Of AAC Technologies and Mr. Pan, CEO of AAC Technologies. Thanks for management's attendance. Today's meeting will be divided into two parts, starting with the presentation, and this will be followed by an open management Q&A session about the company's strategic development business updates. You are welcome to communicate with the management and ask your questions by pressing the Raise Hand button on Zoom, or you can type a message to the moderator in the Zoom chat box, or by contacting our IR team. Please introduce your organization and name before asking questions. We also have simultaneous interpreting channel today. Next, let's take a look at the results of the third quarter and the previous nine months of this year. The Group achieved a revenue of RMB 5.37 billion in the third quarter, up 26.5% year-on-year. The increase in revenue was mainly attributed to the peak sales season of overseas customers and the increase in combined revenue contribution from electromagnetic drives and the precision mechanics business. Gross profit margin was 19%, down 3.7 percentage points year-over-year, and it remained stable Q-on-Q. Net profit of the third quarter was RMB 234 million, up 27.5% year-over-year. To the overall situation in the first nine months of 2022, as you can see, the Group achieved a revenue of RMB 14.78 billion, up 15% year-over-year. Gross profit margin was 19%, down 7.3 percentage points, and net profit of RMB 584 million, down 47.1% year-over-year. In the third quarter, the Group continued its prudent financial management, sitting in a solid cash position of RMB 0.7 billion. The cash inflow was RMB 2.58 billion, and main capital expenditure was RMB 1.44 billion. Cash on book was RMB 5.76 billion. A net gearing ratio was 9.7%. The Group undertook proactive liability management. We believe that this sound financial position is essential to the sustainability of the Group's growth. We will now share with you the financial and operational performance of different business segments. First one is acoustics. In the Q3, the Group's acoustics business revenue was RMB 2.32 billion, up 5.6% year-on-year, driven by the peak season of overseas customers. The Group also proactively supports their business needs. The GP margin remained relatively stable at a 26.9%. We also the GP margin for the acoustic business is at 27%, down 3.6 percentage points. This is mainly due to the year-on-year ASP decline of products of overseas customers in the first half and the impacts on cost side due to the pandemic. The Group continued to work closely with overseas customers and has supported the extension into emerging business fields by constantly enhancing product competitiveness and ensuring stable product delivery. The Group launched their self-research, the combo and the Opera coaxial solutions. The Group will continue to keep abreast of its customers' needs and launch new products and promote customers' product upgrades. In Q3, the Group's optics business revenue was RMB 567 million, up 45.1% year-on-year. Down 39% Q-on-Q. The weakened market demand and the resurgence of the pandemic in China affected the shipment volume and the utilization rate of the plastic lens and the camera modules. During the 9 months of 2022, the Group's optics business revenue was RMB 2.42 billion, up 28.9% year-over-year, mainly due to the increased shipment volume of camera modules. The WLG hybrid lens business is progressing smoothly. In Q3, our 1G5P and 1G6P hybrid lens products were under stable mass production and delivery. The Group actively promotes the implementation of WLG hybrid lens in multiple projects of automotive, AR/VR devices, semiconductor production and testing and other industrial fields. The 3P pancake optic modules for VR devices has already obtained a certificate from our customers. The next focus is on the electromagnetic drives and the precision mechanics business segments. Given the peak season of the major customers of our segments, and also the synergy and the new business are driven by the acquisition of Toyo Precision. The revenue reached RMB 2.05 billion, up 47.3% year-on-year. The gross profit margin was 21.5%. For the previous nine months, our revenue for this combined segment amounted to RMB 4.99 billion, and the gross profit margin was 20.9%, down 1.7 percentage points year-on-year. The shipment volume of X-axis haptics modules is up for Android customers continue to achieve high growth year-on-year, and a combo product of acoustics and haptics with master-level acoustic technology, and X-axis motor has multiple advantages in performance. Also it's effectively reduced production costs. With respect to precision mechanics business, leveraging years of manufacturing experience and in-depth cooperation with the customers, the group has continued to expand its high-value business and optimize its product mix. The synergy between Toyo Precision and existing metal casing business have been fully sustained, substantiated by the smooth expansion into notebook market. Finally, let's focus on the sensors and the semiconductors business. The sensors and the semiconductor business recorded revenue of RMB 421 million, up by 66.1%. Also this, semiconductor business and the sensor business revenue was RMB 900 million, up 16.9%, and the GP margin was 10.7%, down 5.2 percentage points. The factory facility in Malaysia commenced the production of high-performance MEMS microphones, which further strengthened the group's global production capacity. In the future, the group will continue to expand into non-smartphone markets, including IoT notebook, smart home appliances, and automotive markets. After sharing