardware and the computing units, the controlling unit are all integrated. That is to say the LiDAR manufacturers would be responsible for everything, including the hardware, the control and the computing. But going forward, the trend is that the OEM will have the self-developed LiDAR and the hardware and some core units such as computing and controlling parts would be integrated in the central processor. So what they need is an integrated hardware system. And then for companies who are specialized in module and optical technologies, there will be more opportunities.

And the second part is some technological pathways. So with multiyear development and iteration, the technology has been more and more homogenous. So LiDAR have been developing towards the modularized solutions. So the traditional way is -- as you can see on the slide, we have the integration of the camera and the LiDAR. So previously, we have one camera and LiDAR and we mostly have the mechanical integration and calibration. But with the new solutions in 2026, we could have the shared optical pathway with the LiDAR and camera and the receiving for LiDAR as well as the chip of the camera are separated.

So with the shared optical pathway, we can extremely simplify the extrinsic calibration as well as the accuracy of the system. So we have put together more factors about optical technologies and module capabilities. And another trend for LiDAR in the future is called the RGB-D chip integration. That means there is a sense and a camera, a lens. So LiDAR solution would develop towards the modularized way.

So next, the big part is about the cabin perception. The development of the cabin perception is more about vision upgrades, the pixel upgrade and the multimodal fusion. So with this trend, you could see that the demand is coming from the compliance requirement for legislation in China and abroad. For example, we need to have the DMS, OMS -- that means the monitoring systems for the driver and the passenger. So with this rigid demand, the in-cabin camera need to be upgraded. And we would have the combination with the milli-wave LiDAR and the thermoforming cameras and some microphones. So it's not like the simple integration of the 2D image information.

Instead, we would have a more diversified information to be integrated so that we can monitor whether the driver is driving in status, and we can monitor the fatigue-ness and healthy level of the driver, and we would also have some other perceptions and sensations of the driver and the passenger. And another thing about the in-cabin technology, which we have been worked on is the HUD. And the current evolution of the HUD is more and more from W-HUD to AR-HUD. So the W-HUD is composed of a traditional LED screen and is on the lighting systems.

So the massly produced HUD usually have a problem that is a small FOV and the short range of the projection. Therefore, it could not have the integration of the AR technologies. So going forward, if we wanted to develop the AR-HUD, then we need to switch from the liquid crystal technologies to DLP and LCoS. So it includes a lot of lighting and imaging and turning systems and some freeform surfaces. So it includes a lot of the optical components. So HUD upgrading towards the AR-HUD would ask us to further increased added value of the optical components and technologies.

And next, I'd like to talk about the smart headlights. And traditionally, the headlight is mainly used for illumination. But step-by-step, a lot of the domestic and overseas automobile manufacturers, especially the EV companies have been using some smart headlights, which is used for projecting some signals and signs so that the vehicle can interact with the pedestrians. For example, we have gradually switched from the multi-kilo pixel to million level pixels. So just as the HUD development trend, the headlights would also include a lot of the projection and lighting and optical systems so that we can further increase the added value.

The last part to talk about is called AI lighting. And this concept, well, we just covered the intelligent perception and the in-cabin interaction. So we need to think about how to take advantage of these external perceptions and with the internal cloud computing and some algorithms with the empowerment of the AI to allow the HUD smart lighting, headlight and the in-cabin systems to output some execution level information.

With that, we are able to have a closed loop in the system. So for perception, including the LiDAR and the camera, we are able to obtain some external information. And then we have the full vehicle computing platforms, including the cloud computing platform, and we're able to do the computation and operation and then connect it to HUD smart lighting and the cabin interaction. So we are able to increase the comfort level and the safety for the driver. So this is about the AI lighting system. We can do more in these aspects. So I had shared with you the latest development and the trends of smart perception, AR-HUD and cabin interaction involving some product upgrades. It can bring more development opportunities for Sunny. Thank you very much.

Thank you, Mr. Xie, for your in-depth analysis. Beyond automotive solutions, Sunny Optical has built a full layout to cover AI glasses, humanoid robots and a wide range of AI hardware as we explore the physical AI world. And next, let's welcome Mr. Wang Zhongwei to deliver his presentation team to optics as the foundation AI expanding the frontier advancing toward boundless opportunities. Let's welcome Mr. Wang Zhongwei.

Dear investors and analysts, good afternoon. Next, I would like to share with you our pan-IoT business. So these are very popular content and the one is the optical module, and there are three bridges and the other is the physical AI. So for these three bridges here in Sunny, we think that the optical module is the bridge between the computing power and the signal. So I'd probably not go too deep in that because Dr. Gu Bo is going to talk about that later on. And the second bridge is that we think that the perception modules bridge of AI computing and physical AI. This is the perception and interconnection modules. So for AI glasses, we think that the AI glasses bridge the human cognition in the physical AI.

So as you can see, this is the embedded AI technology framework and our ecosystem map. So if we talk about AI, we cannot neglect this triangle. One is data and then it's computing power and then it's the body itself. So the three bridges we see, as we can see, we are those three bridges. One is that if we want to get data, we need to have interaction with the environment or the surroundings. So that we need to have the perceptions of a real-world data include the real robot data or the embodiment-free data. So some of the public companies, they are pretraining these days, as we can see the companies listed, multi-spectrum listed companies and so on. So in terms of AI glasses, is between the embodiment and human beings -- so embodiment and the humans. So how can we use the physical AI after this technology mature and AI glasses has become an important tool for that. So for optic modules, it's solving between the cloud and edge transmission of data.

So here, I would like to talk about -- more about that. So why is data collection is now becoming more important? The logic is really similar to the automotive industry. Why the cars, the vehicles they don't need to collect? Well, actually, they're collecting the data as well. It's just they do it in kind of like in the back end. So for robots and automotives or the auto vehicles, you can actually compare them, but in terms of the robots, we cannot put men's in robots, but we can put people or men's inside the vehicle. For instance, you're driving the vehicle and the data has been collected by the vehicle. And later on, we just need to process it to tag it for the big data and to train the models and so on because we have really high-level autopilot rate.

So from L0 to L5, we can align them with the different stages of human plus robot. But we cannot just send a man inside a robot. So we now have an industry of data collections and companies. So currently speaking, we can see that -- we can probably differentiate into three different stages. One is the basic vision plus IMU or the era of stand-alone data capture device. Second is rapid adoption of UMI plus eco solutions. And third one will be the mature stage of fully integrated multimodal data acquisition.

So the differences between them is the dimensions of data collections and the way of collecting it. It's becoming more diverse. In terms of simulation, the simulated ability of the real world is becoming more competitive. So what we are seeing today, the data acquisition device have very fast growth opportunities. The data is provided by a company. So as we can see, the cost of this device is pretty high. It depends on the complexity of data acquisition. Normal collection is not that expensive. You just need a normal camera. But if you need more 3D remote control, remote data collections, it's going to be more costly, something between $100,000 to $200,000 for one unit. That's about data acquisition device, and this will probably be a continuous developing industry.

So the data after acquired depends on its complexity. The data is actually pretty worthy as well from lower-tier data to higher-tier data to only a few bucks to a few hundred bucks per hour especially some vertical -- some data in some vertical areas is going to cost you more. So you need all these data to run the robot. So from Sunny's perspective, why do we want to expand ourselves into this industry? So for all these years for data acquisition and the visual systems of a robot is really alike from hand tracking, head tracking to all different sensors inside a robot.

If we put it into all these hardwares, the platform technology actually is pretty similar. We have already put ourselves into XR industry quite a long while in terms of wearable solutions. We have now Eagle -- this is actually an Eagle data collection device. And second, I would love to talk about the humanoid robots. We think that's going to be the ultimate form of physical AI because after collecting the data, we have all these different scenarios, all these different data for different scenarios, then humanoid robots can then be landed and commercialized. So in this part, I think we have this different from a few stages. In Stage 1, we have the basic for industrial repetitive task in Stage 2, maybe commercial usage like retail services and so on.

This is the intermediate level. And in Stage 3 after it becomes an advanced intelligent, it probably is going to be really versatile and flexible to provide different services, nonrepetitive services. So for the data I have collected from Goldman Sachs, as you can see, in 2035, it probably will have a very, very strong growth. Maybe in 2 million units, maybe more. So for Sunny, we have really put ourselves inside this domain for quite a long time. From 2015, we started to invest in this industry. So it has been more than 11 years.

So from the head tracking system, the localization and perception system to the waste and chest safety perception systems to the manipulation perception systems on hand to like the obstacle avoidance perception systems, we're all making ourselves in these parts as well. So for humanoids, robots, we don't have a really large-scale shipments, especially for last years, we have talked about this as well. In some typical vertical industries, we have some leading samples in VGAs, in warehouses and so on, all these navigation obstacle avoidance modules are already been placed in use in a relatively large scale.

So in terms of AI glasses, -- we think that it's going to take up swiftly, and we have already put ourselves in this industry for quite a long term as well. And probably it's going to launch a new growth cycle in consumer electronics. So we think that in 2035, it's going to hit 100 KK. So currently seeing this trend, VR is in a relatively stable application like gaming, entertainment, that is a relatively stable scenario. From merging from smart glasses to AR, we can see that trend because smart glasses is actually taking some volumes up as well.

So the next step we'll be taking our augmented reality into the smart glasses. And the next step will probably have more features inside like gestures, brain waves and so on. So in the next step, the smart glasses will be equipped with the waveguide display system. So as we can see, we have -- in our own capabilities, we have been cultivating ourselves. How can we put on this glass without any feelings. It's not going to be too heavy and so on. This is what our technologies launches on, including lightweight prisms, including the high precision micro LED packaging, the Ultrathin VID lens and also the extreme miniaturization packaging.

So we can see that the market will probably grow swift. So besides the physical sensing or the physical perception and the AI glasses, in the AI hardware, we have our own portfolio as well including the trending intelligent imaging. We have some of our KAs in this industry including for our microscope line, we will now upgrade this to AI plus optics, microscopic vision agents. It's called an agent. So we'll have sensing, logic, execution and all the other domains, not just a simple operation like it before. And also for industrial visions, we have our deployment as well.

So after empowered by AI, we think that it is a good news for optical industry. In the future, in these domains, we see the market size and the AI glasses in five years, we'll see a very high-speed growth. Maybe even 2 to 3 years, we'll see that high-speed growth. That's pretty obvious to see. And for the -- we can see for JDs and other companies, listed companies, they are taking their steps in this as well. And also, we have some optic plus AI niche. And also for the embodied AI is going to rely heavily on optics because it's going to be a vision intensive, and it's going to be a trillion level market.

