Good afternoon, everyone. Welcome to Realtek 2026 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 A.M. today. At the beginning, our spokesperson will report our first quarter financial 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 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 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 first quarter 2026 webcast earnings release hosted by Realtek Semiconductor Corporation. Now, let us go through the first quarter 2026 financial results. Q1 revenue reached TWD 36.4 billion, making a 38.6% increase from the previous quarter and a 4.0 percentage points rise year-over-year. While a rebound in the first quarter was anticipated, these results surpass expectations. The strong performance was driven by steady end market demand, restocking following fourth quarter inventory control, and customers pulling in orders due to concerns over potential price changes and upstream supply constraints. Q1 gross margin was 49.7%, representing a 1.6 percentage points improvement over the previous quarter. A 1.9 percentage point decline compared to the same period last year. The gross margin year-to-year decline. First, the gross margin itself indicates a healthy product mix. The year-over-year decline primarily reflects the differences in inventory write-off and inventory write-back. In Q1 2025, there was a net inventory write-back, while in the first quarter 2026, we saw a net inventory write-off associated with our proactive inventory build strategy in response to supply chain uncertainty. These are timing-related accounting adjustments rather than indications of inventory obsolescence. We expect the impact to gross margin to remain well managed in the upcoming quarters. Q1 operating expense amounted to TWD 13.8 billion or 37.8% of revenue. This reflects a 1.4 percentage points in OPEX ratio compared to the previous quarter. The quarter-over-quarter change in OPEX ratio is within expectation as we stay vigilant in managing costs while continuing to invest strategically in product innovation and operational efficiency. Q1 operating profit was TWD 4.33 billion, which amounts to 11.9% of revenue. The operating margin improved by 3 percentage points quarter-over-quarter, driven by a reduced OPEX ratio. Q1 non-GAAP income was TWD 646 million, showing stability compared to the previous quarter. Q1 net profit was TWD 4.33 billion or 11.9% of revenue. Q1 EPS, as a result, was TWD 8.44 compared to TWD 5.17 in Q4 2025, and TWD 9.28 in Q1 2025. Moving on to inventory. Q1 inventory turnover days were 105 days compared to 127 days in the fourth quarter. This notable reduction was largely the result of robust restocking activity and proactive customers' preparations in response to ongoing supply chain uncertainties. This concludes Realtek first quarter 2026 financial results. Looking ahead to the second quarter, supported by stable end market demand and inventory restocking momentum carry over from the first quarter, driven by customers' anticipation of price hikes and upstream supply uncertainties. Realtek maintains a prudent and steady approach toward near-term operations. We will continue to closely monitor changes in the external environment, as well as supply-demand dynamics within the semiconductor industry. Let's examine the key market segments Realtek serves. The PC market, according to IDC, the global PC shipments reached 65.6 million units in the first quarter, marking a 2.5% increase year-over-year. This growth was primarily driven by anticipation of rising component costs, Windows 10 migration activity, and new product launches. IDC maintains a cautious outlook for 2026, and expects shipments to decline approximately 11% compared to 2025. Component shortages and challenging economic conditions are beginning to weigh on the PC market. IDC forecasts further decline in PC shipments for the remainder of the year as system prices continue to rise. Despite these market challenges, Realtek remains focused on expanding its Wi-Fi 7 portfolio and introducing AI-enabled or high-value PC peripherals, such as PC cameras and 10G Ethernet solutions. In the first quarter, the strength in PC shipments resulted in a segment split for PC for Realtek, approximately 36% PC and 64% non-PC. Looking ahead, we anticipate growth in PC-related product business in 2026, even though broader market conditions may remain subdued. The global electronics market posted similarly modest growth to the PC sector in the first quarter. Realtek's TV segment experienced significant momentum, particularly in premium models, as consumers gear up for the upcoming 2026 FIFA World Cup and manufacturers proactively build inventory to offset rising memory costs. The gaming industry also showed robust performance, with the Nintendo Switch 2 launched in mid-2025, completing its first fiscal year as the fastest-selling Nintendo hardware to date. Additionally, we observed increased supply and marketing activity for the IoT-enabled home appliances ahead of the summer season as consumers prepare for higher cooling needs, energy cost concerns, and comfort requirements in anticipation of peak temperatures. The quarter concluded with the industry navigating changing macroeconomic conditions and ongoing global supply chain challenges, including a memory squeeze caused by elevated HBM demand that exerted upward pressure on costs. Looking forward to the second quarter and beyond, we remain focused on global developments and their potential impact on market demand and pricing. Importantly, the shift toward AI integration continues to accelerate, and Realtek is well positioned to seize these opportunities and drive further value in the expanding consumer electronic market. The networking market demonstrated strong resilience in the first quarter, with heightened demand for high-speed routers, switches, PON, and Wi-Fi 7 as the industry continues to prioritize infrastructure upgrades for high-performance AI workloads. This positive momentum supported strong sales of Realtek network solutions such as 10GbE, 10G-PON, and Wi-Fi products. While geopolitical uncertainty and supply chain tightness may temper the segment's full growth potential, we remain encouraged