Hello. Good afternoon, everyone, and thank you for joining us today again for Yageo's fourth quarter result webcast. Yageo is the world's largest supplier of chip resistors and tantalum capacitors, as well as a top three supplier for MLCCs and inductors. My name is Howard Kao, and I'm the coverage analyst here at Morgan Stanley. We are very honored again to have Mr. David Wang, CEO, Mr. Eddie Chen, CFO, and Mr. Claudio Lollini, Head of Global Sales and Marketing of Yageo, here with us today. We look forward to their insights and comments on the company as well as the market. Yageo's management team will first walk us through Yageo's fourth quarter results and also provide some forward-looking commentary. After that, we will open it up to questions. At any time during the webcast, you can send in your questions in the text box on your screen. I would now like to turn it over to Yageo's management team for opening remarks. Good afternoon, ladies and gentlemen. Welcome to Yageo's quarterly announcement for 2023 fourth quarter, as well as the year results for fiscal year 2023. Let me start off with the brief on the income performance. Fourth quarter net sales comes in at roughly TWD 27.4 billion, kind of flat quarter-over-quarter. This is with the two-month addition of the Telemecanique that we acquired or consummated the transactions in end of October, beginning November. There was a two-month effect from that sensor business that we acquired. Quarter-over-quarter, we still see that revenue kind of flat. In terms of gross margin, though, you can see that there's quite a bit of accretion in terms of the gross margin percentage in fourth quarter at 34.5% versus 33.2%. Overall, I think in fourth quarter, regional Yageo business has been able to hold the gross margin performance quarter-over-quarter. With the addition of Telemecanique Sensors business, we're seeing the good of the accretion effect from that new entity, so coming in at TWD 9.4 billion gross margin dollars. On the OpEx though, we also see some increments of the operating expenses, coming in at TWD 4.35 billion versus TWD 3.7 billion third quarter or 15.9%, roughly 16% versus 13.6% in third quarter. This is largely due to some one-off transaction effect from that acquisition that took effect in the fourth quarter, as well as the conventionally higher OpEx structure of the sensor business that we acquired. That OpEx percentage in fourth quarter was kind of on the high side. We do expect that scenario to continue to improve on a quarter-over-quarter basis in 2024. On the operating profits, TWD 5 billion, 18.5% operating income margin, both slightly lower than the previous quarter because of the higher OpEx as I just alluded to. On a non-op front, we generated about TWD 1.1 billion or TWD 1.16 billion on the non-operating income, largely because of you know, the positive carry we generate from the investment position that we have, as well as the hedging activities that we have on the foreign exchange side. It's a better performance than the previous quarter, up from TWD 1 billion versus close to TWD 900 million. Net-net, the income before tax at about TWD 6.2 billion, kind of flat from the previous quarter, or 22.8% income before tax margin. Income tax TWD 1.4 billion versus TWD 1.3 billion, slight higher there. Net income at TWD 4.8 billion versus 4.9 in the previous quarter. On the EPS, TWD 11.38 per share versus TWD 11.6 in the previous quarter. EBITDA margin eroded a little bit from 27% to 26.4% in fourth quarter or TWD 7.2 billion EBITDA dollars. If we compare to the fourth quarter last year, you can see the revenue is down by about 5%, gross margin eroded by about two percentage points as well. All in all, I think the performance versus last year seeing a bit of decline there. Next page. We now take a look at the whole year results for 2023. The top line come in at TWD 107.6 billion or 11% decline from the previous year. The margin eroded a bit as well. We were about 33.5% gross margin percentage or TWD 36 billion gross margin dollar compared to 38% in 2022. That's a 4.5 percentage point decline there. OpEx percentage inched up a little bit from 14.1% last year to 14.5% in 2023. Operating profits at TWD 20 billion or 19% operating income margin. Non-op again as a better performer, we were at about close to TWD 4 billion this year versus about TWD 2 billion plus last year. We've done quite a bit in non-op there. Income, net income comes in at TWD 17.56 billion, 16.3% net income margin that both declined in terms of percentage and absolute dollar from the previous year. EPS for the whole year at TWD 41.8 versus TWD 44.2. The EBITDA, TWD 48.7 billion, 36.7% EBITDA margin there, both declined from the previous year. Let's take a look at the sales mix. In terms of the portfolio, the product split that we have here in fourth quarter, you're seeing just some marginal movement. You can see that the MLCC, tantalum, resistor, magnetics are the four main business groups of company containing close to 80% of the revenue. On other components, 22%, we have the additional sensor business coming in, partially fourth quarter. Starting next quarter, we'll single out the [Accessor] PBG for Business Group for comparison purpose so that you would have a better or clearer picture about the sales mix for different products or business. In terms of the sales breakdown by region, you can see an evenly