Good afternoon, everyone. Welcome to Realtek 2025 First Quarter Earnings Call. This call is 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 first quarter financial results and give a management remark. After that, we will have a Q&A session. You're 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 at any time. Note that portions of what is presented in this call contain forward-looking statements. Investors are cautioned that forward-looking statements involve risk 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. Yes, thank you. Good afternoon, ladies and gentlemen on the line. You are currently participating in the First Quarter 2025 webcast earnings release hosted by Realtek Semiconductor Corporation. Now, let us go through the First Quarter 2025 financial results. First Quarter revenue was TWD 35.02 billion, marking a 32.94% increase from the previous quarter and a 36.68% rise from the same period last year. This notable growth can be attributed to a combination of factors: customers restocking after the first quarter inventory control and proactively placing orders to bolster inventory in anticipation of market uncertainties. First Quarter gross margin was 51.56%, a marked 3.21 percentage point increase quarter over quarter. The main reason is product mix changes towards products with favorable gross margin. Q1 operating expense was TWD 13.15 billion, accounting for 37.6% of revenue. The OPEX ratio is 0.2 percentage points higher than that in the fourth quarter 2024. First quarter operating profit was TWD 4.90 billion, or an operating margin of 14.0%. The operating profit improved 70.3% quarter over quarter thanks to higher gross margin. Q1 non-op income was TWD 702 million, a drop from TWD 762 million in the previous quarter, mainly due to reduced government subsidies this quarter. Q1 tax, in response to the implementation of the global minimum tax, the company started recognizing the relevant income tax. The effective tax rate in Q1 increased to 15% accordingly. First quarter net profit as a result was TWD 4.76 billion, or 13.6% of revenue. Q1 EPS as a result was $9.28, compared to $6.62 in Q4 2024 or TWD 6.10 in the first quarter 2024. Now, regarding inventory, Q1 inventory turnover days were 75 days, a notable 19 days drop from the 94 days in Q4. This drop was expected as the high inventory levels in Q4 were planned to accommodate the order pull-ins anticipated in the first quarter due to tariff uncertainties. Overall, the inventory levels at Realtek and in the market channel are healthy. We also have First Quarter 2025 balance sheet and cash flow statements for your reference at your convenience. This concludes Realtek's First Quarter 2025 financial results. Looking ahead to the second quarter, some customers may continue defensive stocking due to the ongoing high uncertainties in the international landscape. Realtek's operations remain robust nonetheless. Vigilant monitoring of shifts in end market demand is essential. Starting this quarter, we will shift our management remarks from reviewing the top product lines to examining each key market segment that Realtek serves. This approach aims to offer a better understanding of Realtek's performance in relation to market trends. First, PC shipment during the first quarter of 2025 show a 4.9% year-over-year growth in Q1 2025, with global shipments reaching 63.2 million units according to IDC. At Realtek, we saw a higher-than-corporate average growth in PC-related product lines, including PC codec, PC Ethernet, and PC webcam, and more, driven by strategic inventory buildup. This gives rise to a PC versus non-PC revenue split at approximately 36 to 64 in the first quarter. Looking ahead for the rest of 2025, the PC industry has many tailwinds and headwinds, which make it very challenging even for IDC to comment on the full-year outlook and forecast. Specifically, most of the underlying demand factors for PCs, including the install-based upgrade ahead of Windows 10's end of product and demand for on-device AI, remain strong. However, the uncertainty surrounding tariffs and associated inflationary pressure and global macroeconomic risks may negatively impact demand for PCs in the following quarters in 2025. We will have to track the market progress carefully. During the first quarter of 2025, the consumer electronics market performed well, driven by government stimulus, particularly in China, and tariff-driven order pull-ins. Realtek sees growth in its leading consumer segment products, including TVs, IoT devices, and CE audio codecs, matching the corporate average. Despite a strong first quarter, companies are cautious about increasing their full-year 2025 forecast due to the economic uncertainty. The networking market segment remained stable in the first quarter, with regional variations in growth and infrastructure investments. Notably, 10G-PON tender projects, previously concentrated in China, have