And finally, I would like to say that in the past, we think that Sunny is a company making hardwares typically. And for manufacturing industry, we're probably a leading role in that. So for these years, I'm using the pan-IoT products. We are limited by the software, the algorithms. We're professional enough, but the commercialization takes longer time because our own genes does not -- is not strong enough in that same. And after being empowered by AI like Codex Cloud, all these tools and trade, after being empowered by these tools, I think we have kind of compensate all these elements that we lack of before, even we are surfacing in some domains as well.

In terms of our own advantages in our optical technologies become a strong guard for us because for the growth of algorithm, it takes shorter time. But if you want to have our hardware capability, for many companies, it's pretty challenging, and that is relies in our gene. So that's about all I'd like to share with you. Thank you.

Thank you, Mr. Wang for unveiling the unlimited potential for AI hardware. So aimed at explosive surge in demand of AI computing power, optical technology as the core perception gateway for smart terminals to sense physical world against this backdrop, what new business scenarios can we explore? Now ladies and gentlemen, please welcome our CTO and fellow of the Canadian Academy of Engineering, Dr. Gu for his keynote speech leveraging core optical capability to impress the AI computing era, new strategies, new tracks, new future. Ladies and gentlemen, welcome, Dr. Gu.

Dear investors, analysts, good afternoon. I am Gu Bo, and I am the newly elected Vice President and CTO of Sunny Optical Technology. And today, I'd like to share with you the strategic direction in the AI era and the logics behind it as well as our mission that is to embrace the era of AI computing power with the core optical capabilities. New strategy, new track, new future. So first, why AI plus optics? And before I talk about the strategic direction, I'd like to introduce you the background of our four decades development. So what we have accumulated. And in 1984, we started as a township company with a loan of CNY 60,000 and eight senior middle companies with the accumulation of the imaging technologies, a great company with high revenues per year and listed on the Hong Kong Stock Exchange.

So supporting it is the end-to-end ultra-precision laser manufacturing and processing capability. And last year, the company had proposed the idea of expanding from image sensing to optics plus AI strategic direction. And the logic is actually quite straightforward. That is we have seen the exploding demand for AI computing and optic technology is not only the core entry point for intelligent terminals, but also is helping us to collecting data, storing data and processing data. So we have seen the exploded development of AI computing power. There is a strong demand for it.

So the industry background is quite clear, and we have been developing from the dozen kilo to 100 kilo to megapixels. So we have three bottlenecks, the scale up, scale out and scale across. So in the era of connectivity, the bandwidth, power consumption, transmission range, all of these physical bottlenecks has been restricting our development. And when the single GPU computing capability is not enough, we need to put together a dozens of GPU and even hundreds of thousands of the GPUs. And then we have a great demand for the GPU data interchange. Therefore, we have seen a clear trend of further development of optical technologies, replacing the copper physical materials.

So Mr. Wang also had mentioned about it as well. And optic is the core entry point for intelligent terminals to perceive the physical world and ranging from the smart wearables, smart transportation, smart manufacturing to smart home, everything would rely on the optical technologies. So it is an inevitable path to AGI that is towards the physical world. And over the past decade, the prosperity of AI has been built on a vast amount of text and image data in the digital world. And in the next decade, AI will transcend the virtual boundaries and interact deeply with the real physical environment in physical forms and have the in-depth exchanges with the physical world.

So in the coming decade, with the new CMOS sensors as well as Edge AI, the optical sensing plus AI will break free from the conventional restrictions of camera and image perception and processing Instead, we would have the machine-centric reasoning about the 3D world. So it's no longer about the restoration of the images. So it's not allowing the human eyes to see. Instead, we're allowing the AI to see, and we don't necessarily need the images, and we need to allow the machines to understand the 3D physical world. So what we need to do is to extend the human eyes in time and space, enabling machines to see visible and invisible information.

Therefore, every camera will be more useful, and we need to increase the number of the cameras, and we need to switch from see clearly to understand clearly. And the materials, deformation and the stage recognition via factual IMU and detectable calibration would be possible. And we need to transfer from the passive imaging to the active perception and the edge level reasoning and the chip will also be important. So we not only have more numbers of these cameras and components, but also higher value.

So for us, it means three things. The first is that every terminal would not only have 1, but also maybe 5 or even 10 cameras. So for precision, we can see clearly and then understand it deeply. So in terms of the edge computing, we are evolving from a passive imaging to active perception. So I'd like to take today's opportunity to briefly introduce you my personal background. And in optical and LiDAR technology, I have 40 years of R&D experiences. So the reason for me to join Sunny Optical is that I have identified the strong core optical perception strength of the company, and we also boast a very clear strategic vision. So my mission is to work together with the other colleagues at Sunny to lead the cutting-edge technological planning and R&D execution to accelerate the strategic transformation from the image perception to AI plus optics.

And next, let's talk about the core assets that is our core competitiveness. Why we are able to win. We have mentioned that in 1984, we have evolved from a small township company in Yuyao to over HKD 40 billion revenue global company listed on Hong Kong Stock Exchange. And what's supporting this kind of evolution is a complete end-to-end optical capabilities. From ultra-precision manufacturing with the module tolerance of 0.0 millimeters and even nano levels to the systematic design and development and the debugging of the systems. So this is unreplicable and a big differentiation.

And in '24 and '25, our R&D expenditure had accounted for almost 8%, respectively, and accumulated granted patents is close to 8,000. And in terms of the market models, we insisted the 7:2:1 model. That means 70% are invested in the product that will give us the return. And 20% is for the development of the shared platform technology and 10% is for the forward and the prospective layout. And this is not only down to earth and pragmatic, but also very forward-looking. So it helps us to develop in a steady way, but also aim high. And in terms of the market position, you are very familiar with the situation. So we're #1 in headset lens sets and the #1 in headset camera modules. And in 2025, our vehicle lens set is 34%. So we also ranked #1 in this track. This is not the ending point. Instead, this is a starting point for our further development and expansion into the new tracks.

So from the imaging perception to optics plus AI, we had been seizing the opportunities brought about by the great demand in the AI computing area. So we would leverage our existing AI core capabilities and expand it into the new business scenarios that is the optic connectivity and optic perception. Let's start with the optical connection. So this is a highly interested area in the market, and I have already talked about the market background. That is the scaling up of the computing clusters and the connectivity between the GPUs had been very important, and we need to address the limitation of the data exchanges. So previously, we used the copper wires, but now with the physical restraints, we have to use alternative of the optics.

So this is an obvious trend, optics replacing the copper wires. So we have seen the explosive development of the data interaction and the connectivity requirements. We have a bigger demand for the precision optical technologies. So optical connectivity is a technological routes is not quite certain yet. But one thing we are sure is that the base layer, that is the high-precision optical components as well as the high-precision coupling, it is always needed in every technological trajectory. So in terms of the optical interconnectivity, especially the CPOs, what are the opportunities and why we are able to do it? Because the most challenging part is the collaboration and coupling of the optical path. If there is a difference of several nanometers, it will be a fail.

So we have the millimeter and nanometer level design and yield management capability. So we are able to migrate this kind of capabilities into the new scenario that is the transmitter of the optical connectivity components. And right now, the target application scenario is the short-range, high-speed interconnectivity in the AI computing cluster and another scenario for application is the optic sensing. So that means we are upgrading into the chip level sensing. So vehicle and AI vision has a very high demand for dedicated optical chips.

So other thing we need to cover is the synergy across emerging sectors, including the vehicle optics, which is about LiDAR, heads-up display, HUD, smart lighting, just as what Mr. Xi had introduced. And in terms of the second part, AI glasses, just now Mr. Wang had introduced upgrades and the shipment had exceeded 10 million, and we expect that within 5 years, it would exceed 50 million. So Sunny technology -- Sunny Optical technology with our four decades of development, we are able to provide the full chain optic products for AI glasses and even the ODM capability, original manufacturing capability. So in terms of the robotics from the structured light to tough to slam and from mechanical arms to the dexterous hands and to the hand eye brain system, we are now working on the establishment of the visual perception to the full machine and to the co-development capabilities.

So in order to execute this strategy, what we need is not only technology, but also talent. Therefore, this is our dual engine technology plus talent strategy. Now first, let's take a look at the milestones of technologies in optical interconnectivity and optical perceptions. So at the very beginning in the year of 1966, Charles Kao had proposed the theory of optical fiber communication, which won him the Nobel Prize. And in 1970, Corning had verified his theory. And then in 2016, Intel introduced the 100G silicon photonics transceivers. And this is a 5 decades span and year-by-year, we have multiple waves of technological evolution. And recently, NVIDIA had launched the silicon photonics switches.

And for the optical perception, it's the same trend, and it started in the year 1666 and Newton conducted prism experiments, which had became the foundation of spectral perception. And now in 2025, we have the silicon photonic integrated perception and transceiver chip. So for dozens of years, we have many generations of the development. And in our research institute, we have our own two application scenarios and the road maps. And in 2026, we already have 1.6T optical module commercialization and CPO prototype deployment. This is the first year for this road map.

Going forward, we believe that in around 2028, maybe CPO would become a standard spec for supercomputing clusters. And by 2030, we will have 6.4T to 12.8T of optical modules. And by then, the copper wire will no longer be useful. So everything will be replaced by optics. And then by 2034, we expect that CPO would embed the optical engines into the computer chips. So beyond 2034, we can imagine that silicon chips SoC, the photonic SoC is able to integrate computing storage, memory and interconnectivity. So it's a very bright future. So it's the same for the optical perception. And for us, we really need to adopt a 3-tier road map for technology commercialization that is. First, mass production and then R&D and then make predictions for the future. So this is following the rule of technological development. And this year, for optical connectivity, we are being verified by the customer. And by '27, we will have a small amount of production. So for optical computing, we will have a longer period of technological development.

So for talent, it's actually really important for a company. So from our own role from only manufacturing to R&D and full solution providers, that is we need a systematic solutions. And also, we need talents in all these domains we mentioned above. So for that, our strategy is really clear as well that is we need our very clear strategy to tell us where we go through a good platform so that people can do real things through good returns to get people -- to keep people here. And also, we need to attract talents from all over the world. And also we need industry education integration to cultivate interdisciplinary talent through university partnerships. So my role is here to drive all these cutting-edge technology together and land them.

And next, I would like to talk about investment value and outlook because it is a day for investors. So as we can see that the AI compute demand growth is a certainty and that opens the expansion of optical interconnections and perception market. So we can see that the physical AI perception and the domains, we are trying to become a supplier to all these three domains. So in terms of application layer, so the volume and the quality need to improve together. And it's not just about the volume of the sensors, but we need higher precisions and also the volumes, including the mobility, home industry and wearables. In terms of the model-layer, just like Mr. Wang mentioned, it's actually a multi-model data driving our world models evolution. So there's a high possibility that our business will expand from hardware delivery to data services.