split across several regions. In China, 26%, U.S. same, Europe 24%-25%, and Japan and the non-China Asia is about 24% as well. You can see a nice quarter split across different regions in terms of our portfolio split. The next is the sales breakdown by channel. We do see some advancement of the exposure to global distributors at 47% this quarter. I think that's great signs that the distributors continue to digest the inventory and direct sales EMS got diluted a little bit there. In terms of the segment, it's just marginal movements from the previous quarter. You probably see more advance in the industrial exposure at 35%, that was largely due to the sensor business that we acquired are more in this field. Next. Next page. Okay, this is the sales breakdown for the whole year. Again, very stable exposure across different business groups throughout the year. The magnetics at 28%, resistor 14%, tantalum 17%, MLCC 21%. I think that's pretty much a reflection of the whole year's split, with some marginal shift, one way or the other. In terms of region, again, very stable split there as well. This is the sales breakdown by channel and by segment. Again, like I said, the global distributors are gaining momentum throughout the year, just marginally. In terms of the segment, like I said, I think auto and industrial are gaining marginal shares at the expense of the other applications. Next. Here's a good quick look at the balance sheet. Basically, I think the main effect for last year is the acquisition of the Telemecanique sensor businesses, where we draw on quite a bit of our debt capacity there to complete the acquisition. You can see that the cash balance there at TWD 76 billion is about 8.1% decline from the previous quarter. The largest of that is due to the acquisition of Telemecanique. In terms of inventory, the TWD 27 billion versus TWD 25 billion in the third quarter is also because of the addition of the sensor business that we acquired. Apart from that, I think the inventory situations for Yageo business has been pretty stable. At the bottom, we look at the gearing and the return. The net debt to equity at 24.7% versus 8.3%, it was a big jump there. That's because of the draw and the debt capacity that I just mentioned. Also the net debt to EBITDA at 1.15x compared to 39% last quarter. We do expect that as we continue to digest the business that we acquired and the debt or the gearing situation will continue to improve. From the operations. The ROE for this quarter at 3.5%, and if we annualize that, at 13.6%, just a slight decline from the previous quarter. I'll let David comment on the outlook. Thank you, Eddie. In terms of the Q1 guidance, we see the revenue will have low single-digit% growth, quarter-on-quarter. Last quarter, Q4 2023, we did have the two months Telemecanique Sensors business consolidation. In this new quarter, we have the full quarter, three months consolidation. That certainly helps the revenue growth. In terms of the passive component business, it is influenced by the Chinese New Year, so we have lower shipments. In general, we still see the shipments are quite stable. We still maintain the view that we guided you in the last quarter. We see the inventory correction still continues, but we believe that this inventory correction, especially from channel, will end at the latest in the second quarter of this year. Now, in terms of gross margin, we see gross margin percentage, we see this will be flat quarter-on-quarter. I also see that in general, the gross margin performance from each product still remain healthy. In first quarter, this is influenced by the Chinese New Year, so the working day or the production day in China, especially in China, is shorter than past. So that will influence the fixed cost a little bit. So that's why we maintain the view that this quarter we will maintain the gross margin percentage flat. Now, in terms of operating profit, we see Q1 2024, we might decline within 2% quarter-on-quarter. This is mainly due to the OpEx. There are two reasons. First, as Eddie explained that, and we see the new acquired sensor business, and they have a different operating expense structure. Secondly, because Telemecanique Sensors in the past with Schneider Electric, they are part of the operation. Now they come to Yageo, so we need to proceed or implement the carve-out process. In the beginning couple quarters, we will have certain carve-out costs there. That's why in Q1, we see higher operating expense, which means lower operating profit percentage. We do see that we foresee that this higher operating expense structure, I believe we can improve this quarter- on- quarter, quarter- by- quarter in 2024. Thank you. Howard, I think we're ready to take questions. Right. Okay. Thank you, David and Eddie, for those remarks. Now we will move into the Q&A session. Again, as a reminder for those of you on the line, please send in your questions in the text box on your screen, and we will get to them shortly. While we wait for more questions to come in, maybe I can ask the first question. Can you comment a little bit about the kind of end demand outlook that you're seeing by the different end segments or different product lines, such as MLCC and R-Chip in the coming quarter? Howard, I can comment on that. As David said, it is a guideline. We see sales increasing in low single digits in Q1. That's certainly a positive sign. We think the year is still very dominated by the same dynamic as last year. Inventory is still a theme in the channel. I would say that demand picks up a little bit. We had a good start. In January, we see demand from laptop, notebook, the overall consumer segment improving. It was really down strongly in last year, so it's good to see that coming back. Automotive has been always stable and strong, and the EV portion of that certainly carries a lot of growth. 