Good afternoon, everyone. Welcome to Realtek 2022 fourth quarter earnings call. This call will be chaired by Realtek spokesperson, Yee- Wei Huang. The presentation will be available on the company website before 6:00 P.M. today. At the beginning, our spokesperson will report our fourth quarter results and give a management's remark. After that, we will have a Q&A session. You are welcome to type your questions in the box at the lower right corner on the screen. We will answer the questions accordingly. During the call, you can browse through the pages of the presentation anytime. Note that portions of what presented in this call contain forward-looking statements. Investors are cautioned that forward-looking statements involve risks and uncertainty. Actual results may differ materially from the results forecasted or implied in such statements. Investors should not place undue reliance on such statements. Now, I'll pass this call to our Spokesperson, Yee- Wei. Thank you. Good afternoon, ladies and gentlemen on the line. First, on behalf of Realtek, let me wish everyone have a great Year of the Rabbit. You are currently participating in the fourth quarter 2022 webcast earnings release hosted by Realtek Semiconductor Corporation. Let us go through the fourth quarter 2022 operational results. Q4 revenue was TWD 21.76 billion. 26.9% QOQ drop and a 20.5% decline compared to the same period in 2021. End market weakness and supply chain focus on lowering inventory are the main reasons leading to a QOQ and YOY drop. Q4 gross margin was 43.7%. A 4.4 percentage point drop compared to the previous quarter. Three main reasons for the drop are, first, change in product mix. Two, average cost increase. Three, accounting loss from slow-moving inventory. However, Realtek continues to follow the market and customers' needs to develop a high-value product portfolio. Meanwhile, most of the inventories, though written off for accounting purpose, still meet the market needs and can be sold during the year. To this end, we believe that the mid- to long-term growth profit margin may be better than that before COVID-19. Q4 operating expense was TWD 7.73 billion, or 35.5% of revenue, meeting company's expectation as OPEX ratio normally peaks in the fourth quarter. Due to the market headwind, we do not expect the OPEX ratio to improve in the short term. We remain confident to leverage our economy of scale to lower our OPEX ratio as the company scales up in the long term. Q4 operating profit was NT$1.177 billion, or 8.1% of revenue. Lower revenue, gross margin, and higher OPEX ratio led to the sliding of operating profit ratio. Q4 non-op income was NT$484 million, gained from increased government grants and proper hedging against US dollars gave rise to a higher non-op income compared to the last quarter. Q4 net profit as a result was NT$2.13 billion, or 9.8% of revenue. Q4 EPS as a result was NT$4.16, about 50% of the third quarter level. Regarding inventory, Q4 inventory turnover days were at 204 days, a sharp 67 day increase from the 137 days in Q3. As we explained in the third quarter earnings call, we put priority on supporting the distributors and customers to manage their inventories in the third quarter. The resultant in-house inventory increase was within expectation. Most of these inventories are effective ones and will be gradually digested. We target to see the inventory return to normal level by the end of the first half. We also have fourth quarter balance sheet and cash flow statement for your reference at your convenience. We will also quickly go through Realtek's 2022 full year operational results. 2022 net income was TWD 111.8 billion, achieving another year of record high revenue with a 6.0% Y-o-Y growth. 2022 gross margin was 48.9% compared to 50.4% in 2021. 2022 operating expense was TWD 38.9 billion or 34.8% of revenue, compared to 34% in 2021. 2022 operating income was TWD 15.7 billion or 14.1% of revenue, a 2.3 percentage point drop from 16.4% in 2021. 2022 non-GAAP income was TWD 1.20 billion, compared to TWD 250 million in 2021. 2022 net income was TWD 16.2 billion or 14.5% of revenue, compared to 16.0% in 2021. As a result, 2022 EPS was TWD 31.62, compared to TWD 33 in 2021. This concludes Realtek fourth quarter and 2022 financial reports impacted by the macroeconomy conditions. The end market demand in the near term is slow and the semiconductor industry continues its inventory adjustment. The uncertainty arising from the lifting of the COVID-19 control in China and the Lunar New Year holidays are impacting the operations of downstream factories. The first quarter operating outlook is prudently conservative. Despite the short-term headwind, we can still strive for a 2023 annual revenue, no worse than that in 2021. Let's review the top product lines at Realtek. We observe that PC versus non-PC revenue to be approximately at 26% to 74% in the fourth quarter. A notable drop in PC percentage due to the PC market slowness and high customer inventory. On Ethernet, inventory management took the central stage in the fourth quarter for PC Ethernet and other Ethernet customers. Compounded by the depressed macroeconomic conditions, including interest rate rise, inflation, and corporate layoffs. We saw a sharp drop in Ethernet orders in fourth quarter. Entering 1Q 2023, inventory digestion is expected to continue in both PC and network markets, while we are seeing signs of order returning, expecting the market conditions to be better in the second half. Realtek will work with