started to gain traction outside the country. Meanwhile, FTTR deployments in China continued to expand steadily. The switch business held up well in the first quarter as customers strategically built up inventories to cope with tariff uncertainties. Growth was led by 2.5 Gig Switches and Managed Switches as Realtek focused on higher-end enterprise and private cloud switches, while also monitoring server-grade and AI Ethernet switch requirements. Looking ahead, the PON and switch market is expected to grow, driven by emerging technologies and increasing customer demands. At the beginning of 2025, the global automotive market was forecasted to experience modest growth, primarily driven by China, where government incentives for New Energy Vehicles and the nation's aggressive innovation strategy fueled development. In February, a major Chinese automaker announced plans to equip all mainstream car models with Smart ADAS Systems. This announcement was positively received by the market, leading to increased demand for Automotive Ethernet required for these ADAS systems. Consequently, Realtek observed strong demand for automotive Ethernet in the first quarter. However, ongoing tariff pressures are casting uncertainty on the year-over-year growth outlook for the global automotive market in 2025. Despite this, Realtek's automotive Ethernet is anticipated to achieve above-average corporate growth for the year due to continued global expansion of EVs and ADAS. Thank you, Yee-Wei. Now, 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 Bruce Lu, Goldman Sachs, related to demand outlook. In light of the evolving geopolitical landscape and concerns over U.S. tariffs, what are the company's projections for the second quarter 2025 and second half 2025? Do you foresee that the demand pull-in will continue or diminish due to early orders in the first quarter 2025? How do you relate the growing demand in the first quarter to end market recovery versus potential front-loading influence by tariff implications? The significant increase in orders during the first quarter of 2025 was notably influenced by front-loading due to anticipated tariff hikes, particularly for U.S.-bound shipments. Many brand customers expedited procurement in the first quarter to mitigate the impact of expected tariff increases. At the same time, we observed that key customers have taken strategic measures to navigate the uncertainty. Companies are reorganizing their supply chains, shifting U.S.-bound manufacturing to countries with the least tariff impact, while Chinese firms prioritize domestic sourcing. Some are delaying non-critical projects to better manage costs. Despite these challenges, there remains a genuine demand for faster and more manageable connectivity, as well as improved utilization of AI in various edge devices. It is crucial to acknowledge that geopolitical conflicts are unlikely to continue indefinitely. Consequently, while visibility regarding second-half demand remains limited at this moment, we prefer not to rush to conclusions about future demand beyond recognizing the current uncertainties. Nonetheless, overall, we remain committed to our target of achieving steady growth in 2025. Next question is from Brad Lin, Bank of America, about market diversification. How is Realtek navigating the challenge posed by global trade dynamics, particularly concerning the U.S.-China tensions? What steps are being taken to diversify market exposure? Yes, to navigate through geopolitical tensions and tariff uncertainties, Realtek implemented several strategic measures. One, we diversify our foundry and OSAT partnerships to enhance the resilience of our supply chain while leveraging Taiwan's semiconductor ecosystem to minimize tariff impact. Two, we strengthen our compliance team to assure adherence to the laws and regulations of the regions in which we operate. Three, we build just-in-case inventory by staying in close contact with our customers and regularly reviewing our supply demand forecast against our current inventory levels. Four, we expand and diversify our market and client coverage to achieve a balanced customer base and accelerate our entry into new markets such as automotive and servers. We continue to recruit and retain top talent, staying true to our vision of enabling a connected AI world. The next question is from Rick Daiwa. How are macroeconomic uncertainties affecting Realtek's supply chain? The supply chain for Realtek, we are a fabless IC design company, can be affected by macroeconomic uncertainties in several ways. One, geopolitical tensions and trade policies of individual countries can create tariff and non-tariff barriers that disrupt the supply chain. Two, national policies promoting self-sufficiency through government subsidies may lead to oversupply and irrational price competition, ultimately harming the supply chain. Three, fluctuations in end market demand and economy volatility