Good afternoon, everyone. Welcome to Realtek 2023 fourth quarter earnings call. This call is chaired by Realtek spokesperson, Yee-Wei Huang. The presentation will be available on the company website before 6 P.M. today. At the beginning, our spokesperson will report our fourth quarter and 2023 full year 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 portion of what is 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. You are currently participating in the fourth quarter 2023 webcast earnings release, hosted by Realtek Semiconductor Corporation. Now, let us go through the full year 2023 operational results. Q4 revenue was NT$22.59 billion, a 15.3 QOQ drop, but a 3.8% increase compared to the same period in 2022. The combination of traditional seasonal low and no significant improvement in demand is the main reason leading to a QOQ drop. Q4 gross margin was 44.7%, a 2.7 percentage point increase compared to the previous quarter, and a one percentage point increase compared to fourth quarter 2022. The main reason for the increase comes from the reduction in write-off loss due to the slow-moving inventory. Q4 operating expense was NT$8.95 billion, or 39.6% of revenue. Compared to the previous quarter, operating expenses decreased by 2.9%, but the operating expenses ratio increased by five percentage points. The main reason is that despite a double-digit percentage operating revenue decline, we continue to invest in R&D to prepare for the next wave of AI penetration in every market in which we play. Additionally, we had a step up in legal expenses and mask fees. We believe the former is a one-off charge, while the latter comes from the tendency to tape out IC designs in the fourth quarter to wrap up the year. We are confident that the company will return to the top-line growth using again, an improved OPEX ratio as the company resolves and returns to growth and scales up. Q4 operating profit was NT$ 1.16 billion, or 5.7% of revenue. Lower revenue and higher OPEX ratio led to the sliding of operating profit ratio. Q4 non-OP income was NT$ 1.13 billion. The main reasons for the QOQ increase are gains on disposal of investments, gains on valuation of financial assets, and recognition of compensation reimbursed by suppliers. Q4 net profit was NT$ 2.18 billion, or 9.7% of revenue. Q4 EPS, as a result, was NT$ 4.25, slightly lower than the NT$ 5.01 in Q3. Regarding inventory, Q4 inventory turnover days were at 104 days, a seven-day reduction compared with the 111 days in the third quarter. In terms of dollar value, Q4 inventory dropped about 20%. We anticipate a further decline in inventory days over the next few quarters, although at a slow pace. The slightly higher than normal inventory is to respond to the many rush orders we have received since December.... A phenomenon we expect to continue. We also have the 4Q 2023 balance sheet and cash flow statement for your reference at your convenience. This concludes Realtek fourth quarter and 2023 full year financial report. Oh, now, next, we will go through Realtek 2023 full year operational results. First, we observed that PC versus non-PC revenue to be approximately 31-69 in the fourth quarter, reflecting a slow PC market in spite of some PC related rush orders in 4Q. Further, the weakness in the PC market is more pronounced than that in the consumer and communication network markets in the fourth quarter. Let's look at Ethernet. Seasonal slowdown in fourth quarter, despite some PC-related rush order. Nonetheless, Ethernet migration to 2.5 gig Ethernet and 5 gigabit Ethernet is gaining momentum across PC and communications network markets. As the demands for the multi-gig Ethernet are driven by the growth of 10G PON, 10G routers, and even Wi-Fi 7 in the coming years. A caveat is that the competition from indigenous China Ethernet players, who appear to focus solely on price. Realtek is confident to countering such competitions with optimal price performance, as well as solid field-proven interoperability and reliability. On switch, it is positively correlated with the strength of the infrastructure build-up, which remained anemic in the fourth quarter. However, there seems to be signs that the infrastructure tender projects are starting to pick up entering 2024, both in China and around the world. Similar to the case of Ethernet, multi-gig switches, as well as managed switches, are the growth driver as 10G PON and Wi-Fi 7 gain popularity. Now, on Wi-Fi, although Wi-Fi shipments experienced a QOQ drop in the fourth quarter, the drop is milder than expected. This can be seen in TV, IoT, and communications network markets. At the same time, the migration to Wi-Fi 6, 6E in key applications such as PC and routers