customers to push for technology migration from 1 gigabit Ethernet to 2.5 gigabits or even 5 gigabit Ethernet. The switch business was anemic in the fourth quarter due to the inactivity of telco projects under the strict Zero-COVID policy in China and strong U.S. dollars in developing countries. Many factories in China decide to have an extended Lunar New Year holidays in first quarter upon the total lifting of the COVID control. Despite the short-term setback, the market strength is expected to return some in 2023 and more in 2024 to demand spec upgrade, for example, to Multi-Gig switches. Meanwhile, Realtek share gains in managed switches continues slowly but surely. About Wi-Fi. Key Wi-Fi markets, including PC, broadband, router, consumers, et cetera, all froze remarkably in the fourth quarter. Entering the first quarter, customers tend to hold back and issue rush orders when necessary in light of, one, high inventory, two, less working days. Regular demands are expected to bounce back in late first quarter or starting second quarter. In spite of the turbulence, Realtek Wi-Fi 6 now accounts for roughly 20% of our Wi-Fi business. It is expected to at least double within Realtek in 2023. We expect Wi-Fi 4, 5, and 6 to coexist in the foreseeable future, with Wi-Fi 7 adding to the mix in 2024. Wi-Fi 6E, more likely than not, will be a transitionary solution for at least 2 reasons. First, still many countries, including China, India, Taiwan, and most countries in Southeast Asia and Africa, have not approved Wi-Fi in 6 gigahertz. Two, Wi-Fi 7 introduced many additional features, for example, Multi-Link Operation, to effectively use 6 gigahertz band along with the existing 2.4 gigahertz and 5 gigahertz bands. On audio codec, according to IDC shipments, PC shipments, including desktops, notebooks, chromebooks, and Apple, were 292.3 million units in 2022, representing a 16.5% drop compared to 2021. Within 2021, the fourth quarter drop was most pronounced at 29% Y-o-Y. Realtek audio codec drop in Q4 was above market average as we gave priority to help customer manage their inventories. The PC market is likely to drop further in the first quarter 2023 compared to the fourth quarter last year. Most customers forecast the PC market to drop about 5% YoY this year. For non-PC applications nonetheless, we see growth opportunity in 2023, especially in gaming related areas. Last but not the least, on TV. Worldwide TV shipment appears to be around 197 million-202 million last year. It is expected to be between 190 million-197 million units in 2023. A slight YoY drop. Upside opportunity, if any, may come from high frame rate TVs targeting at gaming segment. Realtek TV business is expected to hold steadily in 2023, and we continue to see headroom for growth. Thank you, Yee-Wei. We are entering the Q&A session. Please type your questions in the box at the lower right corner on the screen. We will reply accordingly. The first question is from Randy, Credit Suisse. After the sharp fourth quarter decline, how do you see first quarter stabilizing? Do you see another sharp decline from the lower base? Do you expect a pickup post Chinese New Year and whole year top line target? Well, first, many of the macro challenges seen in the fourth quarter are still with us in the first quarter. For example, high inventory in semiconductor supply chain, inflation, geopolitical conflicts, especially including the war in Europe. Some conditions are improving, while others may get worse before they become better. Further, first quarter with less working days is traditionally not a strong quarter in terms of revenue. All things considered, we expect the first quarter to be the trial of the current business cycle. Some segments are likely to start coming back after the Lunar New Year. We expect second quarter business to be better than that in the first quarter, and second half better than the first half. Overall, we strive for a 2023 no worse than 2022. Next question is from William, JP Morgan. How does China reopening impact our Realtek business? Okay. The short-term impact appears to manifest itself in two interrelated ways. First, a smaller workforce due to a higher number of confirmed cases. Two, longer Lunar New Year holidays for some companies. To this end, business activities in China is slow overall as we speak. The slowness has a direct impact to the business performance of Realtek and our customers. For Realtek operations in China, nonetheless, we see the confirmed cases within the company appear to have peaked, and engineers are mostly back to normal schedule. The impact for Realtek day-to-day operation in Taiwan is minimal. Next question is from Daniel, Morgan Stanley. What will be the key growth drivers in 2023? Okay, 2023 looks flattish compared to 2022 at a first glance. The growth as we strive to achieve may come from spec upgrades in Wi-Fi, Ethernet, and PON, such as the continuing rise of Wi-Fi 6 penetration rate, the adoption of Multi-Gig Ethernet and the growth of 10G-PON. Automotive Ethernet PHY and switch are also expected to outperform with respect to the corporate average, although its space is still relatively small. For CE codec, Bluetooth, and TV, the growth may come from expanded applications. Thank you, Yee-Wei. The third question is still from Daniel, Morgan Stanley. He would like to ask, when do you think the revenue might bottom? How would the seasonality pattern differ from previous years? As, previously stated, first quarter may be the trial of the current cycle. We see