In terms of the infra-layer, just like the optical over copper we mentioned, that is the coupling between our optical hardwares and the optical coupling. So as you can see, the application layer volume growth, the model layer data value added and the infrastructure layer computer scaling. So it forms a very close loop. And finally, why Sunny Optical? On the left-hand side, you can see the free growth. Just like our foundations you mentioned, and the business leaders mentioned, we have high certainties in all these foundation business. So for robot AI glasses, they are going to have very swift growth.

And for the data business and the optical connections, that's going to be a new momentum for our future. And for our own core compatibilities, we have our own experience in our optical solutions, hardware solutions. We have our own custom TKAs and the new strategies and the new tracks for the future, just like our management mentioned, we have capital plus industry tools. And what's more importantly, we have clear strategy. So all these forms our own competitiveness of Sunny Optical. So this is something unique in Sunny Optical.

So in the past, we want to -- in the past, we want to shoot more clear pictures for the handset to make our vehicles see clear the roads. But for the future, we want to help AI understand the world and also to make the computing capabilities being able to pace down to the world. So for the future, 60 years should be able to be empowered by optics. And I would like to say something. I know it's a little over time. First, the past 40 years, we focus on optics and that is not a single not, but is a coordination of a whole technology line. That is something cannot be duplicated by the newcomers. And second, optic plus AI is not changing it to a new track. But we are putting the old capabilities that we have into a -- put that into a more valuable pool from only sensing to computing.

And third, from large-scale manufacturing, migrating to manufacturing plus system solution. So AI empowerment is something that is certain. And in the optic coupling in the optic transmission has been proven by our own customers and trials. So this is not just a new track, but also a fundamentally new valuation logic. The Sunny Optical core value is co-creations. So here, we would like to invite everyone to communicate more. We'll have our transparent disclosure and share long-term value.

So as you can see, for the past four decades, we enable phones and cars to see the world for the decades ahead, we will empower AI to see the world. Thank you.

Okay. Thank you, Dr. Gu, for sharing a transformative strategic vision. Next, please join me to welcome CEO, Mr. Wang Ji to deliver a comprehensive summary of all preceding presentations, a big round of applause, Mr. Wang.

Dear investors, new and old friends, hello, everyone. So academician Gu Bo has just delivered his presentation as the group's first Chief Technical Officer. So -- and I would like to take this opportunity to elaborate on why we established the CTO role at this time period. Some of them may be mentioned already, but maybe I would like to repeat it again. Finally, I would like to make a clear statement. So over the past few years, we have witnessed the rise of emerging tech giants such as OpenAI and SpaceX. They share one defined trait. So as you can see, from day 1, they zeroed in on fundamental long-term challenges, and they tightly align research insights, engineering systems, organizational capabilities and long-term objective forming a full closed loop that spans technological visions all the way to commercial value.

So these firms have offered powerful proof that the structural productivity has transformed. Researchers, computing power and data are now directly form value-generating systems. So this inspires while we continue to meet and create customer demands. And now we must proactively orient ourselves towards the development of needs of future society. So together, these two pillars will steer our corporate strategy and product development. So that is to say our future roads, our future path will not rely on direct consumer demands, but also we need to take future society development and human development into consideration. We need to combine those two things together.

And guided by this conviction, so we have created the group CTO position led by academician Gu Bo. So we will collaborate with top-tier university research labs and industrial partners to forge tighter integrations between cutting-edge research, engineering powers and customer requirements. So this ensure that Sunny Optical maintains leading agent sites and delivers robust real-world implementation aimed the AI-driven paradigm shift in optics. So that is from all the way a manufacturing industry developed in Yuyao.

Actually, we don't need an academician to become our CTO in the past. But now it's not that. We need an academician to become our CTO to lead. because the way that we think changes, our own cognition actually changed. So our closed-loop strategy centers on two core pillars, both elaborated on detail by academician Gu Bo. One is the optical sensing as physical gateway to AI. And second is optical interconnection as the backbone of infrastructure we just mentioned and also a deep introduction was made.

So we can see that light serves as the critical link it enables perception of the physical world. And in other hands, it connects the computing power of the digital realm. So this is the new paradigm we aim to build for the AI era. So moving forward, Sunny Optical will advance along three strategic trajectories. This is very important. This is very important for your own decisions. One, we all know, but I would like to say it again, that is depend on our two core foundation business, smartphones and automotive optics. That's our two foundations. And these segments underpins our customer base, makes production expertise and engineering capabilities.

So we want to put all these elements together. We want to do more. Smartphones hold structural opportunities via high-end upgrading while automotive growth lies in intelligent mobility. We will keep advancing towards high-complexity products, high-value modules and end-to-end system solutions. Second, we will accelerate the development of optical infrastructure for AI computing power. So we will steadily industrialize our capabilities covering precision optical components, coupling assemblies, packaging and testing for optical interconnection. That is what we mentioned with the -- what we mentioned the optic infrastructure.

And third is to empower new physical AI terminals with our optical expertise industry, including wearable glasses, industrial IoT and embodied robots are at distinct stages of evolution. And Sunny Optical will expand our market and product footprint at a pace tailored to each sector, starting with our core optical components. So as you can see, these three structures have different targets, but they carry distinct strategy priorities raised on unified underlying capabilities, chains by ultraprecision machine, optical components, lenses and modules, all the way to complete device and system level solutions.

At present, all key strategic projects are progressing smoothly as scheduled. And the group maintains solid overall operational performance. As AI reshapes the structure of productivity, we will build upon this foundation and that our profound, forward-looking insights will set the benchmark for applied research and industrialization. While genuine customer needs will continuously guide our technological exploration. So we will drive parallel advancements for our two core pillars, optical sensing and optical interconnections. So that is Sunny Optical's strategic choice. To rooted in optics, we grow into the AI era. Thank you all.

Thank you, Mr. Wang, and that concludes all the presentations in our first agenda. So we trust all of you now have a fully clear picture of Sunny Optical. We will take a short break and be back at 4:45 for start of Q&A session. Thank you.

[Break]

Dear guests on site and online, welcome back to Sunny Optical Technology 2026 Investor Day. We now officially kick off the session two. The Q&A with the management. Onsite attendees who wish to ask your questions, please raise your hand first. [Operator Instructions] And before we start the Q&A, I'd like to emphasize that today's discussion will focus on nonfinancial information, mainly covering the market opportunities and the technological trends in core optical tracks as well as Sunny Optical's competitive strength, innovations and the strategic layout. And let's invite our first questioner.

And I'm [indiscernible] from Citibank. And I have two questions about the strategies of the new track. And just now, Mr. Wang had introduced that we're talking about the coupling and the bonding packaging capabilities. And my question is that in the handset lens set and the vehicle lens set, will you have some migrated capabilities? For example, the handset lens and the modules would be both under your radar. And in optical interconnectivities, would you focus on prism and some other connectivity components? And for example, some components that can be connected with the optics and then the packaging capabilities of the modules. So you also have the technological preparation for the module inspection and tests. So I'd like to know more about what you're going to do to hear more details.

And the second question is for Dr. Gu. So you talked about the future outlooks about the optical communications, and you didn't talk about the 3.2T membranes, but you're talking about 1.6T and 12.8T. But you also mentioned that the CPO will be a standardized spec for the future. So 6.4T and 12.8T, is it an optical engine or something else? I'd like to ask about this question for Dr. Gu. Can you shed some light on some breakthroughs in the optical development for the future? Maybe we didn't notice, and you can talk more about the development pathways for the 6.4T optical modules.

Well, you are still asking about the deployment or layout of the optical communication business, right? Well, you also talked about the 6.4T, 12.8T optical modules, and I will ask Dr. Gu to answer this question. So for your first question, in our business expansion, we would definitely start with the core components. And when we are developing those core components business, we are also working on the integration at a systematic and theoretical level. And why we need to adopt this way? As we all know, if you only focus on optical coupling or certain optical components, and lack of understanding for the future mega trends, then there might be some problems.

So you're not comprehensive, holistic or systematic enough. And for us, we start with the fundamental theories, the logics of the optical communication. And on the one hand, we focus on the core components and the other hand, focus on integration. So this is a two-pronged way going forward simultaneously. But first, you will see some results of the core components because we have every capability. It's just a migration. And for the integration, it involves a lot of other factors. For example, the architecture of the communication network and the understanding across the protocols and some test equipment. And we are advancing those work in a very ordered way. And currently, we believe that it's going on very smoothly, meeting our expectations. So this is my answer to the first question. And the next question, over to Dr. Gu. Okay.

Thank you very much for your question. And in my slide, well, we have the Central Research Institute based on a lot of the source of information, we have made such a prediction, and it's not necessarily 100% accurate. And what we wanted to illustrate is that when there is a very high computing speed, especially in the short range, we need to scale up because we have so many different GPUs altogether and it's useless. If you cannot coordinate them well even when you are computing in a very high speed. So the road is just like the channel and the vehicle is just like the chip. So you need to, first of all, have the good road to allow the vehicle to drive smoothly.

So currently, in terms of the cost, we don't necessarily have to use the CPO. And we are just making a prediction based on existing information. So even if it is not a CPO, maybe it's MPO, there are still very high requirement for the optics. So for us, the opportunity is always there. So this is my question -- my answer to your question.

Hello, Chairman. Hello, President. Hello, management. I am from Everbright Securities. My name is [indiscernible], and I had been attending the Investor Day of Sunny Optical Technologies for many years, and we have seen a lot of the old friends of the capital markets and have seen some new faces of the senior management. So we have witnessed the development of Sunny from the consumer electronics to the top company in the vehicle lens sets and the module market, and you have navigated through multiple cycles and now you are entering into the optical communication sector, and we have a lot of expectations. So I have two questions for you.

The first is that just now Dr. Gu said that in the verification of optical communication, there had been some substantial breakthroughs, but you will start with a mass production in 2027, but still limited volumes. Are you very cautious or conservative or you're just talking about the progress of one project with one customer?

And the second question is that we have seen some other companies quickly enter into the optical communication sectors, and they may focus on some similar product ranges as well. So my question is that what is your competitive moat or barrier in the long-term competitiveness in optical communications.

So I would like to answer your first question. Well, it's not that when you have an order backlog, then you are able to deliver. Today, we talk about the year 2027 to deliver. I think it's a reasonable time line. How hard it is to purchase the chip? Do you know how difficult it is? We had just get started. And fortunately, we still have a lot of connectivities in the market. And because of our friends in the supply chain, we are able to get the chips. But whether we are able to deliver this year or next year or the year after, it is heavily dependent on the supply. So we have Marvell and Broadcom as our friends. So I think it's quite understandable for you as well because a lot of components are in short supply.