2023 was a very positive year for automotive. 2024 started on a similar note, maybe a little bit slower pace, but still with a positive outlook. I think industrial is a segment that was very positive in the last few years, especially out of Europe. I think 2024 is a year where we are a little bit more capped in terms of expectation. The other big element is the overall demand from the channel, which, as explained, we see the inventory depletion continuing for a couple of quarters and then hopefully being done for the second half of the year. Product-wise, no particular difference in overall demand. Definitely the laptop, notebook, drives a lot of demand for our Polymer Capacitors product. When you look at MLCC and resistors, they are really used across multiple segments and applications. Got it. Thank you. Just another question from me, and I see it from a lot of investors online as well. Just regarding to you know higher OpEx that we're seeing in the fourth quarter, and you mentioned that it will continue for the next couple of quarters. Any more color on that? Especially if you are able to, you know, tell us exactly how much this one-off expense was in Q4, so we can kind of model what it would look like in a new normal after all of these carve-out expenses are done with. Well, sorry, there was a bit of disruption. I think your question is with regards to some of the nature of the OpEx that we spent in the fourth quarter. 'Cause some of them are really related to transactions, so it's really pretty much one-time nature. There's also part of the OpEx structure that the business carry. It was carrying from its legacy. We think there's a bit of a synergy to be realized over time. That's probably the potential that we see in 2024. In terms of, you know, providing certain logistics services from us instead of from its legacy parents, in terms of getting out the current transitional service agreements from the seller, et cetera. I mean, there are a lot of things here and there that we could tidy up over time, but it just really takes time to go over those and dig them out. You know, a very high level analysis, and we do find out quite a bit of area for further improvements. Logistics, for one thing, for example. I mean, we do have certain logistics operation worldwide that we could really support, the new business in Telemecanique. There's quite a bit of G&A efforts that we could take from different regions that would help to sort of consolidate the costs as well. That's how we see it. I mean, I think the OpEx ratio at this point is not really a big concern to us. I think that really it is a potential that we're hoping to realize over time. Howard, if I may give you some more comment. Well, actually this higher operating expense structure, this is not new or surprise to us. Remember that in 2020, first when we acquired KEMET, it also has a different OpEx structure. Quarter-over-quarter, we found a synergy, there is more integration job to be done. We did see the quarter-over-quarter improvement until today. Actually, we just will go through the same experience of that kind of acquisition. As Eddie said, yes, we will put some more effort there. We will see the quarter-over-quarter improvement. Yeah. I think, yeah. 'Cause still bear in mind that the carve-out design wasn't really designed to fit in Yageo in the very beginning. It was designed to be independent. There is a lot of independent costs or expenses that was structured that way. That really is the potential that we're seeing over time. Got it. That's very helpful. A quick follow-up on that, though. I think previously you guys had a longer-term target to get OpEx ratio down to 12%. Now, with the new acquisition, is that still a target that we can look forward to, or has that target changed? We'll probably have to come to revise that, but probably not until we get a better understanding what kind of potential we could realize from the business that we acquired. Bear in mind, there's not only Telemecanique, there's also Nexensos that we acquired this year. Quite a bit of digestion efforts there. We don't have the new target yet, but we'll address that when the time comes. The nature of the business in the passive component business, I think basically they are different margin performance. Also different operating expense structure. What we will be forecast-focused, it would be the operating income. This is how we look at it today. Got it. Very helpful. Thank you. The next question is again related to outlook, but particularly for the auto market, because I think we have been seeing some weakness in this area. I know, Claudio, you briefly touched upon this just now, but if possible, can you talk a little bit more about what you guys are seeing from an automotive perspective in terms of your outlook? Yeah, certainly. If you look at the way we closed 2023, Howard, we had all our automotive customers grew year over year. That