the financial performance of each business segments, let's focus together on the company's third quarter operations and the new business expansion. In Q3 of 2022, in order to cope with the complex external environment, the group insisted on both internal and external improvement. On the one hand, it deepened the cooperation with partners. On the other hand, it promoted lean management and continued to cultivate internal strength. We also upgrade our business. Our turnover rate is improved by strict inventory management. Through the above strategies, the company will continue to reduce costs and increase efficiency to evolve and achieve diversified business development. In the third quarter, while consolidating its position in the smartphone market, the group continued to explore strategic emerging markets. In the optical field, it successfully developed the new 3P VR pancake optic module, and it will complete the mass production line within the year. Our business partnership with a number of customers relating to the pancake optical module have already commenced, and the Surround view and the in-cabin lens products have already obtained a certification of leading automotive players in the market. With respect to the automotive acoustics market, for example, the group's automotive acoustic solutions has began mass production and deliveries. This will also expand our business. The above is the presentation of the third quarter results. We now begin the QA session. If you need to ask questions, please press the Raise Hand button on Zoom or leave a message to the host in the chat box. Before asking question, please introduce your organization and name. Thank you. I would also like to remind you that the company is not in a position to comment on other companies and the customers, so I hope you can focus more on our company's strategy and the business development in your question. Thank you. The first question is from the CICC Electronics. Please unmute yourself. Can you hear me? Yes, please go ahead. Thank you management for your time. I have two questions. The first question is about the inventory level. What's your outlook on the smartphone market, and what's your management strategy? The second question is just the automotive products. Any updates on your business? What are these kinds of business development in the future, as well as the content per box? First, I would like to answer the inventory part, the inventory position. By the end of 2021, our inventory is about HKD 55.6 billion, and we also have HKD 200 million decrease. In this weakening market demand, we strived our efforts on the inventory management and the control as well as the CapEx control. In the future and the next few months, we will deepen the control and the management on inventory to improve our overall efficiency as well as the CapEx, and also cash investment. In terms of the outlook, we have the prudent attitude towards the market. The shipment volume will be similar to the volume of this year. Therefore, we will strictly control our inventory. With respect to the smartphone market, you also know that the 2022 market is the most weakened market. We think there will be a 10 percentage points decline. In the Chinese market, there will be a two-digit decline. We think next year, there will be a single-digit growth. There won't be a big rebound. We think the overall smartphone market will record a slight rebound. For us, we will proactively promote our innovative products as well as the precision mechanics. In terms of the automotive acoustics. You can see this Neta S. For us, we provided the full set of acoustic solutions to Neta and was recognized by the market in a positive way. This is also landmark for the mass production of an AAC acoustics in the automotive field. Apart from the traditional automotive companies, we also obtained the collaborations from the NEVs and the new automakers. Next year, the revenue will be boosted in this regard. This results will be promising in terms of the revenue on our acoustics field. Okay. Thank you, management's answer. Thank you, taking my question. Next question is from Kyna Wong. Please go ahead. Good afternoon, management. I'm Kyna from UBS. We see that the top line is very good for this year. We also face, for example, the impact from the COVID impact in Zhengzhou. What's your outlook on the growth in Q4? Any support you will provide in the growth of Q4? In addition, I also want to ask about the inventory of acoustics, because you also see the weakened market demand. We think there is inventory. What's the inventory position on acoustics? What's your strategy in the destocking? I will answer the difference between Q3 and Q4. Based on the performance of Q3, we believe the performance of Q4 will be stable and there will be potential growth. Of course, the supply chain was impacted by the COVID, but this is only minor changes. In terms of the shipment volume, I think there will be a single digit change. For us, this kind of an impact is very limited. The growth trends will be maintained. Okay. In terms of the optics and inventory level. We also see the situation in Q3. Actually, based on the Q2 situation, we undertook measures to manage our inventories. Going forward, this inventory management will continue. Of course, this kind of destocking speed will be in line with demand of the market. Our target is not changed, our target for the next year is about 3-4 months. We think we can achieve the target next year. You mentioned the target is in the end of this year. This target will be maintained to the next year, right? Yes. For the second half of the year, we can see the