are often magnified by the semiconductor supply chain's large-time constant. Facing the uncertainties, Realtek remains cautiously optimistic while implementing strategic measures mentioned in our reply to the previous question. The next question is from Sunny Lin, UBS, regarding the gross margin outlook. Guidance on gross margin in second quarter 2025. How is it possible to sustain gross margin into second half 2025? How will the latest round of U.S. tariffs affect gross margin outlook? Among the three factors influencing gross margin, namely average sales cost, average sales price, and product mix, we recognize that product mix currently has the most significant impact. Generally, when the macroeconomy is strong or orders are robust, the mix tends to favor high-margin products. Conversely, when macroeconomy weakens, lower-margin products become more prevalent. A prolonged high tariff, if happens, is anticipated to dampen the macroeconomy, thereby exerting pressure on gross margin. Regardless of macroeconomic conditions, Realtek is committed to evolving our product portfolio to deliver higher value through AI-enabled products or products that facilitate AI. Despite the challenges, Realtek has managed and will continue to manage our gross margin favorably. The next question is from William Yang, JP Morgan, related to R&D expense and OPEX. Amid with macro uncertainties, what is our top priority or product to spend R&D dollar in 2025? What is our latest OPEX ratio and dollar guidance for 2025? Realtek's current R&D priorities, in no particular order, include advanced node designs less than 7 nanometers, cutting-edge high-speed SerDes over 100 gigabits per second per LAN, and various aspects of spec upgrade of current products and AI hardware and software development for diverse applications. It is anticipated that R&D expenses will increase as the company continues to grow, although this will be controlled and modest. In the first quarter, our OPEX amounted to TWD 9.7 billion, with an OPEX ratio of 37.6%. The higher-than-expected figures were primarily due to high selling expenses, largely comprised of product mix-based sales commissions. Nevertheless, we anticipate a decline in the OPEX ratio in the medium to long term. Next question is from Sunny Lin, UBS. What is the current inventory level at Realtek and app channels? What is your latest inventory management strategy, especially with U.S. tariffs soon taking effect? As previously reported, Realtek's Q1 inventory turnover days were 75 days, reflecting a significant 19-day quarter-over-quarter drop. This decrease was anticipated as we began accumulating just-in-case inventory in Q4 to manage the uncertainties associated with tariffs. We will continue to follow the just-in-case inventory strategy. We maintain close communication with our customers and regularly review our supply demand forecast against current inventory levels to ensure its health. Currently, we find the inventory levels, both in-house and within the channel, to be very healthy. Additionally, we observe that end customer inventory levels may be elevated as part of their strategy to mitigate tariff-related risks. Okay. Next is a question related to PC from Daniel Yen, Morgan Stanley. What is the full-year PC shipment outlook for 2025 now after the tariff impact? As previously shared, according to IDC, total shipment of PC grew by 4.9% compared to a year ago, reaching 63.2 million units in the first quarter of 2025. This surge in shipments was driven by OEMs increasing their deliveries to the U.S. in anticipation of forthcoming tariff announcements. As of today, the U.S. has officially exempted semiconductors, smartphones, computers, including PC and laptops, and many related electronic devices such as gaming consoles, displays, memory cards, and flash devices/drives from newly imposed reciprocal tariffs. While these exemptions offer immediate relief, the situation remains fluid as U.S. trade policy continues to evolve. Despite the Q1 shipment surge, many predict this increase to be temporary. PC demand is expected to taper off or even contract in the later part of 2025 if tariffs take full effect and inventory levels normalize. In its latest update in February, IDC forecasted a 3.7% increase in PC units shipments to reach 273 million units for the full year 2025 compared to 2024. Given the uncertainties, the 2025 full-year PC shipment growth is likely to be modest at best, potentially even declining depending on the severity and duration of tariff impacts, a sentiment echoed by most of our customers. Another question on PC from Aaron Jeng, Nomura. After announcement of tariffs, do you receive any order adjustments from PC customers? Do you expect to share the cost if required by customers? We see different PC customers having various responses to tariff announcements. Note that many have already accelerated shipments, especially those to the U.S. in Q1, to