A lot of the companies couldn't produce because their vendors could not give them a lead time specifically. So it's a very special period. And I believe that by next year, we are able to gradually solve this problem. If by next year, we still don't know when to deliver, then I think the world becomes quite unrecognizable for all of us. And how should it be unknown to us for such a long time. And we have to admit that this is the reality right now. So whether we are able to deliver this year or next year, this is still a question mark. And I feel the same way like you. And I also hope that we're able to deliver this year. But still, there are a lot of restraints, but we will try our best to arrange the delivery as soon as possible.

About your second question, about the technological pathway, right? Well, this is a complicated issue. We believe that CPO will not be adopted so quickly. And maybe we will have an LPO or NPO, which are more pragmatic at the moment, but we will not discontinue our exploration and collaboration with the chip and packaging companies. And at the same time, for the modules, packaging and bonding is very important. And we do have part of the capability, and we will try to do some pilot level processing and to combine our capabilities with the need of the optical packaging capabilities. And this is the long-term development.

And right now, we had been conducting R&Ds on multiple aspects. And for the research institute, we will be more forward-looking and get ready for the future. Let me give you a simple example. And I'm not sure whether you have heard about the optical router or not. Well, when we transmit the light, there are multiple beams of the light. And this is a basic technology. And optical router is a very interesting technology. And I think it is having a lot of promising applications, and it's a very useful engineering method for optical transmission. So we will do a lot of R&D on that as well. And due to some special reasons, we cannot disclose the information before technology is more mature. So please forgive us. So what I can tell you is that we do have multiple technologies under development.

I'm from [indiscernible]. I have 2 questions. One is that last year, we were here because actually told us a lot of organizational changes. We used the pre-map. It's called [indiscernible] for that graph. That's 3 graph, I think. And one is about the organizational change, what it has come to effect. How is the performance for last year? And also, you've told us the 3-stage development change, mobile, automotive, optical interconnections and AI glasses. So how it's going to cope with the organizational structure? Is that we're going to start a new BU or branch?

Thank you [indiscernible], for your concerns about our organizational structure. Actually, it is. We use the Sky land tree, that graph to explore our organizational structure. So our molding platform, our resource platform -- and all of these has been strongly constructed, and we invest a lot on all these perspectives. So in that domain speaking, it is actually quite effective. So I'm not going to talk about the exact number, but after we have the resource platforms established in terms of our own vendor management, and optimization of the supply chain is really effective. Our own equipment platform is empowering our different BUs. Actually, we are supplying them pretty strongly.

For molding, we can now empower them to different BUs as well. So as you can see, our overall competitiveness has been boosted. And you mentioned about in the future, will there be an optic communication, optic interconnection BUs? I think it's certainly in the future. But in terms of when we'll start the construction, it really depends on our own development situation. In our current structure, some of the optical path can already be covered by our current organizational structure. If we need more technological integrations more BUs to be integrated and then new branch will be formed because if we emerge new brands right now comparing to the past, it will be easier because we have a centralized organization that's been established and then BUs are just like branches, and we are not that challenging in terms of resources compared to the past.

And by initiating new strategy, talent is the key. So we are going to introduce more high-end talent. all types of talents. And also, we're going to cooperate with universities, higher education organizations as well. You're probably going to ask that so I just elaborated that.

I have our second question is for Mr. Wang. In your opening remarks, you mentioned three points. One is about renewing the management team. Second is establishing a branch in Hong Kong network. And third is R&D network. In the past decades, we're covering Sunny Optics. You are growing internally. That's what we saw. And in the future, what's your thoughts about internal growth and outreaching growth? How do you balance that? Because I can see that the company is investing some investments in Hong Kong. I don't know what's your strategies on that?

In the past, in our capital markets, we don't have a lot of voice. Now we have our new strategy is that we want to make new friends in the capital market to use our own influence to expand our own friends circle. That is part of our growth. Thank you.

I'm [indiscernible]. I have 2 questions for the management. First is academician Gu Bo. You mentioned that we can actually have landed one generation, mass production, generation and pre-research one generation. We talk about optical perceptions, optical storage and so on with different products in there. Are there any products you can share with us and their lending situations and the pace of it? That's the first question for academician Gu Bo.

And second question, I would like to direct to Mr. Wang. You mentioned our data business, that is our data collection equipment. According to your words that collecting in one -- multidimensions and these different scenarios, these different types of products, what's our layout today? What kind of portfolios do we have now? And in the future, what's our commercialization path to these products and also mass production? What's going to be like -- what's the pace of it? That's my two questions.

So let me answer the data collection. One, in terms of -- from the hardware perspective, you all know that Sunny is really good at the hardwares, right? In terms of our systematic capabilities, we have quite -- we are quite good at that part. And our team in Hangzhou, we have 11 years of investments. So in terms of hardware, in terms of these products, I think we can complete the task easily. But in terms of single collections, it's quite easy. You can just type your phone on your head and you can do that job as well. But if you want to do a UMI plus Eagle, that the format of the data, what type of content of the data do you need? And we need to define -- we need to have a very deep defined or clear definition in terms of hardware. It's not just a simple hardware.

So we are making collaborations with a few data collection companies, making discussions with them and cooperations with them. And another thing is that from Sunny's perspective, because ourself, Ningbo is a city famous for manufacturing industry. So nowadays, we have a lot of job positions to be optimized and cost optimizations for data collection positions. So we ourselves is a large data generation factory. And we have cooperations with other manufacturing industries in Ningbo as well. We're talking with them to how do we collect the data. So we have got 2 paths.

One is it will all be completed by Sunny. That's a way. And the second way is to have cooperations with our external players. We're taking considerations. So that echoes what academician Gu Bo mentioned that from hardware collection to data processing. And we're probably going to do it together, both data itself and hardware will develop together. In terms of hardware, with top KAs, we're talking to them pure hardware for -- with data companies, just like I mentioned. One is cooperation. And the second way is that we can do it independently. So both of them are possible. Thank you for your question.

So this is actually quite -- this is actually -- the way we mentioned is quite generalized. For instance, like from imaging, it's just pure imaging. But in the future, we need to analyze that image. For instance, we need to see its own light spectrum. And we're not just detecting its position, but also we maybe need to know its UMIs and so on. So the product you have right now under mass production and the next generation of the product will under R&D. And then if you look to the future, maybe it's about integration of chips and other things. So that's all the way speaking.

In terms of optical interconnections, just like we mentioned in the past question -- in the last question. In China, we have a lot of users. They are still under 1T. They're still in 800 gigs. But you can see the trend, you can try to analyze the trend. The CPOs, they probably -- they're not going to use it. But in the future, they probably will need to use it, right, LPOs and all these different solutions. But that doesn't mean that you don't need to prepare the next generation of product. So you need to have things in your arsenals to keep it ready for the next generation, right?

For instance, in terms of the light source, people have different views. People have different technological paths, some mature, some immature. In the U.S., it's the same. But no matter what, we need to find our own possibilities of Sunny.

I have two more questions. One is that you've mentioned the external environment is still the same. But we've seen three months ago, we've seen the first quarter is actually pretty good. And if we're seeing the second quarter, the change within in this quarter, do you remain the same perspective towards the market, including your handset business and your automotive business?

And second is that I know that I cannot mention exact numbers. But I would like to ask some ethic issues. One is that for the growth of RMB in terms of overseas clients, do you have more opportunities because of that influence? Is it a good effect to you?

It's about the exchange rate, right? One is about the data, the data of the industry from three months ago. You probably know quite well about the data of the industry, right? Three months later, it's going to remain the same. Probably the handset, if we need to have another few folds of growth, we don't have that high possibility. In the beginning of the year, we thought that the price increase in memory is just temporary. But now I don't think it's temporary. It's going to be a long term. So I was actually thinking that the cell phone should have a change, right? Do we really need memories to have in cell phones? Can we have AI and the handsets?

If it does, and then we will have new demands. The situation will change then. But within the industry, there's a saying -- from the current formation of the handsets, it is actually -- we've actually finished a high-speed growth period. So really, we need to have AI phones, AI handsets. I think maybe next year or the year after next year, we'll probably have this new formation of handsets being released. That requires the GSM companies and the cell phone companies or the handset companies to work together and that is not profitable enough for themselves if they work it singly. So they are still holding the line because the hardwares of handsets is not making money, but it's earning monies via apps applications.

So if AI can take the profit of the applications and then probably these handset companies will have different ways of different ideas maybe. But I think it's going to a parallel situation. Both APP will be there. The apps will be there and the AI will be there. I think that's a higher possibility for the future. Or maybe let me put this way. In the past, smartphones, the functionalities of the smartphones we only use partially of them. That is because it's actually quite difficult or complicated to operate. But maybe for the future, it's going to become easier if that day comes, our smartphone will then again be rising.

But there's two things comparing to the things we mentioned in the beginning of the year. In the beginning of the year, we mentioned about -- with what we mentioned is about the memory, and it still remains the same. But for the handset or the phones itself, is it going to have another new direction of [ evolvement ] or new possibilities? I think it is. I think the possibility is there. So every time when the crisis comes, there's crisis and there's opportunities. So we do think that the industry is a lot of -- is still optimistic and with a lot of imaginations.

So dear friends, dear investors or analysts, you know that we actually are acquiring many chips, no matter phones, auto vehicles, LTs, we are increasing the procurement of chips, but our overseas income is growing as well. So as you can see, the exchange rate of incoming and outgoing is actually -- the gap is not that large. So we don't have that huge influence of the exchange rate.

I'm Andy from Morgan Stanley. My question is that I've just read the news that is out affiliated to Sunny had just started production of its Shanghai Lingang factory. And with this factory, we do have the capability of producing semiconductors. And for us, when we are switching into the optical communication sectors, will it be helpful, for example, whether we are able to adopt those semiconductor equipment for the optical components and in CPO, MPO regarding the precision of processing will be increased. So I'm wondering whether this factor will become -- will contribute to our competitive edges in the future? This is the first question.

And the second question is that when we are developing the potential customers, do we focus more on the domestic ones or more on overseas ones? And to be more specific, in CPO sectors, we noticed that in Taiwan, China, some customers when we are developing those technologies, they may have some advantages. And when we are developing and researching those components of the CPOs, will we consider collaborating together with those Taiwan companies?

For your first question about ally. And the second question is about the customers of the CPO. Well, I believe that this factory in Shanghai will definitely contribute to the processing of some special components in optical communication because we know that the semiconductor optics, we have the macro and nanometer processing and a lot of the components in optical communication requires the specific technologies. And I definitely believe there is value here. But as for what specific product will contribute to, I don't have the information for you right now because it's quite complicated.