by the sustained demand for high-speed connectivity, which supports our positive long-term outlook. The global automotive sales remain stable, tracking at low 900 million units this year according to S&P Global Mobility and GlobalData, though we continue to observe varying trends across different regions. In the first quarter, Realtek delivered solid growth in Korea, the EU, and the U.S., and we anticipate that this positive momentum will persist through the remainder of the year. While our automotive business is still expected to grow, the rate will be likely moderate compared to previous years due to short-term macro economy headwinds. On the technology front, the industry's transition towards software-defined vehicle is shifting value creation from hardware to software, while the adoption of zonal E/E architectures is driving increased demand for high-speed in-vehicle data connectivity. Additionally, a renewed interest in hybrid vehicles is offering practical choices for consumers facing concerns about battery EV, BEV charging infrastructure, and fluctuating oil prices. These market dynamics are fueling greater adoption of automotive Ethernet and AI integration, both of which remain central to Realtek's automotive solutions strategy. 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 Kevin Wang, Mizuho. Regarding demand and product mix outlook, what is demand outlook for second quarter 2026 by applications, including PC, networking, consumer, and automotive? Also, do you expect better product mix in 2026? Well, as highlighted in our previous remarks by market segment, end market demand remained steady in the first quarter. With customers moving up their orders in response to anticipated price increases in memory and manufacturing for the months ahead. We anticipate these patterns to continue into the second quarter. In terms of product mix, when manufacturing capacity is tight, whether due to limited production capacity, shortage in raw materials, or supply chain constraints, solution providers across all segments tend to focus on higher value offerings that yield better returns. Currently, it is well known that a significant portion of industry resources is being allocated to high performance, high value data center AI solutions. We should note, nonetheless, that our customers consistently aim to secure the most cost-effective solutions available. To stay competitive, we are working closely with both suppliers and customers to create mutually beneficial outcomes. Overall, the market trend is clearly shifting toward product solution with AI features, which are generally more sophisticated, yet user-friendly, supporting a more favorable product mix for Realtek for the long term. The next question is from William Young, JP Morgan. What is the visibility into second half 2026? What products might outperform and what might underperform? Well, our visibility into the second quarter of the year remains limited. While some customers are expressing caution due to varying degrees of order pull-ins and persistent supply chain uncertainty driven by multiple interrelated factors, most are reluctant to lower their order forecast at this time. This approach reflects their desire to preserve a strong competitive position in gaining resource allocation. We will continue to monitor developments on a month-by-month basis to ensure we remain agile and responsive. Overall, we anticipate that network connectivity products are likely to perform more robustly, supported by the ongoing macro trend of increasing AI adoption. The demand for high speed, low latency infrastructure to support AI workloads continues to provide a strong foundation for our network business. In contrast, sectors that are more susceptible to short-term consumer sentiment may experience a more normalized pace. Nevertheless, the long-term transition toward AI integration remains a consistent driver across all segments. On the outside of this comment, our visibility to the second half of the year, not the second quarter of the year, remain limited. With that correction, let's continue. Thank you, Yee-Wei. The next question is from Rick, Daiwa. Given the current cost environment, how do we expect gross margin to trend going forward? Well, the outlook for gross margin is under pressure due to a range of cost factors. Since the start of the year, DDR for DRAM prices have nearly doubled, and TrendForce anticipates that conventional DRAM contract prices will climb by a further 58%-63% quarter-on-quarter in Q2 2026 as suppliers continue shifting capacity towards server-related applications. This directly depresses the gross margin of semiconductor products with embedded DRAM. On the manufacturing side, assembly and tests are currently a major bottleneck in the supply chain, necessitating ongoing price adjustments. While Mature node wafer prices remain stable throughout the first quarter. Leading foundries are now signaling future price rises. Taken together, these factors are placing considerable strain on our gross margins. In response, we are taking proactive steps by working closely with our suppliers to secure resources and collaborating with our customers to ensure that changing cost landscape is appropriately reflected. The next question is from Michelle Huang, Fubon. Could you provide an update on the current cost environment for wafer foundry and OSAT? Are we seeing persistent inflationary pressures or supply-side constraints heading into the second half 2026? Yes. Well, as implied in our previous comments, the current cost environment for wafer foundry and OSAT shows persistent structural pressures driven primarily by supply side constraints heading into the second half of the year. The seemingly demand resilience in network connectivity and AI adjacent segments amid structural shortage suggests that upward pricing trends are likely to persist with little expectation for near-term easing. A follow-up question on cost is from Dawei Yin, Morgan Stanley. Is it possible that we could pass through the increased cost from OSAT and materials to the end customers? Maintaining a mutually beneficial partnership with our customers is always our guiding principle, regardless of market