was, as I said before, very encouraging. That is through maybe with the exception to some extent of the China market, which had a bit of a challenging year. Everybody else, the European OEM, the American OEM involved more in EV, they all grew strongly. In general, the content of electronics in automotive, EV in particular, continues to grow. Some program has been pushed out, we see that too. I think at the start of 2024 points to a year that is not gonna repeat the growth expectation of last year. Overall, still a positive segment for us. Got it. Thank you. Next question is on your chip resistor performance in the fourth quarter. Any color or comments on why chip resistor was down sequentially in Q4? I think for chip resistors, the fourth quarter revenue declined a little bit, but then I think they've managed to uphold the gross margin. Actually, slight improvements there. Maybe a bit of a seasonality issue and a bit of the inventory digestion in that particular quarter. Overall, I think we kinda like the performance we had in chip resistors in that particular quarter. Is that because the percentage distribution within that could be? Could be, yeah. The fourth quarter. Stable Yeah. Was kind of actually improving a little bit, but then the revenue declined very minor, very mild. Got it. Thank you. Just on Q4, there's a question here on why was China strong from a region perspective in the fourth quarter? No particular reason. I think that part of that, maybe two factors I can single out perhaps. One is our local China distribution business. As you know, Yageo has quite an extensive network of local distributors. They have a lot of reach. We are happy to see that the inventory level in that particular China local distribution segment became quite healthy with the end of 2023. That allowed distributors to start restocking mildly, but start restocking already in Q4. That had a positive impact for the China region. Another reason is, as I said, the notebook laptop segment, although was very down, contracted a lot in 2023, in particular Q4 is a seasonal high and strong quarter, and a lot of that assembly is still coming out of China. Not necessarily the end customer, but the assembly piece it is. These two factors combined show China relatively stronger compared to, for example, Europe, where in Q4 you have seasonally a down quarter, and the Americas, where majority of the global distribution channel is destocking. They had a lower purchasing volume to Yageo. You combine all of these things that made China relatively stronger within the regions for Q4. Got it. Thank you. A question related to that is, as you see, and you guys mentioned in the opening remarks, in the fourth quarter, global distributor sales improved a little bit, quarter-over-quarter. You mentioned that it was because there was a lot of inventory digestion heading to Q4 that led to some restocking. With end demand kind of falling off a bit for smartphones and PCs in Q1, does that concern you in terms of you know, prolonged inventory digestion in the first half of this year? It's everybody's thought these days in the industry. Just yesterday I was with our largest distribution partner, and we had reviewed the business and their thoughts are also that end demand will determine very quickly the way they're gonna restock their inventory. They continue to invest, which is a good sign. I think everybody continue to be very positive on the industry as a whole. Currently, we think that there is about six months worth of inventory sitting in the global channel, and that is about two, three months too much, probably. With current demand the way it is, it'll probably take, as we said, until the end of Q2. Now, if end demand were to erode, then it will take longer. If end demand were to pick up a little bit, then that inventory will be consumed very quickly and you will see the channel coming back very aggressively to restock. At the moment, it's hard to give you a firm answer, but from what we see, we estimate. The destocking to be completed by the end of Q2 with a stable end demand. So far, what we see in January and the beginning of February in terms of end demand has been encouraging. Got it. Can I clarify? Thank you. That was very helpful. Can I clarify? Did you say that global distribution or distributor inventory right now is at around six months? Yeah. You can segment the channel between, or at least we do. We have a large Chinese-based network that typically operates with much more dynamically and concentrated on Greater China. In that channel in particular, we have an inventory situation that is healthy. Depending on the product, you can have two-four months. In general, that is considered a healthy level. When you look at the global distributors, and that includes also the high-service distributors, which typically carry much more inventory, as an aggregate, we are looking at about six months. Typically that channel, including the high-service, would run things between three-four months, depending on how aggressively they wanna have their terms. We believe there is two-three months of inventory still to be digested. That can take very quickly if end demand picks up, or it can take a quarter and some if the demand stays where it is. Got it. Thank you. On topic of inventory, can you talk a little bit about your own inventory on your balance sheet? We're currently, I think our