weakened demand in the Android market. The destocking speed and the target will be postponed to the next year. Okay, understood. In terms of the optics product mix. With the whole in Q3. There was a decline. The GP will be delivered. How do you see the product mix of this year? Actually, the product mix will also include the 5P. A 7P will be shipped in the end of this year. A 6P is about 10% will be maintained at this level. This is also in line with the configuration requirements of our customers. We also have the G+P. We have this 1G+6P. Before we deliver the 7P, we have already launched or delivered 1G6P, and those products are applied in Xiaomi products. You can experience those products in Xiaomi stores. From my own perspective, the customer experience is good. Okay, thank you very much. Thank you, Kyna's question, and thank you management's answer. Next question is from CICC. Mr. Liang, please go ahead. Mr. Liang, we cannot hear you. We invite next investor to proceed his question first. Okay, Andy. Yes. Thank you. My question is about the acoustics of products categories and the relevant market share and its ranking. I would like to know more about the acoustics products position in the market. With respect to acoustics, we have the overseas customers and the domestic customers. We are the top players in the domestic market and in the overseas market. The situation is similar. According to the volatilities in the market, we believe we are still the best partner to our customers. No matter they use our products in either the IoT or smartphone products. In terms of the delivery and the cooperation relationship, and we are still maintaining a very best level with our customers. Thank you. Any segments, their market share will further improve, and what's the core competitive edge in the acoustics? There are some areas of acoustics will be improved. First of all, earphones. With the upgrade of IoT, we are actively helping our customers to deliver high-quality products. It includes the high- pitch products. In addition, we also see the adjustments of the smartphone market. We will also launch the new products aligning with this change. For example, we have the combo of products. We use the one product to realize the X-axis motor and the plus one speaker. This will help us to increase our strength, and also help our customers to increase their product performance. Thank you. Thank you. Andy's answer. That answers question. Mr. Liang? We still can't hear you. We also received the questions from the chat box. The question is about the pledges and the new loans of the company in Q3. Whether you will use more RMB to replace the U.S. debts in the future. Actually in Q3, you can see there's a tender. This is overall liability and active management. We replace the U.S. dollar debts with the low interest RMB debt. Because there are preferential policies to support the high-tech companies in the Chinese market, and also the term is well matched. At present, we are focusing on the two years or longer than two years loans, and the interest rate is also attractive. This kind of liabilities also provide liquidities to the company in this volatile market. It's a very good method. In the future, we also see the maturity of our debt and the other liability and management. We will also consider the replacement of any debts in the future if necessary. Okay. Next is from Huatai. Mr. Huang, please go ahead. My question is about utilization rate of our acoustics, and if there are big orders, whether these big orders can be digested by our production. Our utilization efficiency is high according to the different products and the requirements of our customers. Of course, we will have some minor change in the product mix and a new product launch. In terms of the acoustics, we will use more smart more flexible and smart production mode to meet the needs of our customers. Thank you. I have a follow-up question. In Q3, we also see a very intensified competition in acoustics, and the GP margin is a negative. What's the reason behind? What's the breakdown of the GP margin? If we want to achieve a positive GP margin, what kind of measures we will take? Okay, I will take this question. Thank you for your question. In Q3, we see this GP margin decline in the optics, and the GP margin is a negative 14%, and the plastic lens is negative 2%. The reasons behind include the production pipeline declined and the utilization rate low increased the cost sharply. In addition, the 5P lens, the competition in the markets was very fierce, so the ASP is reported a double-digit decline. This also creates its negative impact on our GP margin. Moreover, modules competition is also fierce. It triggered the challenge in our modules GP margin. The GP margin on this regard declined by 5% because it's related to the chips. Thank you. In the future, if we want to improve our GP margin on optics, what kind of measures you would take? First of all, we will upgrade our lens modules. This will create positive influence on our ASP because our ASP was declined for the past two years. In addition, we will optimize our efficiency and to reduce the production cost. Thirdly, we will increase and improve our utilization rate and the production. We think in the future, in next year, there will be double digits growth. This growth is mainly due to the industrial recovery and the structural improvement as well as our overseas customers, especially Korean customers increase. Okay. Thank you, Mr. Pan. No more questions. Thank you. The next microphone GP margin is declined in Q3. What's the reason of this decline, and what's the outlook of the GP