continues. While the first batch of products armed with Wi-Fi 7 will hit the market shortly after the Wi-Fi 7 Logo program concludes in the first quarter, 2024, that is this quarter. The trend to adopt Wi-Fi 6, 6E will continue. It should be safe to assume that Wi-Fi will return to growth at Realtek in 2024, as we find new applications using Wi-Fi and using higher Wi-Fi specs. Audio codec, closely related to the PC market. The latest IDC data suggests that PC shipments, including desktops, notebooks, Chromebooks, and Apple, were around 259.7 million units in 2023, representing another 13.9% Y-o-Y drop after a 13.7% Y-o-Y drop in 2022. Although PC returns to a QOQ drop in fourth quarter after a seemingly healthy QOQ growth in second and third quarter in 2023, most believe the PC market will return to growth in 2024, perhaps a mild 3%-5% growth. Realtek PC audio codec business is expected to perform more or less in line with the PC market. Further, we are looking to embed AI in various audio-based solutions for PC and non-PC applications. This is expected to provide mid, long-term growth opportunity for Realtek audio codec business. Now, last but not least, TV. Worldwide TV shipment appears to be around 197 million units in 2023.... which is at the high end of the market forecast, given in the beginning of the year, but flattish compared to 2022. Realtek TV business, nevertheless, was holding steady with a mild growth, as planned in 2023. The TV, its market, is expected to see growth this year, as there is 2024 Summer Olympic Games in Paris, while TV makers are promoting Mini LED TV that are good for watching sports, while, to watch sports events with a huge screen, near the quality of OLED TV, but at a lower price. Thank you, Yee-Wei. Now we enter into QA session. The first question is from Daniel, Morgan Stanley. Could you provide us with 2024 full year and first quarter outlook? What are the major growth drivers for Realtek this year? As reported earlier, although there remains uncertainty in the overall economy and international situation, the supply chain inventory is returning to a healthy level. Realtek's first quarter operations outlook is provenly sound. As for 2024 full year, we believe Realtek will return to growth in 2024. The main growth drivers are spec upgrades. For example, Wi-Fi 6, 6E, Wi-Fi 7, 10G PON, multi-gig Ethernet and switch, as well as the inventory restocking in the supply chain. Communications, network, and automotive in general may fare better than PC and consumer applications. Thank you, Yee-Wei. The second question is from Brad, BofA. Can management provide revenue and gross margin guidance in 2024 and/or longer term? Right. So despite the setback in 2023, we expect Realtek to return to top-line growth in 2024 onward. We believe the trend for more edge AI devices is here to stay. Such a trend will demand chip solutions to facilitate faster, more flexible, and more manageable connectivity to the cloud servers and more human-centric audio and video man-machine interfaces, all within the focused expertise areas of Realtek. The trend also leaves plenty of room for Realtek to innovate, as we aim at mass enabling AI solutions for everyday work and living. Realtek envisions that the trend aligns well with Realtek's goal to move our product mix to favor mid-high-end products, thereby yielding gross margin improvement in the long run. Next question is from Randy, UBS. How is your view to grow OPEX in line with the revenue? Are you slowing hiring and expense growth? Well, heretofore, Realtek consistently delivered revenue growth that exceeded the growth rate of headcount, which is the major contributor to operating expenses. The momentum had a setback in 2023 against asset inventory problems, macroeconomic weakness, and geopolitical tensions. Nevertheless, we are confident of returning to revenue growth. At the same time, we will sharpen our focus on per capita productivity and deliver the economy of scale benefit. Next quest- To the best we can tell today, with very limited visibility, the 2024 OPEX ratio may stay in the ballpark of what we have today, meaning on an annual basis, meaning compared to 2023 level on the annual basis. Next question is from Kevin, Mizuho. What is the amount of inventory write-off in the fourth quarter 2023, compared with third quarter 2023? Will it continue to decline in the first quarter 2024? Do you expect that the gross profit margin to return to high 40% or higher in some quarters of 2024, due to the smaller inventory write-off and high gross profit margin for sales of previous write-off products? Well, as we shared in the last earnings call, and as attested by the fourth quarter gross margin result, the write-off due to