second quarter revenue better than the first quarter and second half better than the first half. A reversal from the previous year and back to the normal seasonality with a vengeance. Next question is from Rick, Daiwa. His question is about gross margin. How is gross margin outlook in 2023 on inventory adjustment and likely pricing pressure? Would Realtek's gross margin be back to pre-COVID level in the short term? The gross margin is under pressure in the short term to reconcile with both the accounting loss from slow-moving inventories and pricing pressure from the adversarial market conditions. It may be the second half before we see gross margin stabilizing. In the mid to long term, however, we do believe that the gross margin can be better than that before COVID-19 because of the sustaining product mix changes. Next question is from Terence, KGI, regarding OPEX. Can management give us some hints about the first quarter 23 and 2023 OPEX and OPEX ratio? Due to the market headwind, we do not expect OPEX ratio to improve in the short term. We expect the 2023 full year OPEX ratio remains at a similar level compared to 2022. Next question is from Bruce, Goldman Sachs on overall PC demand. For last three months, we continue to see deteriorated PC demand. Do we see the clear bottom in recovery for the overall PC demand? Most of the PC customers we talk with believe a mild YOY decline of roughly 5% for the PC market in 2023. This implies clearly a better second half than first half this year for the PC market. Stated differently, the PC market is expected to bottom out by the second quarter at the latest. Next question is from Aaron Nomura. Considering the positive view on networking segment for 2023 from spec upgrades, what sales% do we expect this segment to account? How would the mix change impact the growth margin beyond? Suffice it to say that communication network segment has contributed to the largest portion of Realtek business for many years. It is expected to outgrow others this year, driven by the spec upgrades. Note, however, spec upgrades alone may help ASP and the top line, but not necessarily gross margin. Realtek Communications network products continue to venture into new market segments that reward advanced specs and features with a premium. An example will be Realtek's continuing progress in managed switches. There are opportunities to integrate value-added features such as AI, audio, video into communications network products as Realtek accumulates increasing number of relevant IPs from other business operations. Case in point, a router SoC with AI QOS can markedly improve user experience for gamers and online live streamers. Such integration is oftentimes welcome for mid, high-end applications. It can boost both revenue and more often than not, gross margin. That is, Realtek product mix trends toward mid, high-end. It helps achieve gross margin improvement. Thank you, Yee-Wei. Next question is from Martina, Subang. Please share your view on the outlook or directions of telco project in China impacted by COVID in 2023. Well, some tender projects awarded in 2022 did not actually land or were not deployed by the year end. We estimate the actual deployment of China's telco projects in 2022 may be 70 million-80 million units for PON, 50 million-60 million units for routers, and 30 million-40 million units for set-top boxes. China has lifted the zero-COVID control, the outlook for telco projects is positive. The plan for telco tender projects in 2023 may be 80 million-90 million units for PON, 60 million-70 million units for routers, and 50 million-60 million units for set-top boxes. We shall pay close attention to the development after the Lunar New Year. A follow-up questions on telco project from Randy, Credit Suisse. Are there any spec upgrades in the telecom project? How are the activities in overseas markets? We observe that all telco routers in China may go for Wi-Fi 6 in 2023. Huawei's 2.5G and 10G PON may go without Wi-Fi. In contrast, we see some developing countries outside China may choose to stay with Wi-Fi 5, AC1200 for example, instead of Wi-Fi 6, AX1800 for example, due to budget concern. Next question is from Kevin, Mizuho. What is your updated expectation for Wi-Fi 6 adoption rate in PC and router, respectively in 2023? Wi-Fi 6 has achieved 50%-60% penetration in PC and 40%-50% in routers in 2022, as expected. It is expected to gain at least another 10% market share, market position in 2023. Next question is from Randy, Credit Suisse. What is your development progress on Wi-Fi 7? Timing for mass production and the initial targeted application? Wi-Fi 7 interoperability process, as we explained before, hosted by Wi-Fi Alliance, has been ongoing since fall 2022. It is expected to continue until mid-year this year. Realtek is actively participating in the process. Customer design is adopting Realtek Wi-Fi 7. It's also ongoing. We expect small volume mass production in 2024. The initial target markets will include PC, router, and broadband 10 gig, 10 GPON pairing. Next question is from Casey, Shandi. A follow-up question on Wi-Fi. Please update on the price differences among the different generations of Wi-Fi. Okay. By fourth quarter, the ratio between Wi-Fi 4, 5, 6, and 7 are roughly 1 to 3 to 4.5 to 9. Thank you, Yee-Wei. Next question is from Jason, CLSA. Regarding networking market share, do you see U.S. players now have better wafer supply to get market share? Do we see Chinese players gain market share with lower EMP? We see competition