stockpile inventory before the April 2nd announcement, leading to a strong inventory buildup for the quarter. Following the tariff announcement, PC makers adjusted orders again to benefit from the 90-day freeze on tariffs, but doing so cautiously to avoid misjudging post-freeze demands. Based on what we know, semiconductor suppliers have not yet been asked to share the cost of tariffs. The burden of tariffs, if they are enacted, seems likely to fall primarily on the PC importers and consumers. Next question is from Sunny Lin, UBS. Are the tariffs starting to impact the technology upgrades, like AI PCs or Wi-Fi 7 or multi-gig internet with higher cost? The tariffs are indeed affecting technology upgrades as we speak in areas such as AI PCs, Wi-Fi 7, and multi-gigabit internet infrastructure, primarily through increased costs and supply chain disruptions. One of the key intentions behind these tariffs is to encourage semiconductor production to move back to the U.S. However, this shift faces significant challenges, including high production costs and labor shortages, which could threaten long-term affordability. In essence, whether due to tariffs or intended reshoring, these increased costs are having an impact on technology upgrades. The next is a question related to Wi-Fi from William Yang, JP Morgan. May we update the Wi-Fi 7 penetration rate estimates for PC and networking in 2025? Previously, we reported that Wi-Fi 7 penetration reached over 4% in 2024 and was projected to increase to over 10% in 2025. Despite the uncertainty surrounding tariffs, the Wi-Fi 7 market appears to keep expanding. In light of the latest product plans from key customers for this year and next, we observe the following. On PC, the Wi-Fi 7 penetration rate is projected to surpass 10% for the entirety of 2025, with the potential to exceed 20% in 2026. Regarding router, the Wi-Fi 7 penetration rate is expected to be lower due to delayed adoption by operators and decreased consumer interest. Major operators like China Telecom seem to be still utilizing Wi-Fi 6. Another question on Wi-Fi 7 from Sunny Lin, UBS. What is the current feedback from customers? How is this lining up with competition's Wi-Fi 7 products, especially with cost and performance? Also, can you update the competitive landscape for Wi-Fi and Ethernet, etc., in China in recent 6 to 9 months? Are Chinese competitors catching up on Wi-Fi 6 and Wi-Fi 7 capabilities? Customers have given positive feedback about Realtek Wi-Fi 7. For example, our Wi-Fi 7 solutions for PCs introduce a new power-saving architecture that excels particularly in standby mode, outperforming our competitors. Our Wi-Fi 7 architecture for routers is exceptionally flexible, making it an ideal choice for the retail market with multiple configuration options. It is especially suitable for mesh routers, where it strikes a perfect balance between cost and coverage. Realtek further introduces the market's only multifunction high-speed wireless IC featuring Wi-Fi 7 with Realtek Wi-Sense, Wi-Fi sensing and positioning, Bluetooth 6.0, IEEE 802.15.4 for Zigbee 3.0, and OpenThread while supporting AEC-Q100 Grade 2 specifications and secure boot mechanism. We need accolades from customers for a wide range of applications, including PC, TV, game console, smart surveillance, environmental monitoring, and automotive. In the Chinese market, we observe that local companies primarily offer Wi-Fi 4 and basic one-by-one Wi-Fi 6 solutions, which Realtek avoids competing solely on price. Instead, Realtek aims to attract users by providing additional features and superior cost performance, while Chinese competitors are striving to expand their coverage to maximally meet domestic market needs in Wi-Fi, Ethernet, and more. Realtek is advancing rapidly with enhanced features to maintain a competitive edge in the global market. Next question is from Lucas Lu, KGI, regarding tender projects. What is the status of the China tender projects for 2025 to 2026? Also, can you provide an update on the XG-PON upgrade in the U.S., Europe, China, and other regions in 2025? We are closely monitoring the impact of U.S. tariff policies on the telecom market, but the visibility for the rest of 2025 and 2026 remains low. Here are what we have observed by the end of the first quarter. In China, the progression clearly indicates a move toward 10G-PON, judging from the shipments related to previously awarded projects. Also, the FTTR deployments in China continue to expand steadily. In America and Europe, we see aggressive deployments of 10G-PON products. North America is focusing on Wi-Fi 7 Tri-Band HGU projects, while Latin America appears to concentrate on GPON AX3000. Europe is focused on Wi-Fi 7 Dual-Band HGU projects. In emerging countries, telco projects predominantly use GPON with varying Wi-Fi standards from Wi-Fi 5 to Wi-Fi 6. We have observed an increase in demand in India and Vietnam, with an