And to be honest with you, the Sunny ally production line the capacity might not be enough when we have the high demand, but the technology can be shared. That is to say the equipment we have there and the capabilities we have there will be useful for us when we run some tests experiments, et cetera. And as for the customers for the optical communication sectors, we will develop both the domestic and overseas customers. And Taiwan is part of China, right? You can count it as part of China. So we do not have a set alone plan for it. So we would develop both the domestic and overseas customers. please rest assured. And given the structure of the customer base, we would definitely push both domestically and internationally, and we will not limit ourselves to certain regions.

I am [indiscernible] Investment. And I have noticed that not long ago, you have invested in Aisen Optoelectronics, which specialized in the optical modules. Can you share with us the reason of making this investment? And does it mean that you will also pay more attention to the optical modules in the future? And just now, Mr. Wang also mentioned that for a lot of the sectors, the upstream material is in short supply, such as DSP. And if you focus on some other modules, it's not related to DSP. So I'm wondering whether these two things can be correlated together? Does it mean that you're going to pay more attention to the optical module?

So the second question is that can you give us more information about the sample delivery in the second half of the year? And what will be the product involved? And also for next year, you said that you will have the small-scale mass production in next year and what will be the products involved because we have such a wide range of the products. So I would like to hear from you about more details.

So we don't have any quantitative guide. We do not share any financial information on this event. So for you, the question cannot be specifically answered. Even if I know the answer, I cannot tell you right now. So we will promote the development of the core modules and the optical modules at the same time, just as I had mentioned before. And the investment of the Aisen Optoelectronics Technology, well, it's just an investment as simple as that. But whether it's a signal for us to focusing more on optical modules, that's definitely true because we have a big investment here. Usually, the investment only accounts for a small percentage of the revenue, but this one is relatively quite big investment. So what we will do is to accelerate the development of the optical communication.

And we use some capital market operations to help us to do that. And just as our Chairman had mentioned, we didn't do many of the capital market operation before, but this is one of it -- one of them. So we will also have the integration between AI and optical communication, and you may know later about more details. And we have made some important investment in this aspect as well, such as data collection and handset module manufacturers, robotics, et cetera, if they are able to contribute to the integration between AI, optical perception and conducive for the industry development and our own business development, we may make some investment.

So all of these are laying solid foundations for our strategic layout going forward.

I have 3 questions. The first, because Sunny Optical had evolved to not only from the handset lens sets and the vehicle lens sets but also had expanded to other sectors. And for these core businesses, you are always #1. So for the investors, the most important question may be what kind of track would you like to access? And to be more specific in AI plus optics, I'm not asking for a near-term guidance. I'm wondering in what aspects would be a potential market? Or what is the market potential? And in my understanding, the first step is to develop some components. And the second step is to develop the second-generation CPO coupling. So could you share with us more details how large is the pie in this market? And what are you specifically going to do? This is my first question.

And my second question, you also mentioned that we're going to have some investment to use some capital market tools. So I wonder, apart from making investment from the operations perspective, what capabilities do you think are possible to be included through the means of M&A? Or in other words, what kind of capabilities do you want to acquire through M&A?

And the third question is related to the online factory. And I wanted to know -- it seems that there is an equity switch swap between online and Goertek if you wanted to access the optical communication industry online is very important, but why do you want to have a swap with Goertek. And our handset and vehicle business is mostly 2C business. And now in the optical communication business, I think it's mainly about 2B customers such as the cloud companies. So when you complete such a switch, what kind of switch of capabilities would occur because we suddenly see companies that focus both on 2C and 2B market.

So you have asked 3 questions, right? Well, I'm sorry. Well, the moderator said that you should limit your questions into one or two. You have asked 3 questions. So I have already forgotten your first question. Can you be more straightforward? What are your two questions?

Okay. Let me simplify. The first question, can you share with us how big the market is? And what are the specific areas are you going to focus on? So you're talking about the planning of the optical communication, right? Okay. This is the first question.

Okay. And the second question is what kind of capabilities do you want to obtain by making the investment in the capital market. For example, for the optical communication business, you may realize that you lack certain capabilities, and you can apply those kind of capabilities to investment. So can you share with us about that as well?

Okay. It's still about the strategic planning. It's about resource matching. Now let me try to answer your question. You talked about planning and how promising the market is. And I think all of you understand it clearly. And we will definitely trust the big scale of the market. And if it is not tens of billions of scale, we want to access it. And the second thing is that I have already told you that we will focus on both the components modules and the products and what kind of capabilities we still lack.

Well, honestly, we do lack multiple capabilities, but how to fill those gaps, we're still having a discussion and consideration right now. It's a long-term thing. And the main reason is that for optical communication and optical interconnectivity, the development trajectory is of high uncertainty. So I am being very frank and candid here. Maybe year-by-year, there will be very big changes. So generally speaking, using optic technologies for connectivity and phasing out copper wires with optics and the development of optical computing and storage will definitely be the trend.

And in the end, we need to fully utilize the core features of optical communication. So what we lack right now, to be honest. So previously, we have the image perception or the geometric optics. This was our strength. But now what we lack is the physical optics and we need to accumulate more capabilities in this aspect. So this is a focus. And as for what specific technologies in physical optics, it's quite complicated because it's such a big range. But centering around optical communication, we do believe that we will have a very thorough plan.

So the latest version of the plan will be completed by the end of October this year. And this is also why we invited Mr. Gu to join us. And in the past few years, the company mainly focused on the optical imaging. And what we need to do now is to switch more to the optical communication and interconnectivity. The underlying logic is the same. But in terms of application, there is some inconsistency here. And I would like to mention, by the way, about the ally factory. Well, together with Gu, we can enable the company to develop better, and that is the simple reason. So this time, you have seen that we have respectively added another CNY 500 million as the equity, but there is no big change of the share of -- percentage of the share. So this means we are determined to have long-term development.

So together with Goer Optics, we made the investment. So it's not a simple swap, and we will not leave it alone, and we will follow up with the future development and conduct a very close cooperation with Goer Optics and boost the development of AI. Well, due to the interest of the time, we will have the last question. If you want to ask a question, please raise your hand.

Dear management of Sunny, I'm very honored to be the -- to bring up the last question. My name is [indiscernible]. And so I would like to pick up the topic to ask that is in terms of handsets. Just like Mr. Gu mentioned that the storage situation may be a long-term impact. And so in terms of the scale of the impact, what's it for Sunny? And where can the turning point be? And in this period of time, how do you tackle that issue? And in terms of the -- for the auto vehicles, and we can see that since this year to the second half of the year, maybe the growth in this market will change as well. So what's your perspective towards the market? And how do you tackle that situation?

So probably I'll answer the handset. In terms of the handset business, just like I mentioned last time in the roadshow, we have 2 Ks growing for other clients, it's not very ideal for them. We don't have a big change since our last roadshow. There was a news that is for the login, they don't want to manufacture the Apple's lens. And the reason is not that. But our market share is growing. It's just like what's been seen outside. So what we rely on is our clients inside China and overseas clients.

So in this business domain, comparing to our competitors, we're doing relatively good, I think. But the overall industry is going down. That's also a fact. So we don't have significant change since our road show during the end of March. It's just a little bit more challenging. For the automotive industry because for the automotive industry, we can see that the selling figures of these vehicles is still there. But in terms of the sensors on the auto vehicles, that's what we're majorly doing, right? The sensors onboard these vehicles, SUG, LiDARs, beams and so on. These vehicle sensors, the amount of them is actually increasing, especially inside China. we are doing L2+ applications. And by the end of this year, a lot of these players will launch L3 autopilot systems. So there are cameras, there are LiDARs, camera modules, a lot of them needs to be upgraded.

So if we're talking about cameras or camera modules in L2+ for the front view, we have a few 8-megapixel cameras, but the surroundings and the rear view, it is just 3 megapixel. So if we want to go to L3 level, all needs will be upgraded to 8 megapixel. So the pixels is improving. And for L2+, including L3 autopilot, all these players in the market, a lot of players in this market last year, these new players, including BYD and the Geely, they are making their moves in this stage. And a lot of major players inside China will migrating themselves from L2 to L3. For overseas market our high level auto pilot. The speed of onboarding the sensor is not as fast as the markets in China. But for overseas, a lot of these car brands, L2, L3s, they are now going into mass production as well, especially for the European players since 2026.

Although there are pressure in terms of the sales figures of the vehicles, auto vehicles, but the amount of cameras or the sensors required on these vehicles is actually increasing, especially for the North American player, as you know, because they have more than 20 cities approved -- approval to do their auto pilot trial. So L4 levels will be adopted as well. So for the North American brand, they are using 70 megapixel cameras and a few LiDARs. We heard that is 70 megapixel has been onboard the vehicle. The upgrade of the resolution and also the amount has been increased. So all these are value added for these car brands.

For the new players -- the new energy vehicles players, AIHUD is making their moves as well and also the ibeams intelligent lighting. For the onboarding rate, it's not that high in the market. After being onboarded by the new players of the new energy car brand in China, I think this will gradually pick up or becoming standards in the market. And also, the overseas players will follow up, especially for the high-end OEM players in overseas, including AIHUD, smart beams and so on. So these new products will give us growth as well. That will be all.

All right. So due to limitation of time, we know that there are a lot of unanswered questions. But at the banquet, we welcome our investors to have exchange with our management. So that will conclude our main venue's agenda, and we sincerely thank you for your trust and support and also wishing you smooth work and every success. Thank you.

[This call length has exceeded streaming capabilities - Please refer to the preliminary transcript that will be posted shortly.]

[Foreign Language] Executive Director and CEO, Mr. Wang Wenjie; Vice President and Interim Company Secretary, Mr. Ma Jianfeng; Ms. Wong Pui Ling, Senior Director of IR; Ms. [ Lu Yan Fong ], Director, Investor Relations. First of all, Mr. Wang [ Thang Zong ] will make opening remarks, please.

Honorable investors, analysts, morning. Last night, we published our 2025 annual results, and this is quite a satisfactory report card. AI is bringing to us very wide opportunities. We have already set a new round of RMB 100 billion strategy, and we have planned a clear road map. Even though there are very complicated external environment, and in the industry, there are short-term fluctuations as well. We have much confidence in the high-quality growth in 2026. In Q1, we enjoyed record high results in our operations, and this is laying a very strong foundation for us.

So now I will defer to Mr. Wang Wenjie to go through our business results and then the management will be happy to answer your questions. Thank you.

Investors, good morning. Welcome to Sunny Optical Technology's 2025 Annual Results Presentation.