aged inventory, by and large, had come to an end in third quarter 2023. Whatever may be left can be insignificant. We prefer not to get too far ahead of the margin performance in the coming quarters. Suffice it to say that we see further gross margin improvement doable, and we are working hard on several fronts to manage our gross margin continuously. This includes, one, working closely with our customers to respond to the tremendous price pressure from the market. Two, negotiate tirelessly with our suppliers to meet the expectations of the market and our customers. Three, doing engineering product cost down, including redesign where applicable. And four, developing new products with enhanced value propositions to enhance a favorable ASP. Next question is from Jason, CLSA. Regarding competition, how's the market share or market competition, especially in Chinese market? Do you see any impact from HiSilicon in Wi-Fi or telecom market? Can Realtek further gain market share from U.S. players? Well, given equal choices, now more than ever, customers in China will lean toward buying China. Having said that, most customers, in reality, in China or elsewhere, will choose a supplier that is reliable and deliver the best cost performance. The duty falls upon Realtek to help our customer justify buying Realtek. HiSilicon, as a preferred telecom IC supplier in China, was well known before the U.S.-China confrontation. Realtek has been competing against HiSilicon and many other reputable IC providers from U.S. and elsewhere all the time. Our track record shows that Realtek is always one of the few left standing in the long run, in the field in which we play. We have confidence in continuing this record. Thank you, Yee-Wei. Next question is from Bruce, Goldman Sachs: In terms of AI PC, we see several products you rolled out that performs AI functionalities. We would like to know what's the incremental dollar content within AI PC you can get versus the regular PC? Well, despite many growth stories, AI PC, Windows 10 decommission, and PC refresh cycle to name a few, it is worth noting that most market reports and PC industry players are forecasting a very mild annual PC market growth from 2024 to 2026. To this end, it may be prudent not to overplay the impact of AI PC on the PC market, at least not in 2024. To put things into perspective, the definition of AI PC is still vague. According to TrendForce, Microsoft appears to be setting a hardware baseline for an AI PC, which should have at least 16 GB of DRAM and 40 TOPS of computational power. Other than Microsoft Copilot, however, there does not seem to be any information regarding additional AI applications that may be found in an AI PC that may benefit from such hardware configuration. It should be further noted that no PC product today meets the set AI PC threshold. A PC using CPU, NPU, meeting the 40 TOPS requirement, such as Qualcomm's Snapdragon X Elite, AMD's Strix Point, and Intel's Lunar Lake, may come in the second half of 2024 at the earliest. Having said that, Realtek is leading the market to infuse various AI features into a PC. Realtek's second generation Edge AI human sensing USB camera controller, and CES 2024 Innovation Award winner, is a great example. It is the first AI PC webcam controller meeting all the requirements set by Intel and Microsoft. Additionally, there are increasing number of Realtek IC solution with embedded AI features for the PC market as we go forward. These progressions should be viewed as a necessary product upgrade to meet the market trend and customers' expectations, thereby assuring Realtek's growth and our leading position as a PC IC solution provider. Stated differently, AI-enabled PCs are almost certain to be the next phase of PC evolution. AI features may gradually appear from one generation to the next, to ensure the health and growth of the PC market, and to protect against market stagnation and ASP erosion. It may not be meaningful to speak of the additional revenues from AI PC versus regular PCs. Thank you, Yee-Wei. The next question is from Rick from Daiwa. When will Wi-Fi 7 start revenue contribution? And Wi-Fi 4, 5, 6, 7 ASP ratio and the percentage of total Wi-Fi revenue. What's the Wi-Fi 6 penetration rate in the PC and router in 2024 and 2025? Would Wi-Fi 7 penetrate faster than previous generations? Right. So Wi-Fi 7 Logo program is concluding this quarter. Products armed with Wi-Fi 7 should be hitting the market shortly after. Realtek Wi-Fi 7 will be among the first batch of products equipped with logo-certified Wi-Fi 7. Nevertheless, Wi-Fi 7 market penetration may be rather limited in 2024, likely around 5% at best. It may follow the same growth path as the previous generations