inventory turnover days is in the range of 135-ish, slightly longer than what we had in third quarter. I think we also have to take into account the fact that we acquired a new business from TE Connectivity. That's part of the business that we're still trying to digest. All in all, throughout the year, I think you're seeing we continue to digest the inventory, although it's kind of like flattish year in year out. Going into 2024, we still hope that we could digest inventory by second quarter. Hopefully, we'll have with better outlook for the rest of the year. That's like Claudio just said, it's everybody's guess. So far, we like the momentum we enter into January, and the outlook we have is kind of within our spectrum. Take it from there. Got it. Thank you for that. Just relating to your utilization rate, can you talk about what you know, what kind of utilization rates you guys were running in the fourth quarter? How do you guys expect that to change in Q1 and potentially in Q2 this year? With that being, we don't see too much change. As guided in the last quarter, the information we gave to you, in our commodity business, the utilization is around 50%. For the premium business, this is around 70%. Well, actually, in Q4, that remained pretty much in similar level. In Q1, that will be still the same. In Q1, this will be influenced by the Chinese New Year, so less working day. But in average, we'll try to maintain that kind of utilization rate. A couple of consideration. First is that I think we have enough inventory to support any business, any urgent business that we need. Secondly, yeah, we control this utilization is also because we want to control the inventory. The last is, when you see the utilization, there's always a balance of the inventory, also the gross margin. Basically, we see that in Q1, this will be the similar level, and we have enough time to reflect if we do see the businesses coming in quarter two. Got it. Thank you for that. You guys commented that in the last earnings call that you guys expect fourth quarter/Q1 to be the trough. Is this statement still valid? Should we expect just revenues to trough in the first quarter and to see sequential improvements over the next couple of quarters throughout this year? We have generally positive outlook for the whole year. Quarter-on-quarter, I think we just guided the first quarter performance. Like I said, we do expect the inventory digestion continue to happen first quarter. Really depends on how we come out of first quarter. Then so far, I think we are pretty positive for the whole year. Got it. Thank you. In terms of your new sensor business from Telemecanique Sensors, are you able to provide some kind of breakdown in terms of their revenue contribution in the fourth quarter? As well as what kind of operating profit contribution it was? That'll be too specific, right? I have like two business units. I possibly I can't possibly dissect each and every one of them. Like I said, the gross margin from the sensor business is really accretive, and with higher OpEx structure that we're trying to fix over time. The fourth quarter performance is not really representative. Out of that pie that I just showed you, I think probably somewhere between 5%-10% of that revenue contribution is from the sensor business, probably towards the lower end of the bound. What I promise that in the first quarter next year, we'll single out the sensor business mix for better view for you guys. Got it. I think that would be very helpful. I had to try to ask. In Q1, you said you guys will single out and break out the sensor business. This new sensor business that you guys will break out in Q1, it would be inclusive of the two acquisitions you guys did last year, as well as the whatever existing sensor business Yageo had previously? Well, we're trying to rationalize, so we'll hold that for our first quarter results. Predominantly from the two acquisitions that we have. Got it. Thank you. Very helpful. I think maybe coming back to inventory. There's a question here on your inventory levels in the fourth quarter. Excluding the acquisition, just Yageo's passive business in Q4, how did inventory trend? Was it also up, or was it flattish in the fourth quarter? I think we were flat, probably slightly better than the previous quarter. In other words, the addition of the sensor inventories in the quarter, the fourth quarter carried some weight. Got it. Thank you. Next, I think there's a question here on the BB ratio for both commodity and premium segment. How is that trending now, and how do you expect that to change in the coming quarter? For both product, book-to-bill has been improving and is now sitting around one. Got it. Thank you. I have to ask, in terms of pricing, are you guys seeing anything different on the pricing front? You mentioned that, for some distributors, inventory levels are slightly higher than normal. Is that having an impact on your pricing? No. We don't see any significant change in the dynamics pricing-wise in the market. I would say that it has been pretty stable within the normal corridor of, you know, typical movement that you have. Nothing unusual. Concerning the global inventory level, Claudio just mentioned that on average they have around six months. Actually, if you see from the past one to two years, this is getting improved quarter-over-quarter. We do expect that maybe it takes