Today, I will begin with 4 key judgments to directly address the issues of greatest concern to you. First, Sunny Optical's handset business continue to achieve reverse trends in 2026, building on the implementation of our premiumiization in 2025 to effectively market vulnerability to sustained ASP growth, market gains with key overseas games, achieving the trend growth in our handset business.

Second, have established full stack soft algorithm and integrated hardware, software solution capabilities. We have completed the development and engineering delivery of algorithms across the full spectrum of imaging, time caption, demand segmentation. They show nationalization and CD reconstruction. We have achieved the auction of system-level products for warehouse automotive robot AI industrial cameras secured cession in visual and within practical applications such as body intelligence and smart manufacturing. Now this is the capability for large-scale delivery of integrated hardware/software solutions required to bring AI into the real world.

Third, in addition to our handset products and vehicle businesses, have identified a high certainty growth opportunities for the [indiscernible]. Growth momentum will stem from the continued expansion of AI-enabled wearable smart hardware and robotics. In the long term, we'll optical forces our core starting point and take that strategic deployment across [indiscernible].

The information of perception transmission, processing, storage, display. By cross applying precision optical optoelectronic integration technologies have been validated through large scale production will under term growth prospects.

Fourth, regarding spin-off, our vehicle business, which has affected significant engine, we capitalize on industry dividends through the spin-off at the same time line by reaching an independent catalyzed platform to maximize the value of the vehicles, deepened upstream, downstream collection across the industry chain and going to build an open and mutually beneficial industrial ecosystem.

Moving on I will now elaborate 4 [indiscernible] covering a review of our 2025 miss business highlights, future outlook and ESG movement. Let's move on to the first results review of 2025. 2025 outcome achieved revenue of RMB 43.23 million, representing a year-on-year increased 12.9%. Revenue growth is primarily driven by the combined effort of the 3 major segments, and that's vehicles at the pan IoT sector. With the company's diversified business layout getting significant [indiscernible].

On profitability, our full year gross margin stood at 19%, 1 percentage point a year, driven by 2 key factors: first, focusing on more opportunities from premiumization on smartphone imaging. The product mix for lenses, handset lenses and camera modules continuously optimized driving improvement in gross margins of [indiscernible] the continued rise in revenue in vehicle business. In terms of profits, our net profit attributable for the full year at [indiscernible] increase of 71.9%, maintaining high-quality growth despite a hard base investment income of RMB 119 million generated from the equity investment in [indiscernible], the company's net profit grew 37% year-on-year.

In terms of cost control, our overall expense ratio of stood 11.6%, down 0.8 percentage compared to 2024. Selling and distribution expenses fell by 2.9% year-on-year, demonstrated significant success in cost management. R&D expenses was up 11.4% year-year as we continue to ramp up R&D investment in a vehicle related businesses to lay a technological function for long term takes our overall expense increase further with target range 10% to 11%. All financial data are detailed in the announcement, so I shall not elaborate them here.

Session business highlights for the whole 825. Firstly, handset products business. In 2025, set this achieved steady new growth rising 8.6% on year on the industry as a whole. The core driver this growth are our continuously deepening premiumization strategy and the going to main of our product. whilst ship volume of HS and camera module line ASP saw a significant increase with lens ASP rising by over 10% and volume by 15% demonstrating the remarkable effectiveness of our premiumization strategy.

Specifically, revenue from our glass plastic high HRS improved by 95.8% year-on-year. Revenue from risk expenses rose 20.7%, accounting for 18% HLS Revenue from Paris got modules was up 5.9%, accounted for 20.4% of handset modules revenue. Continued press in high-end products have laid for business growth. [indiscernible] be the most ultra-miniaton than technology and AOA ultraprecision technology, we have successfully over numerous challenging technical bottlenecks enabling mass production of multiple products.

For instance, our high-performance ultra large aperture cement periscope solution utilizes our proprietary AOA multigroup high precision signal to achieve group access technology breakthrough and so supplier to a certain high and more is our integrated lens water module technology, which has successfully enabled mass production of a car at landfill with a belonging malnutrition and weight reduction. It has been successfully adopted clients flagship high end module. Furthermore in 2025, we committed into units major overseas plans in key breakthroughs across projects being a solidation future growth.

Next, the products business. In 2026, and intelligent ride continue to rise. Vehicle optics sector is entering a period of rapid growth. have seen these industry opportunities steadily in easing on to share with key clients, which has driven 21.3% year-on-year increase in vehicle revenue. We have successfully achieved mass production of several products, including 7 pixel ADS cameras, long-range LiDAR, transceiver malls and none glass plant preproduction less. In terms of internal collaboration, our land module teams together to tackle key challenges. [indiscernible] projects, including real Epsilutions and cleaning solutions have passed validation by leading clients. The relevant technological achievements are being rapidly coned into mass product projects foundation for the continued expansion of our core business.

Third is the XR business. In 2025, overall revenue from the XR business declined year-on-year, primarily due to weak demand in the VR MR sector and adjust to the product launch those of major clients. However, revenue from our AR smart glasses, camera modules surged by 8% year-on-year. effectively offsetting the impact of the decline in the VRMR business, the same overall gross margin for XR segment reached 19.6%, up 3.8% year-on-year, representing a significant improvement in profitability.

In terms of internal synergy, we build collaborated capabilities across multiple subsidiaries optimized management model engage with top additional clients and it service interface to achieve end-to-end coordination of most demand response technology and product delivery. In 2025, we achieved several milestones. Firstly, we success end supply pains of future overseas clients for this pay equipped products. Second, we achieved mass production of glasses and device on Qualcomm AR1 and [indiscernible].

And third, our solutions reference design top-tier international clients. In 2025, a share swap, we completed a strategic mutually beneficial arrangement with [ [indiscernible] that leverages our complementary strengths. By aligning equity interest, we have achieved efficient synergy in technology, talent and industrial resources, delivering 2 key strategic values. First, we're closely collecting to become core technological near-eye display, establishing a world-leading waveguide mass production platform, covering the entire process from [ Kunono ] designed to mode processing and front back-end manufacturing by consolidating our core strength, technology and scale manufacturing.

Second, everything, the industrial piece of both companies, we have achieved mutual are customer resource and capital strength establishing a complete chain technology R&D to market implementation and jointly drive the development of AR optics in Fourth, an IoT business. By 2025, our formation into a provider complete smart solutions is put substantial sales we completed the device development and compete mass production shipment, I industrials and AI webcams in the robotic sector, we establish end-to-end development capabilities core modules device, collaborative projects and clients achieve stable mass production and shipment.

It is worth noting in where automation projects for leading overseas clients, we have progressed from mass production of individual modules the interconnected system-level products comprising multiple device business on to our capabilities and development certification and overseas servicing of system-level products enabled to successfully enter supply chains of each overseas clients, not warehousing operations. in funding for expanding for the high-value system-level projects the precision is business.

In 2025, we achieved breakthrough in mass production capacity for integrated optimisms. -- time, our group formerly established precision company to further strengthen core competitors in the fields of outposition optical veining and loaded thus through our proprietary high-efficiency technology, pressure molding has been significantly shortened. Production efficiency was up Cost per unit fell 21%, laying a solid technological foundation for future expansion into new market segments.

Finally, I would like to highlight our achievements in 2025. Regarding implementation of technology and development of our core capabilities of integrated hardware and software. In terms of our implementation, we on scalability and scenario-based applications to drive empowerment across entire production process, forming a close system and compensing governance, training, production cation and data feedback.

Multiple AI application scenario have been all implemented. Driven [indiscernible], we have achieved an average 10% increase in UPH on production lines without modifying equipment. Through AI recommended forming machine parameters, we have show product development sales by over 30 AISP visual modeling, we have achieved real-time boost loop interception of noncompleted operations, abnormal risk to process plasma cleaning thereby improving product acceptance.

In terms of core capability even leveraging a full R&D expertise optic device, electric and computing. We have developed multimode optical in system and stain end-to-end technical capabilities, spanning option processing and application all cortices of under successful product rotation. This system is based on our 3 multivision matrix and high-precision division sensing solutions combined with driven imaging enhancement technology and edge lightweight intelligent caption algorithms and have already covered scenarios such as optic detection and biometric recognition currently related average mass shipments core algorithm being platform successfully used across all projects.

Furthermore, we have mastered high precision multiscalibration and multimodal intrusion technologies. -- buying on a full standevelopment Archit, but we have established an integrated system design featuring hardware, software synergy by fortifying our system delivery barrier, building the system capability, developed a role vision solution featuring between perception hardware, intelligent algorithms, device system has been deleted customized way to several new clients on various indies receiving positive market feedback.

That concludes our overview of our business and capacity building achievements in 2025. We will move on to Part 3, outlook for the future. Firstly, handset business. Although the global handset market is forecast to contract by 12.9% and in 2026. We're confident that our handset business achieved growth against the trend. This confidence stems from the sustained increase in ASP driven by a solid program made in our the premium in 2025 as well as the optimization of our customer structure.

2026 will continue to drive both from both the product and clients, further consolidating with more terms. On the product shipments of low no are expected to decline, we'll continue to strengthen our core technological advantage and per vertically integrated solutions to drive sustained volume growth for high-end products. As the in high-end products is several times that of standard products can effectively get industry fluctuation through continued improvement in [indiscernible].

We forecast that by 2026, revenue from last plastic HLS will grow by over 150 Paris and revenue increased by 40% year-on-year. Periscomodule revenue will rise by 8% year-on-year. And revenue from integrated data malls will grow by over 50% year-on-year. These products will deliver stable and predictable profit growth to the buses, becoming the core draws of counter trend growth in handset sector.

The trajectory for our client side is clear. Firstly, we continue to increase our overall market share among leading clients, Huawei and so with this growth primarily concentrated in the product lines. Secondly, we are achieving continuous growth in cooperation with major overseas clients, with our 1 market share steadily increasing. Substantial progress has been met on relevant main projects are encouragingly have expanded the product lines.

Revenue from major overseas clients is projected to grow by over 100% in 2016, checking signarevenue and growth into the handset business. In TV, we entered that revenue of handset business will grow by 5%, 10% year-on-year with margin for mobile handset lenses stabilized at 25% growth gene target for handset camera models at no less than 8%.

Next is vehicle business. Vehicle optics have become a core necessity for smart cards driven by technology and the software find vehicles smart cars are evolving a mere means of transport into a third space that encompasses the entirely. This one will shift nature demands on driving safety in massive cabin experience human-vehicle interaction. And optical solutions are the core foundation underpinning the industrial transformation based on some conviction regarding the long-term growth of this sector and to further unlock development potential of our core business, is pursuing enough listing of the vehicles on the market with the scale of a big offering not exceeding 15%.