is generally back to the pre-COVID, pre-shortage period. The differences are, one, Realtek has gained footing in some accounts that we could not get in before. Two, specs has moved up another notch. To this end, Realtek finds ourselves in a familiar yet improved position. We put priority on providing best cost performance solutions with second-to-none customer services and avoid segments that compete purely on price. Next question is from FSSA, Martin Lo. Can you talk about your view on your gap with various Chinese competitors like Espressif Systems or Airoha Technology? Are they catching you up? As we explained, the specs continue to go up. Also, passing the interoperability test and field tests, they are important. We see the gap between Realtek and Chinese competitors still exists. Thank you, Yee-Wei. Next question is auto Ethernet related from Terence, KGI. Can Realtek provide recent updates on the automotive Ethernet product line? What is the future product roadmap of the company's automotive Ethernet segment? Has Realtek seen slowing automotive demand or auto electrification trend given macro uncertainties? Well, first, it may be worth repeating that automotive Ethernet is agnostic to the choice of electrification or not. Both electric vehicles and cars running on gasoline are embracing automotive Ethernet as in-vehicle network infrastructure. An electric car with auto Ethernet, nevertheless, renders itself much like a TCP/IP-based IT platform that is easy to scale and build application on it. We see the trend for more vehicles to adopt auto Ethernet unstoppable. Future product roadmap revolves around higher speed and better security. Nevertheless, we see a number of new automotive OEM projects originally scheduled for 2025, 2026 production delayed due to supply shortage. This has caused a push to of the new components product roadmap accordingly. Existing solutions will have an extended product life in the meantime. Next question is from William, JP Morgan. Realtek demonstrated the audio solution ALC5575 for the automotive application. Could you give us more colors about the strength, mass production, timing, and potential team for this product? Okay. Realtek's intelligent automotive noise suppression technology with voice, that the part number is ALC5575, uses a pre-enrolled voice print of a specific user, retaining only specific user's voice, so a far-end listener can readily hear the talker clearly. This technology integrates Realtek AI beamforming and noise suppression, making it possible to remove noises from tires, windshield, rain, et cetera, in a moving vehicle. The solution will be ready in the first half this year. Such technology can be most readily deployed to an electric vehicle, which will be our initial target market. Per The Wall Street Journal, global sales of fully electric vehicles total about 7.8 million units in 2022, and make up about 10% of the 80 million new cars sold last year. Some analysts forecast battery-powered EVs will amount to 20% of global sales by 2025, and 59% by 2035. These are all our target market. Thank you, Yee-Wei. Next question is from Aaron, Nomura. Please kindly provide an update on high-speed interface products, such as USB4 and PCIe Gen5. Realtek first USB4 product is a USB4 hub controller. It is the first full-featured USB4 solution in the market. The sample has been delivered to customers for engineering build. The target MP time is in the second half this year. Realtek PCIe 5.0 is planned for 2023 readiness. Next question from Terence, KGI, on R&D headcount. What's our ideal R&D headcount in 2023, and how would it impact your R&D expense in 2023? Currently, about 87% of Realtek 6,700 employees globally at the end of 2022 are R&D engineers. We expect the number to grow modestly in 2023, depending on the business condition. All managers are prudent in hiring. We believe the R&D expense as a percentage of sales will be about the same level as that last year. Next question is from Daniel, Morgan Stanley. What's your view on TV shipment growth globally, and Realtek's TV SoC growth in 2023? I believe we mentioned earlier, worldwide TV panels is expected to be around 190 million to 197 million this year. A slight Y-o-Y drop. Upside opportunity, if any, may come from high frame rate TVs targeting at gaming segment. Realtek TV business is expected to hold steadily in 2023. Next question is from Jason, CLSA, regarding Bluetooth. How should we think about the TWS market in 2023, and the focus of Realtek's Bluetooth product line? Realtek remains committed to the Bluetooth TWS solution. Although we are seeing many Bluetooth products now are competing purely on price. We currently are staying away from the basic TWS market competing solely on price. We are focusing on global brand customers, gaming applications, and the new BLE audio applications. We are also combining wearables and TWS into a 2-in-1 solution that provides a double dual-mode wearable solution. That is BLE data with Bluetooth Classic audio, and Bluetooth Classic audio with BLE audio. As BLE audio becomes commonplace in the near future, Realtek will help customers enjoy time to market benefits for BLE audio watch, TWS, and various related applications. Thank you, Yee-Wei. Next question is from Leo Chang. Could you share your view on Taiwan Chip Act? As we speak, Taiwan Chip Act is still under discussion in the Legislative Yuan to the best of our knowledge. It will be premature to comment other than saying that as an industry member, we certainly welcome-