one more quarter. Hopefully, they come back to the very normal level. This does not mean that they are getting worse. They actually are improving. Got it. Thank you. I think it's probably fair to expect, at the gross level, margins, should improve every quarter throughout the year. Is that the correct read? We haven't really guided that, but that, knock on wood, of course, that's what we're hoping for. Got it. Perfect. There's a question here on your capacity. Can you talk a little bit about your capacity plans for this year and potentially 2025? Oh, I think we're pretty flat from previous year. We continue to spend about 20%-25% of our EBITDA dollars on CapEx. I see pretty similar outlook for 2024. Okay. Any additional color on, I think, the recent announcement you guys made, in terms of spending or I think investing, I think TWD 20 billion, if I recall correctly? Oh, Caotun. Yeah, that's a very high-level investment project. I mean, obviously, we're eyeing on long-term growth of our business in Taiwan. I think the ability to continue to secure premises for our future growth is critical. We haven't really filled out each and every details of that investment projects yet, but that's definitely something important for our long-term growth. Right now, I think we're filling in details and probably not right to comment yet. Got it. Is it fair to say that that is something that we don't expect to ramp up in the next two years? Definitely not this year. I mean, we still got our cultural plans, you know, in full swing. Probably in the next year or two, we'll be more focused on the expansion or continued ramping up of that facility. If we're talking about that TWD 20 billion investment projects that we have, like I said, it's more eyeing on the longer- term future. I don't see that in two, three years beyond. Got it. Thank you. Just coming back to inventory levels. Can you please talk a little bit about the inventory levels at the assembly, at the, like the ODM and the EMS guys? We don't have visibility on that, Howard, so a bit difficult to give you an answer here. What I can say is that it has been improved as well over the last year and hopefully now has reached a much healthier level. This is what I hear by conversing with them. Again, we don't have any data, any visibility on that from our end. I see. Thank you for that. Can you talk a little bit about some of the competitive dynamics? In particular, are you guys seeing your Japanese peers being more aggressive on the mid to low end passive component space? In terms of pricing, you mean? In terms of pricing, looking to take more share in this particular mid-to-low-end segment. Has there been any changes you think from your Japanese peers from a, I guess, strategy perspective? Because I think in the past, they've been always focused more on trying to take share or grow in the high end. We haven't. You know, you hear here and there some of that commentary, but and maybe we had seen perhaps more aggressive pricing during the depreciation of the yen. I think in general, nothing particular comes to my mind when it comes to Japanese player aggressively trying to gain share or hurt market price. I see. Got it. Thank you. A question here on dividend. I noticed you guys did not announce your dividends for last year. Would there be any change from a payout perspective that we can expect? Yeah. Actually, in today's board meeting, we resolved that we're going to. You'll probably get the announcements later today because we've just finished the board meeting not long ago. We will resolve that, you know, well, for the shareholders meeting to approve obviously, we would distribute TWD 20 per share cash dividend and TWD 2 stock dividend this year. As you can see that it is higher distribution ratio than the previous years. I think in the past several years, I think we've been trying to understand, we're trying to find the right balance for the dividend distribution. I think judging from the current liquidity situation of the company and the capital structure that we have, we think that it might make sense that we, you know, propose the TWD 20 cash dividends and the TWD 2 stock dividends, let's say, as probably sharing with our shareholders. That's the resolution from the board today. Got it. Thank you. Just maybe coming back a little bit on the outlook. Any high-level comments on looking at your different product lines, MLCC, R-Chip, tantalum, sensor, et cetera, going forward for the full year. Any comments on, you know, which product line do you expect the strongest growth and which do you expect the least? I think, you know, when you look at the exposure of our product by segment, there is some peculiarity, but it is also true that many of them are used across a variety of applications. We are projecting growth for the year across all products. There is not a lot of significant differences between each type. I would say, Howard, that all of them have similar growth targets for the year. Got it. Very helpful. Thank you. Coming back to, still on demand, but more related to AI. Is there any color you guys can provide in terms of AI PC and AI smartphones and how that will drive passive component content? We have. As you know, AI is a very popular topic in the industry, rightly so, but at the same time, a very challenging segment to track and measure, because, you know, you don't really have a, an AI graded