Objective of this office to utilize dependent capital platform to further amplify the industrial value business, track global talent and simultaneously introduce cornerstone investors with synergies, industry results that are deepening the performant and large capability in the vehicle supply chain. Subject to the Hong Kong Exchange disclosure rules, recruitment of listings those presentation will provide all official information regarding the eco-business without doing into further details. Please refer to our company's official enhancements for subsequent developments.

Lastly, the 2026 plans for the XR business. In 2026, due to launch schedule of new product by major overseas clients, the related business within the XR side continued to face pressure, with full year equal revenue approached at RMB 2 billion. We remain confident in the segment's long-term growth primarily due to key certainties due support of growth in core business and the expansion of strategic layout.

In 2026, we'll continue to deep cooperation within industry clients to consolidate our global leasing market share. in the industry pain points of lightweight and high integrated AR glasses leverage our accumulated capabilities in optical miniaturization, R&D large mass production to drive the element of pack optical as a system integration modules and other products aligning with the new product development life cost. Gradual [indiscernible] in '26. We're jointly developing optical engines lens competition products with top international clients with mass production of these products scheduled for 2027, which is expected to become a key growth driver for the XL business year.

Furthermore, through our strategic equity stake, in Karoli, we're securing strong footprint in the AR optics sector. In 2026, Cortera's overall revenue will reach a new level. Currently, they are advancing pro several major core electronics clients in our sector simultaneously product R&D across various technical parts, ringing solutions for defective we guys nonsolutions different serials such as resin, loan SRC support the utilization of client products.

Regarding the whole devices, we'll continue to iterate on products. Existing projects, refine our multi-platform capability and drive breakthroughs more application scenario. Secondly, the large-scale proliferation of heart for real-world AI assistance. The strong sales of overseas clients classes in 2025 have made it clear to us that with the further development of AI technology our AI assistance moving from concept to co-applications.

For such a assistant to create real value, the first amen to see the world really. Only by accurate perceiving physic teams through achieve understanding, decision make and value output and the is the refrigeration of such interactive AI leases, serving the. Industry is currently a variety of duties, including AI advances, AI, smartphones with visual capability and desktop hardware regardless of which category achieves market adoption in the future reception will remain a core feature.

Consequently, the logic behind the industry is clear. as AI continues to iterate AI-assisted real-world scenarios will runs rapidly, driving continued expand of the consumer hardware market and fueling steady growth in camera shipments. At the same time, etch AI vision is subject to strengthen constraints with computing power consumption and format with this performance being dependent on the quality of raw data from front-end visual perception. Moreover, the more for the AI abilities, the higher demands on accuracy, efficiency and environmental adaptivity of visual perception.

These factors will drive evolution of cameras towards maturization low-power concerned, high dynamic range, high redness and distortion, there by continuously enhancing technical specifications and of individual units currently building upon 2 hardware capabilities, we have established a lot waiting system. For consumer rate I heard, featuring tech capabilities, edge side enhancement spatial semantic understanding, steel station post tracking and high-precision reconstruction at a closed range. Through [indiscernible] between algins and Heartbeat, we have established a core missive advantage based on integration of were in hardware, thereby enhancing added value of our products.

At the time, we're able to provide composed solutions tailored to clients' needs. -- by continuously strengthening our technological barriers. This represents 1 of Sundyoptical's high certainty growth opportunities for the next 5 years. Fourth is robotics business, a strategic sector in which we're focusing our efforts, and we'll continue to invest carefully. Currently, we have established end-to-end development capabilities ranging from core robotic module, the whole device for typical applications, larose logistics, long and small pool plan.

Through in-depth collaboration with industry-leading plans, we're closely building up core visual technologies and visual perception systems for human robots. Future will the technical expertise across upon scenarios to extend our capabilities into more car scenarios, providing critical visual support for practical implementation of the robotics industry. In 2020 an IoT revenue grew rapidly with revenue growth exceeding 60%. both outlined strategic positioning and implementation pace of our various business over 2026, the group's revenue and operating profit are both expected to a growth of no less than 7%.

Next, I would like to share with you our long-term strategic access of the convergence of AI and or intersection at an AI information, a common cornerstone makers as the fundamental carrier of information in the physical world whilst AI represents the parade for information across current -- the focus competition AI is shifting from which model is larger or greater computing power entity be stands the lowering the evolution of the world and which can in more into real physical systems. Ecosystem serve has the core gateway through which AI acquires remote data. The performance determines the jet and precision of physical AI standing of reality.

Based on this charter, we have divided the evolution of optical perception into 3 progressed stages with only at completed corresponding strategic planning and atin at each site first, which is seeing the world clearly for intelligent systems to perceive the real environments in a stable and reliable manner. They may only recognize the appeal of objects, but also grasp the patio temporary context, relying on high-precision optical percept systems, we are constructing a dimension or spatial, temporal coordinate system, that's perceptible, active and variable.

Optical technology capabilities enable AI systems to capture detailed information from the physical world with stability and position. And our comp in this field have achieved a leading global position. The second which is understanding the world. True standing revised not only on algorithms, but all the information capabilities of sensors, traditional RTB vision technology to capture a sense of object.

For example, it's not effectively distinguish between an IC road service and the word service, there for technologies such as spectrum, hyperspectral and polyonending are required to the physical property objects, ensuring that understanding is built upon a reliable foundation of optical perception. Our [indiscernible] algorithm platform poses capability to such, develop and implement algorithms for full chain modeling of optoelectronic imaging, multiple physical information present, appreciation spatial post estimation and 3D geometric construction. This enables to cross scenario we use of core arms, providing underlying tech support for a wide range to greater hardware software solution.

The third stage involved to participate in execution as the dimensions of visual perception become richer and data was increase, the trial model of submitting the entire video stream to the back-end processing cannot meet the means for low latency, high purity operating and real-world scenarios. Consequently, optic assumption systems evolve computing integrated architecture, deal integrating to the production decision execution closed loop, enabling optical modules not only to submit raw video streams. So to output sure cement streams.

Through compute power and algorithms integrated at the sensor and cementation also reasoning and rapid making a completely [indiscernible] a low-latency response mechanism currently, our warehouse automation systems products, robotic systems and AI industrial cameras have all achieved close implementation from perception to execution. As I mentioned earlier, with light serving as the carrier of information, optical perception represents the core entry point for data. We'll take this as our starting point and develop a comprehensive strategy along the information chain depicted in the diagram, sensing, transmission, processing storage display.

Today, I will focus on the core hub of the gene, the transmission stage, specifically introducing the optical interconnect that is of such interest to you all. Our natural extension into the field of optical interconnect is underpinned by the fact that manufacturing processes for optical sensing and optical communication device share a high degree of commonality. The technological and process advantages our company has accumulated over many years in the traditional optical can be directly transformed into core support for optical interconnect industry chain primarily manifested in the following 2 aspects.

First, the reuse of auto electronic packaging and active alignment technologies. Our large-scale application of COB processes as well as our independently developed in degree of freedom, AA alignment and adjustment equipment enables micron coupling and alignment between optical chips, lasers and optical fibers, ensuring high yield rates and high consistency in optical material packaging.

Secondly, the reuse of ultra-precision micro nano optical manufacturing capabilities, leveraging our deep expertise in ultra position machining and coating processes, we can not produce core passive optical interconnect components such as micro length arrays prisms and high-frequency fiber arrays, meeting the core requirements of low loss and low-cost talk and high-speed optical communications.

At the same time, to meet the ever-increasing demand for high-speed interconnects and computing networks and data center we have established a strategic focus on silicon-based optoelectronic chip technology. We have already achieved significant milestones in the R&D of core optoelectronic integrated devices as high-speed optical modulators and optical switches.

In summary, by leveraging the synergies of these technologies, our forward-looking strategic positioning, we'll be able to establish a clear competitive advantage the field of optical interconnect. Our core high-precision packaging technology will further evolve into the cornerstone for the future manufacturing of intelligent optoelectronic hybrid sensors and photonic chips, a solid foundation for suliopticals rapid development in the AI era.

Moving forward, we'll continue to take AX+AI as our core driving force. Leveraging our robust technical capabilities and engineering and manufacturing expertise will continue to deepen our strategic positioning along the information chain, unlocking long-term growth opportunities for the company.

Now we move on to the fourth part, ESG outcomes. In 2025, we continue to deepen our commitment to ESG, maintaining an AA rating from MSCI ESG, a globally leading position in the industry. FTSE Russell ESG score rose from 3.5 to 4.0. At the same time, we formally published our first climate-related disclosure report and updated the group's carbon reduct targets to reach carbon peak emissions by 2028, reduced total common emissions by 20% by 2030 and achieve carbon neutrality by 2050, thereby putting corporate social responsibility into practice through concrete actions.

Ladies and gentlemen, investors, the curtain has risen on the AI era. Optics serves as the core gateway through which AI enters the real world. And Sunny Optical stands at the very center of this pathway. We possess mature technological expertise, proven business achievements, a clear growth trajectory and a well-defined long-term strategy. We very much look forward to working with all of you our investors to seize the historic opportunities in the optical industry during the AI era and to witness Sunny Optical's long-term growth together.

That concludes my presentation. We will now move on to the Q&A session. Thank you all.

[Operator Instructions] The gentleman on the first row on the left, please.

I'm Huatai Securities, Huang Leping. Congratulations on your very good results. I have 2 questions. First question on the last slide, so there are 5 development stages, AIs optics development plan. My question is, first, right now, looking at last year's R&D expenses of RMB 2 billion, what is your future R&D plan in the future? Now most of your revenues are from perception related products. So if you want to realize revenue. So apart from those perception-based products, what about transmission-based products, how much revenue will be realized in the future?

Okay. Let me answer your question. originally, concerning our plan, well, it is made in relation to the industrial operations. So starting 2025, apart from making plans in the industry, our departments, our business departments have made many different plans and deployments. So as you know, we will establish many research institutes in Shenzhen, in Europe. And of course, we have other plans, which we cannot disclose now. In terms of core semiconductor production and packaging. So in areas where more advanced. We have already made some plans and deployments.

So our consideration of this matter is that we have been paying attention then the volume and the scale was not big yet. for optical modules like 100G and so on, that are a bit more established than the investments and also the launch products are not many, but no opportunities have emerged. Now for our handset business, it has declined. That is because of the internal storage. Whereas inner storage, it has gone to the computing power. So for computing power development after that -- well, originally, in terms of technology, investment and output in the past return was not that good, but now it has changed to a more positive situation.

So I have to solve a number of problems, for example, power consumption and also power supply. That needs new technology. So I think now we have a very good solution to the problem. So if you talk about the optical transmission, the information volume is a few hundred times, not a few times. So when it comes to resources consumed, it is totally different.