margin? From Q3, we have a big project on our chips and the Android market. We are promoting AAC self-produced chips, and the GP margin of this chips is above 20%. But the chips from Infineon. Customized chips and the customized configurations are required by the customers, and this will impact our GP margin in Q3. In order to cope these difficulties, we will proactively promote our self-produced chips in the market. We will also adopt a more flexible manufacturing method to balance the GP margins and income from the chips of the Infineon. We're thinking in the future, next year, the GP margin will be improved. Cathy from Daiwa, please go ahead. Thank you for your time. First, I'd like to ask about this precision mechanics and the growth is very promising. What's the growth in terms of your smartphone segment? Any difference between the GP margin and in different areas in this segment? Many investors observe there's a strong momentum of the growth in the Precision Mechanics. This is related to the synergy of the acquisition of Toyo Precision. This year, the Android smartphone market is weakened, but the affordable smartphones from some big customers are increasing. The affordable smartphones momentum is very strong this year, and this also boosted our growth on this regard. Apart from this reason, in Q4 and next year, our outlook on Precision Mechanics are also very promising. Sorry. Yes, we can hear you, and your voice is clear now. Okay. My next question is about the acoustics. We have our components of acoustics. Have you considered the assembly of the EMS of acoustics? Actually, we have already built a very good relationship with our customers, so we will continue our business on components. Next year, we will also launch the new products and the technologies and to enhance our leading positions in this market and help our customers to compete in their industry. With respect to modules and assembly business, we have an open mindset. We also have some communication with potential customers, but those are in the preliminary phases. If we have further improvements, then we will communicate and share the information with you in the future. Okay. Our next question is about the automotive area. What's the percentage will the automotive contribute to the company next year? Thank you for your question. The automotive is different from consumer electronics in terms of its cycle. The mass production needs longer time. The revenue contribution will be limited in the next one or two years. Of course, we think the revenue of an automotive in the future won't be less than the revenue of consumer electronics. This is my answer. Okay, thank you, management. Next question is from CICC Electronics, and the first question is how do you destock the inventory? The second question is about the precision. It's the Toyo Precision. What's the current business structure of Toyo Precision? The first question is about the optics lens. Our strategy will be dependent on the demand and the supply. For the strategy for the last year and the first half of the year, those strategies were very aggressive. At present, the market is weakening. We will adopt the measures to guarantee our profits and our stable cash flow. In the first half of the year, we managed our inventory, so we have recorded a positive operating cash flow. This year the cash flow will continue to improve. Sorry, I forgot the second question. The second question is about the Toyo Precision. I will repeat the question. The question is about the business structure of Toyo Precision and its subsequent business plan, and how to position Toyo Precision with existing manufacturers. Many investors know that Toyo Precision served overseas and Western big customers for a long time at present. Their business are focused on the notebooks. After the acquisition of Toyo Precision, our synergies were created in promoting the new projects and the market share. We have a strong confidence in Toyo Precision in its future development because its growth is very decent. Yes. The technology of Toyo Precision as well as its customer relationships are their competitive edge. We will continue to expand our market share in notebooks. Next year, we also see some projects of next year are smoothly promoted. We think this will help us to obtain a double-digit growth in this regard. Next questions are from our chatbot box. Some investors wanted to know the CapEx outlook and the breakdown on each segments. I will take the question. The CapEx from January to September is about RMB 1.4 billion. Actually, there was a big drop compared with last year. The management also mentioned the inventory control and the cash flow control. For the overall CapEx of this year will declined by 40% and from HKD 3.5 billion to about HKD 2 billion. Next year, we will continue to optimize the CapEx. It will decrease by 15%-20%. In terms of the acoustics motor, the CapEx is stable, and on optics, the CapEx is decreased because the optics scale has already achieved a certain level, and we completed the early stage of production. Many investors pay more attention to the Precision Mechanics, and we also have some confirmed products. Some CapEx will be put into this area, and this is also in line with our overall strategy. Depended on the demand of our customers. Thank you. Next question is from Tony Zhang. Please go ahead. Thank you for the opportunity. My first question is about the smart motor. Whether this smart motor can replace this physical functions. Any obstacles in this replacement or any need any demand from the customers? In terms of the technology on the X-axis motor and the development with our