product or you don't really have a very clear, in many cases, a very clear identification of what exactly is an AI segment. Within that, having said that, we do see very strong growth in a couple of areas, data centers and server farms, AI driven. That we can see, and that is growing very strongly. We have a variety of products that is used there. Most notably for that particular application we have a tantalum polymer. Why is that? Because it has a very high energy density, which obviously plays well for the requirement of AI, which is very intensive in terms of energy. We have other projects that are supporting AI infrastructure, and that is through with a couple of semiconductor companies that are producing modules that will support and enable AI deployment. We have also here a lot of growth. Most notably, maybe I single out our Nanomet inductor product that is specifically designed for AI application. Also here, the reason is just a higher energy level. For these two particular cases, we see a lot of growth. The base is not huge yet, but I would say that very quickly, those two customer engagements we have are scaling up and entering in our top 20, top 30 customers overall for the company. That's good to see. So far, that continue to be very, very strong. Got it. Thank you. Very helpful. Just follow up on the consumer side, though. We've seen in the previous cycle, for example, in smartphones going from 4G to 5G, a pretty noticeable increase in terms of content. I think, you know, industry-wide people were talking about 20%-30% passive component content increase for sub-6 GHz smartphones, and higher for millimeter wave. Is that something that we can also expect for an AI smartphone or do you have a different view in terms of the magnitude of the content increase? I don't have a visibility on a potential bill of materials for an AI smartphone compared to a non-AI bill of materials. It is an open item also for us to research and understand better. Certainly, you know, the higher the computation need, power need of the application, the higher content of the electronics components that will stay true. Whether that's 30% or 50%, it's a bit hard to say at the moment, but it will be significant for sure. It will not be single digits. Got it. Thank you. Is it fair to assume that all of these different products going into AI, whether it's data center or consumer side, these should all be beneficial from a margin perspective? Not necessarily. You know, you certainly have certain products like our polymer high energy density or our Nanomet inductor where we hope that the technology that we deploy and provide can help to secure a decent margin, like higher margin than most of our commodity products. But I wouldn't make a direct link that anything that goes into AI necessarily drives per se higher margin. It will come down to the technical spec of the product and the competitive environment and the cost structure. Got it. Thank you. Maybe just to close up the call, and I'm sorry, Eddie, if you have mentioned this earlier, but I was looking at the proposed payout you guys mentioned earlier. It seems like the payout ratio has increased. You know, is this something that we can expect going forward, at least this kind of level? Well, I'm sorry, Howard, can you rephrase your questions again? What ratio are you referring to? The payout ratio. The $20 dividend that you guys announced seems like it has come up versus the previous year. Is this higher level of payout ratio something that we can expect going forward or it will still fluctuate depending on the situation? Well, I have to say this probably will be still somewhat fluid. I mean, like I said, in last two years, I mean, our payout ratio was comparatively low. Although still competitive with our Japanese competitors, as we figure out and as we, you know, visited more and more investors, I think we're trying to rationalize this dividend policy. I can't promise you that this is going to be the new norm for the company but then promise that we'll continue to monitor the situations to make sure that we find the right balance between dishing out or sharing the performance result with our investors vis-a-vis maintaining certain stability of the operations. Because, you know, like this year, I think with that TWD 20 cash dividend out and TWD 2 stock dividend, we still think that we'll be able to maintain certain EPS growth over time. I mean, this is something that we're trying to justify. Stay tuned. Like I said, no promise as a new norm. We'll continue to monitor the situation. Got it. Very helpful. I think that was the last question. Before we close, do you guys have any closing remarks? Entering this year, 2024, first, we are very happy that we see the revenue and the gross margin in the first quarter at least will remains stable. Secondly, we still see the inventory correction. This will be continue but we hope that this will be end of story, maybe by quarter two this year. Internally, we do see now we have higher operating expense structure, but we also see that this is very good opportunity for us to have a further improvement. Thank you for everyone's participation. Perfect. Thank you. Thank you for your time, David, Eddie, and Claudio. This concludes our webcast today. Thank you all for joining, and we look forward to seeing you guys next time. Thank you. Yeah. Thank you. See you next. [crosstalk]