of Wi-Fi. The price gaps among different generations remain significant, with the average price of Wi-Fi 6, 6E, more than 60% of that of Wi-Fi 5, and more than 4x of that of Wi-Fi 4. The ASP of Wi-Fi 7 is clearly more than 2x of that of Wi-Fi 6, 6E today. Such price gaps almost guarantee that the legacy Wi-Fi, namely Wi-Fi 4, 5, and even 6, 6E, will continue to dominate the Wi-Fi market this year and perhaps even next. We observe that Wi-Fi 6, 6E may reach 80%-90% market penetration for PCs in 2024, and 70% for routers. The next question is from Lucas, KGI. Does the company observe sporadic demand in the China bidding market? What are management's expectation for demand in the China bidding market in 2024? What were the shipments for the Set-Top Box, PON, and routers in 2023? Well, the telco tender projects in China practically slept through 2023. As the year concluded, we estimated the shipment for PON, routers, and set-top box in 2023 might be no more than 40-50 million for PON, 20-30 million for routers, and 20-30 million for set-top box. In China... Oh, okay, the number was for China. Entering 2024, we are finally seeing signs of China telco tender projects coming alive in the past couple of weeks. Our current best estimate is to see the shipments at least double what they were shipped in 2023. It will be worth noting, however, half of the PON may come without Wi-Fi, and 80%-90% of set-top box may still have Bluetooth only and without Wi-Fi to save costs, an indication that the economy in China may be still struggling. A follow-up question related to the telco project from Aaron from Nomura. What's Realtek's competitive position in global and China telco tender market? How is Realtek's market share in PON, router, and set-top box? Okay. Well, first, we do not comment on market share. Realtek solution for the telco tender project include PON, Wi-Fi, Bluetooth, and Ethernet PHY, each of which covers product specs ranging from entry to high-end. For example, for Wi-Fi, Wi-Fi 5, 6, 7, 6E, 7, or for GPON, 1G, 1 gig, 2.5 gig, and 10G PON. Or for Ethernet PHY, gigabit PHY, 2.5 gig, 5 gig, or 10G PHY. Just to name a few. Our competition oftentimes find themselves qualified for either the entry-level specification or the high-end, but rarely both. We arguably have the most complete solution portfolio of interest to the telco tender projects, offering one-stop shopping appreciated by many telco brands, as well as their system integrators and ODMs. Our complete product portfolio and second-to-none service position Realtek well in the global tender market. And caveat, the geopolitical tension now more than ever may bias tender awards. Sometimes the award may favor Realtek as a result, and other times it cannot be ruled out that certain competitors may have a better position than us due to government policies. Next question is from Daniel, Morgan Stanley. Auto market seems to undergoing an inventory correction progress. Are we seeing any impact on our auto products? Could you share the latest development on the auto side? Do we have a near and longer term target for the auto-related product? We do not see any inventory problem for Realtek automotive Ethernet products, despite the temporary correction in the overall automotive semiconductor market. Realtek maintains a two-pronged approach to advance ourselves in the automotive market. First, Realtek Automotive Ethernet team stays highly focused on maximizing new design wins. This requires timely introduction of both cost down of mature products and spec ups of new products, with higher throughput and security, as well as lower power. Realtek Auto Ethernet PHY and switch business have been growing steadily at a rate significantly higher than the corporate growth rate in the past four years. The momentum is expected to continue in the foreseeable future. Second, we start working with car OEMs and Tier 1s, to bring other Realtek solutions, Wi-Fi or audio DSP, for example, into the automotive market. Some of the design wins may start bearing fruits in 2025. Long term, we expect to see additional Realtek products to go into the automotive market. Next question is from Jason, CLSA. How do we quantify the contribution from spec migration, such as Wi-Fi 7, 10G PON, 2.5G Ethernet? Well, all these products, Wi-Fi 7, 10G PON, 2.5G Ethernet, help Realtek in two ways. Quantitatively, each of them commands an ASP that is easily 2x of its predecessors. Qualitatively, they shift Realtek product mix to a high end with a favorable gross margin. Next question is from Nicolas, Macquarie. Please comment in which end market product categories do you expect ASP to increase? Well, short-term price pressure aside, we expect to see our product ASP