customers are always continued. We think in the future, an X-axis motor will fulfill some functions in the future, but of course, its specific structure will be dependent on the requirements of the customers. Actually, the major barrier or obstacles are not from the technology from the acceptance of the customers and their requirements. We are the best partner to our customers in terms of the technology. Okay. Mm-hmm. Second question. My second question actually is about the market outlook of Android. So actually, for example, for the same technology, there will be some price cut in the domestic market, in the Android market, but there won't be a big change. Okay, thank you. Next question is about the optics latest IPO progress. So we are in progress with the CICC and also the exchange and we are waiting for the second phase of the communication. At present, we don't have the detailed information to announce. Okay. Next question is from Henry. Yes, we can hear you. Please go ahead. Good afternoon, management. My question is related to optics. So would you please provide us information on the product mix of the optics in the hybrid lens and the molded glass. What's the shipment volume? Next year, Mr. Dun mentioned a double-digit growth. What's the breakdown in terms of lens and modules? What's the growth rate in this first half of next year and the second half of next year? You asked about lens. We won't have any big change in the product mix. Our focus is still on the 5P. The 6P is accounted for about 10%. In the second half of the year, we increased 1G5P and 1G6P, and the shipment volume target of this year is 5 million. By the end of this year, we can see the target is hard to achieve because of the weakened market demand and the pandemic impact. The shipment volume of this year is about 3 million. The mass production commenced in Q2, and in Q3 the production was ramped up in Changzhou factory. The chips shipment volume is increased. We also have our new products in our pipeline. We are closely negotiating and communicating with our customers. We have our ultra-transparent concept and the 1G5P is in progress. Next year we will increase the WLG market share and the high-end lens market share. In addition, we'll also increase our price to performance of products in the market. In the past, some hybrid lenses were very expensive. In the future, those high quality products will further penetrate to the mid and the low-end market. In addition, our customers pay more attention to the brand or co-brand collaboration, for example, Leica and other brands. Of course, this will help us to improve on hybrid lens and high quality lens. In terms of the vertical integration, our OIS commenced its mass production. We estimate that the OIS motor mass production will be commenced in December. Next year, the modules and the products on OIS will be largely improved. Modules will be developed into higher end. We also see the potential and opportunities in the OIS market. This year, we have one Android customer. In the second half of the year, we obtained the three Android customers. It helps us to increase our market share. Thank you for your answer. That's all for me. Thank you. We will welcome the last question. Gross margin has been declining for quite a while. When can we see an improvement in the margins? Thanks. Miss Ro, would you please answer the question and I will make some supplement. Okay. From our previous communication, some questions about the GP margin level of the recent years. Actually, we don't have a particular GP margin level. The GP margin reflected our overall products. From acoustics to motor to optics to the precision mechanics. Our products are more diversified. Optics, as mentioned by the management, started from lens and developed to modules. Actually, the GP margin of the modules and the precision mechanics is similar, different from the acoustics. That's the main reason for this change in the GP margin based on our portfolio, our product portfolio. In the future, based on the industry cycle and the customer demand and the need, Mr. Pan and Maggie Huang and Jack also mentioned that. Based on the demand of our customers, we upgrade our products of motor and the acoustics and the optics. For example, this hybrid lens. We are proactively promoting the high GP margin products, and this strategy is confirmed. The top line of the company, you can see in this volatile macroeconomic environment, our top line is going up, largely. Next year there are still some uncertainties. The management still have the confidence in the next year's growth and the customer service. Yes, agree. I think the overall smartphone market is challenging. Next year, this kind of a situation will continue. In acoustics, we will help our customers in this competition. We think the GP margin of acoustics will be stable. In terms of the precision mechanics and with the Toyo precision and other products and the GP margin will be improved next year. From the sensors and the microphones and the growth will also be positive because new customers and new intakes are introduced. We think the sensors, the GP margin of the sensors has great potential to grow. At the same time, we still have to pay attention to the macro environment. We will try our best to grasp more opportunities to grow and to improve our GP margin. Thank you, management answer. Our time is constrained. AAC Technologies 2022 third quarter results conference has to be concluded here. If you have more questions, please feel free to contact the company's IR team at any time. Thank you for your attention to AAC Technologies. Thank you. See you. Bye-bye.