Now for computing power center, we have intelligent systems. And now they are very active. How do you put it? I think we need to make use of intelligent way to enhance and ensure ourselves. So we think that this is the broad direction. However, at what time are going to see how much sales or revenue?

Well, I can give you an answer now. There are many big manufacturers. If you ask them, not even they can tell you the answer. So I think that it will be quite fast. It is not true that we did not know about it in the past in the past, the input output is not satisfactory. Now everybody is developing in this direction. And the big companies are striving to promote this direction. So we think that there will be many opportunities. So establishment of research institutes, both domestically and overseas is something that we will be working on in the future. there will be some new updates from us.

Second question is about XR. So now for VR, it is already quite stable. For AR, apart from the first one in the U.S., the second manufacturer is also launching many open platforms and new platforms. So what do you think about the XR market this year, revenue declined slightly. So when product format changes from VR to AR, then what would be the change in the volume for you? And then in the AR product line, if volume rises, then at what time do we need to pay attention to what so as to embrace an explosion stage?

Now looking at the current situation, for VR, it is already fixed in shape. So it is an expansion screen mainly to solve the gaming experience and scenario needs. In the market, there are already many products in use. For example, Quest series that you know, Apple Vision Pro and also in recent years, for whole device plant, a lot of immersive glasses have been produced. So whether these products can sell or not, how much is the DAU, how many -- what is the number of DAU.

So for Vision Pro, the first day about it, I found it very exciting. So I spent the whole afternoon working with it. And then on the second day, I spent 2 more hours to sort things out. And on the third day, and then on the third day, I find it too heavy. So afterwards, I no longer used it. So it is a good product. Of course, you can use this kind of glasses in other scenarios.

Now for VR in the past, the perspective was about experience. So now I think everybody is quite clear of it. So I don't think there is the possibility of achieving breakthrough in volume growth. But for AR, it's different. It is still evolving. For new products, new launches, there are many. As we all know, international big clients gave different numbers, and they are achieving forward. So for companies that are not working on hot where they may have 2 ROCE picture about the world, but then things are not that fast really.

But the mentality has changed. In the past, we're talking about display. But then later on, when there are new products launched, it is not related to display anymore. So for display, I think it is about information delivery. It is still needed. I think XR is going to see very good development. So with these glasses, they are used to acquire and collect data. I think this kind of users will increase. Besides, it is like the AI brain and it is then connected to your own brain. It is like the half, linking these 2 sides. So if this is the perspective, then I think the AR glasses will see very good development. Of course, we need other market -- favorable market circumstances.

When it comes to volume explosion, just now the investor asked a question. There are other big companies doing a lot of promotion. Our plan is that we will start mass production in 2027. Now we are doing preparation because there are many ecological or ecosystem software issues. There are more and more companies participating in the field. This shows that -- this industry will develop even faster. In the past, I thought it would happen 5 years later. But then now it would be within 5 years. I think within -- or after 2 to 3 years, we'll see a stage change. That will be the situation.

Next question, please. The gentleman on the first row.

I am Tony Zhang from CLSA. Recently, I can see that your company has cooperation with different subsidiaries in terms of equity, for example, the vehicle business. So now regarding investment strategy. So in which areas will you cooperate with external parties? Are you going to bring in new investors? And which new business development will you aim at? So what is the outlook and plan, please?

Right. In my results presentation just now, basically, I had already given clear explanation on this point. So for vehicles, we would bring in many ecosystem, supply chain working partners. Now our present, we would like to make our company more open, and then we hope to achieve win-win with more synergy in ecosystem development. So in the past, we did not this kind of equity or shareholding change, for example, M&A or spin-off or collaboration. -- did very little in the past but in the future, we'll do more of this.

We think that in this front, we cannot only rely on our self-fitting the battle. We have to work with ecosystem so as to achieve further development. Then we can -- each party can capitalize on its own strength, that is a better method. Well, I also explained about some new technologies. You will notice that technologies are developed jointly by us and our partners. That would be better.

All right. Next question, the gentleman over there on the first row.

My name is [indiscernible]. So I want to talk about optics plus AI. That slide with components. So you have a saying that optics and AI in combined, this is the future era. So now we are in the perceptual dimension. And just now, you also said that in the future, you will gradually extend from physical world to transmission, transmit processing and even intelligent agent. So my question is for Sunny Optical, in the future, regarding value layout, how is your plan employment? And for the long cycle, in which areas will you focus more on in your development?

This is a very good question. So this is also an important issue in our long-term strategic plan and consideration. Internally, we have gone through a lot of discussion and consideration. So now what we have described includes things that we have considered. So how should we explain in easier terms I think I can talk about the change process of our thinking and also our collaboration plan. We work on mass production optical products, I think you have much understanding.

In the past, you saw our large-scale production highly efficient production and automated production, large-scale production. So many of our technologies are developed towards this direction each First of all, we'll continue to insist on this direction because it doesn't only bring us cash flow. It is also a fundamental support for our long-term development. However, with the AI era, we know that between optics and AI that can be favorable combination for joint development. Then, of course, we have to give deeper thoughts to this matter.

So regarding mass production, precise, large-scale production, we will turn it to production and system solutions. Both will coexist. So a few years ago, we started to make this point already. So that means we want to develop toward system solutions. And the core is software and algorithm. What is the difference with other people, software and algorithm, this is the problem that we need to solve. So we focus on optic reception, optic solutions.

Regarding software and hardware, our core modules and optical instruments, but they can be strongly connected with our algorithm and other capabilities. So we can enhance its efficiency and also it can achieve low latency. A few years ago, I already said that our Micro core image detection, AI software is even faster in recognizing image than many internationally acclaimed AI professors. And I asked how come that's the case. and that professor said that this is definitely possible because you are using hardware and optical parameters. So efficiency can be enhanced. So your algorithm speed is faster than mine. So this is definitely possible.

So optical front and hardware and the we are software algorithm combined, then I think we have the advantages comparing with the pure software. So in the future -- in future, optical perception intelligence system, I think this will play a very important role. That's the first point.

Secondly, we are working on uptake hardware and core components. So that means we use the optical method to reach evolution. Many technologies are actually common. In the future, the algorithm will be multidimensional, information collection. Now we are RTP. And then I think you know future evolution and future -- in the future physical information and then spectral information and so on. So in the future, will be a perception intelligent agent on multi dimensions. I think that is our broad development direction. In the future, our glasses and our personal assistance will be equipped with these.

And then the second area if you refer to the slide after perception transmission well, if you talk about these technologies, perception transmission seems to be separate. However, many fundamental technologies are the same. We are talking about the optic glass functionality. We always consider different light sources and also optoelectronic conversion. So basically, when it comes to transmission, storage, computing, these are all related. And we have to make use of the unique characteristics of optics to do the work. So in the future, in the area of optics technology, we will achieve more breakthrough and we'll do more research so that in the future, in the AI era. our capability and technology can meet the huge needs.

So these are our 2 directions. One is the perception intelligent agents. Second, on the foundation of optics, we will expand lay out the fundamental pathway so that in the future, in the AI era, we will process strong optical fundamental capabilities will become a optical perception intelligent agent company.

Okay. Next question, please, the lady on the second row.

I'm Bernstein, Alex. My question is about AI optic communication. In the future, will your products be within traditional optic modules or it will be a CPU packaging technology Well, the direction is definitely the latter one. And it's possible that in the former one, there might be some connection, but we will definitely develop towards the latter direction because if I still focus on the former one, then it is not that meaningful?

Okay, in the PPT, so you listed out some processes. So in which area are you going to increase volume? Is it about coating or the micro lens? So have you said strategies to build research institutes or is it true that your products are already in late-stage research? And then next year, the year after next year, there will be commercialization?

I don't know how to differentiate the stage. Definitely, we are not in planning stage. We are not in the planning stage because as I said earlier, we already have colleagues doing the advanced work. Because it was still -- it was early back then. Now there are more and more opportunities. So people come and ask whether we can do this and that.

In last year, no one asked these questions. So people still have a lot of doubts. So what is the value behind. People still have those, but this year, it seems that the situation is different.

But the technology is different. There are some investor companies which are very good. Their products are already used very widely. So we have to seize the path in which we are more competent in. We should not do things that we are not strong in. If you talk about opiate modules right now, the light is very small. The light is very small engine. The others are points. So we will connect this with optoelectronic conversion. So you just talked about optic fiber, matrix and so on, those are our major directions.

I believe actually, in 27, 2028, there will be a lot of new things coming out. Of course, we have to work with our clients. So we do have internal plans and schedule but I think it is not the right time to disclose it yet.

My next question is about handsets. Overseas handset customers this year may enjoy a big increase in revenue. Is it true that it is related to North America variable aperture or that there is some progress with Korean customers?

Well, I did not mention the North American customers and Korean customers, definitely, it is a big customer overseas. And there is some certainty in the growth. You cannot say more because otherwise, if I give too much details, I will be fined.

Okay. The lady on the fourth row. Because of time, this will be our last question.

I'm an Wen Hanjing from CICC. Because of time limit, I will ask a more detailed question. This year, we can see that storage has caused impact to consumer electronics. For high-end camera this year, there won't be a big threat to the business. And this year, regarding handsets, regarding pressure phase, if you do a breakdown in different price range, what do you think?

Okay, handsets, correct? You want me to talk about handset. Okay. For handsets, you are worried about sales decline. But as I already said just now, we will not suffer from a decline. Of course, we have to work hard, and we will be able to achieve our established plan and targets Well, just now the question, one question was about overseas clients. I won't talk about it for our Chinese clients. They did not all decline. There are companies which enjoyed very good growth. And for that company, we also have very good business relationship. So with the growth, we also will enjoy growth together. This is a very important point.

And such growth is high end as well. You know about that customer. There is this only clients for Chinese brand that is growing. At the end of last year, their plan was 50% growth. And in the first half of this year, they will still have some new plants coming out. So under these circumstances, it is not easy to achieve a high growth. So there will still be growth.

And then for a storage issue, some people are of the view that in the second half of the year, it will be alleviated, especially starting from Q4. But the point is for new storage solutions, are there any other new storage solutions that will come out. But I think that things will not happen all of a sudden. In Q4 last year, all of a sudden, they realized that, that was not enough. That's not possible.

So I think the type situation has been there already. And in the future, I think there would be some alleviation. So for handsets, we do admit that this year, this business is not good. And in fact, the situation is very painful. Many people have the to other business or industries.

Okay. So I think we have taken a lot of time already. Okay. So we will conclude our presentation here. Thank you for your participation. Goodbye.