annual growth rate in the mid to high single-digit% range. Overall, excuse me, we observe a growing trend where China tender projects increasingly favor domestic semiconductor companies. Simultaneously, we are witnessing expanding opportunities globally, particularly in the U.S., EU, India, and emerging markets. The next question is related to automotive Ethernet business from Kevin Wang, Mizuho. What is sales contribution from automotive business for Realtek in 2025? How should we expect the market growth for automotive Ethernet market and Realtek's market share changes in 2025 and 2026? Realtek's automotive Ethernet business experienced significant growth in the first quarter, continuing its trend of outperforming the corporate average for five consecutive years. Automotive Ethernet has emerged as one of Realtek's leading product lines. The strategic importance of Ethernet in the automotive industry is underscored by Infineon Technologies' recent acquisition of Marvell Technologies' automotive Ethernet business for $2.5 billion. According to Infineon, Ethernet is a key enabling technology for low-latency, high-bandwidth communication, which is crucial for software-defined vehicles. Additionally, it has significant potential in adjacent fields of use such as humanoid robots. The automotive Ethernet market is expected to continue its growth trajectory in the coming years. However, as previously reported, the automotive market in 2025 and perhaps even 2026 is anticipated to face challenges stemming from tariffs and geopolitical tensions. Realtek remains confident in maintaining its leadership position through these turbulent times, considering our robust customer base and comprehensive automotive Ethernet product portfolio. Another auto question raised by Bruce Liu of Goldman Sachs. With the automotive Ethernet market expected to expand quickly, driven by the rising demand for connected and autonomous vehicles, could you share updates on any recent projects in the automotive sector? Additionally, in what ways does Realtek's automotive solution stand out from the competition? Do we have an updated perspective on the total addressable market for automotive Ethernet in 2025 and 2026? Various market reports indicate significant growth in the automotive Ethernet market. The total addressable market is anticipated to reach between $700 million and $800 million by 2025-2026 and could exceed $1 billion in the following three years. This growth is driven by the increasing adoption of software-defined vehicles that demand higher data intensity and connectivity. Prior to Infineon's acquisition, Marvell's automotive Ethernet business, prior to Infineon's acquisition of Marvell's automotive Ethernet business on April 8, NXP announced in December 2024 its acquisition of Aviva Links, a provider of automotive service alliance compliant in-vehicle connectivity solutions. These actions reflect an industry-wide shift towards software-defined vehicles that require high-speed standardized in-vehicle networking solutions. Realtek has consistently emphasized the importance of automotive Ethernet and ASA technologies for several years, positioning ourselves at the forefront of this automotive evolution and preparing solutions for the sector's growth. This strategic foresight provides us with a competitive advantage in serving our customers. Another question on auto from Michelle Wong. Marvell will sell automotive Ethernet business to Infineon. May I know if there is any impact to our automotive Ethernet business? As previously mentioned, it is important to emphasize the significance of Marvell's position in the automotive Ethernet market. Their decision to sell this division may suggest their difficulties in maintaining competitiveness. Conversely, Infineon's strategic acquisition speaks loudly about the critical role of automotive Ethernet in their product lineup, reflecting their desire to complete the missing puzzle to remain the top automotive IC solution provider. This move underscores the ongoing evolution and growth of automotive Ethernet technology. Realtek has consistently performed well against major competitors like Marvell, and we are confident in our ability to continue thriving in this sector. The next question is from Sunny, UBS, about TV. What's your current forecast on TV shipment in 2025? With last year's high base, are you optimistic for growth this year? Due to panel price stabilization, potential tariff increases, and China's swap old for new stimulus policy, there has been strong initial demand for flat panel displays, resulting in increased TV production from late Q4 2024 to Q1 2025. The demand for second quarter 2025 appears steady. However, supply-demand imbalance is anticipated in 2025. Excuse me. Is anticipated in 2025 with a tight supply in the first half of the year, followed by an oversupply in the second half. Amid the rapidly changing tariff policy, TV manufacturers