trend up across the board as we commit ourselves to deliver more feature-rich and intelligent solutions enabled with AI. Next question is from Randy, UBS. Your new smart home products are supporting Matter and Thread now. Are these standards adding additional content to your IoT solutions, or are they more of a way to increase adoption? Well, a little bit of both, a bit of both. Nevertheless, enabling more IoT device sales will be the main reason. Before Matter, an IoT device based on a certain protocol, for example, Thread, will not be able to communicate with another IoT device based on a different protocol, for example, Wi-Fi or Bluetooth. The problem may be circumvented by cloud-to-cloud connection, but this induces another problem, such as access, latency, and arcane setup. Realtek Matter smart home products, including Realtek Ameba Wi-Fi, Bluetooth, MCU family products, fully support the Matter protocol. Adding Realtek Open Thread solution, Realtek completes the puzzle to enable customers to develop IoT products that can work with many, any other Matter-certified ecosystem using a single protocol. It is worth noting that there are over 1,200 products of 19 device types, including air conditioners, refrigerators, door locks, lighting, smart plugs, to name a few, from more than 300 companies that have received Matter certification. Next question is from Lucas, KGI. Regarding edge AI solutions, can management provide further details on the product roadmap for each AI-related product? Well, as explained, increasing number of Realtek solutions have or will have an embedded NPU to perform AI tasks at the edge. Today, AI, that's AI inferencing, to be exact. Moving forward, we are planning to enable generative AI at the edge. ... Next question is from Kevin Mizuho. What is the current pricing pressure and competition for your networking, consumer, and PC products? Do you see more favorable cost structure given foundry cost decline in 2024? Well, there's no secret that price pressure is very high today for Realtek products across the board. There's also no secret that foundries are generally underutilized at the present time, and some foundries are more receptive than others for price concession, which will benefit Realtek as well as Realtek competitors. To this end, lower foundry prices, when available, are necessary, but not sufficient, to ensure Realtek's competitiveness. We have to keep doing engineering costs down, as well as introducing new products with attractive price performance to stay competitive and win projects. Next question is from Rick, Daiwa. USB4 related products revenue contribution in 2023, 2024, 2025. If the macro condition continues to be weak, how do we expect that the willingness of customers adapting more advanced spec, like USB4 or PCIe 5? We prefer not commenting on the revenue breakdown for a particular product. Your concern, nevertheless, is valid as people tend to buy products with basic features and mature technologies when the economy is soft, which is where we are today. Although USB4 is a premium high-end spec today, its penetration into the mainstream may depend on how quickly and how pervasive popular host devices, for example, PCs, will be equipped with USB4. To this end, the new Intel and AMD PC chipsets today all support native USB4. This almost guarantees that USB4 will become standard in most new PCs in 2024, thereby stimulating the development and sales of USB4 peripheral devices, such as USB4 hubs, which represent the main application for Realtek in USB4. Next question is from Daniel from Morgan Stanley. How's the current pricing for the TV SoC, and your view on the shipment trend for 2024 onwards? Yes, the price of TV SoC, along with all other products, are under tremendous price pressure at the present time. This is expected to continue in 2024. Nevertheless, managing price is all in a day's work, which we have the confidence to manage well. As we previously commented, we see plenty of headroom for Realtek TV business to grow. Next question is from Mark Liu, Fubon Insurance. Since the 2023 net income dropped 43% year-over-year, what is management's thoughts on dividend policy? Is it possible that the dollar amount of the dividend in 2024 will drop significantly? We are not aware of any plan to change the dividend policy, you know, which has been ranging on the 80% range. So the policy will continue. Thank you, Yee-Wei. Due to the time constraint, we will conclude the meeting now. Thanks for your participation today. Please feel free to contact our IR team if you have further questions after the meeting. The replay will be available on the IR page of the company website before 6:00 P.M. Thank you, and have a good afternoon.