may need to adjust their shipment targets, leading to a correction in demand for the entire year. As it stands, the global TV shipment for 2025 is likely to decline slightly year over year, according to Omdia. The next question is from Lucas Lu, KGI Securities, related to smart glasses. Are there any updates to share on the smart glasses business? When can we expect a more meaningful revenue contribution? What is the sales target for this segment? The initial success of Ray-Ban Meta smart glasses has sparked a rise in global smart glasses shipments. Many follow-up products and competitors are now emerging, particularly in China, striving to build on Ray-Ban's achievements. Users are mainly interested in smart glasses for hands-free, AI-driven digital interaction, augmented reality experiences, communication, content creation, and professional productivity. As these competitors work on enhancing battery life, camera quality, and reduce weight, Realtek offers a low-power AI smart glasses chipset solution. This includes two chips, one with a high-performance CPU, AI NPU engine, Dual-Band Wi-Fi, and Image ISP. The other with an MCU, Bluetooth 5.4, LE audio, and DSP, supporting multi-microphone noise reduction and hardware voice activity detection. Realtek's solution provides exceptional computing capabilities and low power consumption, with millisecond response times for seamless keyword spotting, voice command processing, steady visuals, and electronic image stabilization. A clear 2K video quality, AI-powered HD image recognition, and real-time translation for a seamless digital experience anywhere. Our leading customers are at various stages of product development. We release this expected in the second half of the year. At this point, we prefer not to comment on the expected revenue contribution. Suffice it to say, nonetheless, we do not expect a new product to ramp up quickly in its first year of introduction. Next is a question raised by Bruce Liu, Goldman Sachs, related to humanoid robotics. The company has previously mentioned a focus on emerging sectors like humanoid robotics. Are there any updates regarding the firm's expectations for revenue diversification stemming from these new applications in 2025 and beyond? If so, when does the company anticipate this growth will begin? What percentage of revenue contribution is expected once fully developed? NVIDIA has projected that humanoid robots could be introduced within the next five years with an initial focus on industrial environments such as factories. This was highlighted during NVIDIA's keynote address at its annual technology conference, the GTC, held in March 2025. Industry experts generally agree that the first significant adoption of humanoid robots will occur in controlled settings like manufacturing, where tasks are clearly defined and automation is more straightforward to implement. It is worth noting that along with NVIDIA, two companies that are IC-capable and vocal about humanoid robots are Tesla and Infineon, all with extensive experience in the automotive industry. As in the case of automotive applications, although Realtek may not be the one offering the most powerful SoC for humanoid robots, there are significant opportunities for our wired and wireless connectivity solutions, as well as its AI-driven audio-visual technologies. The integration of Realtek's advanced connectivity and multimedia capability can greatly enhance the functionality and user experience of humanoid robots. Next question is from Rixi Daewa. Can you share some more details about your collaboration with E Ink on the second-generation system on panel ESL? E Ink and Realtek have collaborated to develop the second-generation system on panel electronic shelf label technology, featuring significant advancements in design, efficiency, and sustainability. The scope of collaboration includes the following: on technology integration, Realtek contributes its Bluetooth 5.0 SoC and expertise in RFIC bonding, while E Ink focuses on panel design and chip-on-glass integration. On product readiness, the design is commercially viable and set for mass production. On future development, the partnership is advancing color displays, lower power consumption, and cost reduction for next-generation ESLs, alongside applications in healthcare using Realtek Wi-Fi and energy harvesting Bluetooth and display scaler controllers. The last question is from Daniel Yim. Morgan Stanley, could you give us some updates on the ASIC business? We are currently still in the preparatory phase and are progressing according to our plan. Specifically, we are advancing our design flows for advanced process nodes, including 4 nanometer and 5 nanometers, and developing relevant IPs such as 10.4, 10 gigabit per second, 100 gigabit per second, 200 gigabit per second service for targeted applications, including edge servers. 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.