conditions. In light of the substantial cost increases we are experiencing throughout the supply chain, we are collaborating closely with our customers to navigate these challenges together. Ultimately, whether or not these additional costs are passed on to end users will be determined by the strategies of system makers and brands. The next question is from Boyd Ting. Given the recent news regarding headcount adjustments, could management share some information on your current resource optimization strategy? Which product lines or departments are the primary focus? First, Realtek does not have any Unusual headcount adjustment, you know, since the beginning of the year. We clearly have a goal to further increase our headcount productivity, per engineer productivity. Our strategy is to maximally take advantage of various AI tools that will help us in every aspect, from design to manufacturing and in operation. There's no abnormal headcount adjustments. Next, three questions from Sunny Lin, UBS. The first question is about OpEx. How would your OpEx and OpEx ratio trend in 2nd quarter and 2026? Will OpEx amount remain elevated with more advanced node designs in 2026? Okay. As we previously mentioned, tracking our OPEX ratio gives a clear picture of operational efficiency in relation to our revenue growth. While the absolute OPEX amount helps establish our spending baseline, the ratio reveals how effectively we are using those expenses to drive business expansion. In the most recent quarter, Realtek's OPEX ratio fell by 1.4 percentage points compared to the previous quarter. This result is in line with our expectations and demonstrates our ongoing discipline in managing costs, even as we continue to invest strategically in product innovation. Looking forward, we expect the OPEX ratio to remain steady at current levels. Although shifting to more advanced node designs naturally increases R&D intensity, we remain committed to balancing these investments with strict operational oversight to create long-term value for our stakeholders. The second question is from Sunny Lin, is related to inventory level. What is the current inventory level at Realtek and at channels? What is your latest inventory maximum strategy with restocking in early 2026 and the likely weakened consumer sentiment in second half 2026? As previously mentioned, Realtek inventory turnover days for Q1 stood at 105 days, down from 127 days in Q4. We consider an inventory turnover period of around 100 days to be both healthy and manageable, especially given ongoing challenges such as rising supply chain costs and geopolitical uncertainties. Based on our understanding, our customers share a similar perspective on inventory management. Although their inventory levels are somewhat above average, they remain within manageable bounds. The next question is related to spec upgrade trend. For the broader product segments, what is the current spec upgrade traction that we can anticipate for AI PC, Wi-Fi 7, multi-gig Ethernet, and so on? It is increasingly evident that with supply chains tight customer prefer to offer products with greater value and differentiating features. Currently, we are witnessing a widespread shift in product specifications toward high performance local processing and ultra-fast connectivity. AI PCs are adopting standardized configuration with NPU delivering 40-plus TOPS, such as Intel Core Ultra, known as Lunar Lake, at up to 48 TOPS. AMD Ryzen AI 300 Series at up to 50-55 TOPS. Qualcomm Snapdragon X Elite at 45 TOPS. Along with a minimum 16 GB of RAM and up to 32 GB + recommended for professional tasks. AI-enabled peripherals like webcam and embedded NPUs. This enhanced local processing is complemented by the spec upgrade to Wi-Fi 7 to provide wireless speed comparable to fiber and sub-1 millisecond latency to avoid performance bottleneck. Wireline is also moving toward multi-gig Ethernet, 2.5G and 10G Ethernet. Ports are now quickly becoming standard for routers and motherboards, ensuring support for the significant data demands of today's AI power workloads. The next is a question related to Wi-Fi from Dawei Yin, Morgan Stanley. Could you please share any updates on Wi-Fi 7 and layout of Wi-Fi 8? What is the penetration rate so far and looking into 2026? This year, 2026, we still anticipate Wi-Fi 7 will achieve over 30% penetration in the PC notebook segment. That's about double what we saw last year in terms of penetration, with the strongest uptake in high-end commercial models. Meanwhile, Wi-Fi 7 adoption in routers and broadband equipment is progressing more slowly than initially projected, largely due to higher memory costs and a widening price gap compared to Wi-Fi 6 offerings. Although manufacturers are rolling out more basic version of Wi-Fi 7, memory pricing continues to be a key factor influencing the overall adoption rate. Wi-Fi 8, known as also IEEE 802.11bn, is advancing through its development phase, with the first interoperability plugfest planned for this year, 2026. Initial adoption is expected in smartphones, PCs, and routers. Unlike its predecessor, Wi-Fi 8 does not seek to increase maximum theoretical throughput, meaning that it remains at about 46 Gbps theoretically, but instead focuses on boosting real-world throughput, lowering latency, and improving reliability by at least 25%. Wi-Fi 8 is anticipated to remain a mainstay in broadband and router products for several years. As Wi-Fi 9 could be 802.11bq, could be 802.11bx, is not expected until 2029 or later, with industry discussions on the standard still ongoing. The next question is from Michelle Huang. In light of rapid AI growth, do you see any upside opportunities for the networking market in second half 2026? Specifically, are you seeing accelerated deployment schedules or shift toward higher specifications to support AI-driven workloads? Indeed, rapid AI growth presents significant upside opportunities for the networking market in the second half this year as hyperscalers move beyond early-stage AI experimentation into industrial-scale AI factories. In parallel, the on-premise networking and device market is also undergoing a structural transformation as organizations are increasingly rebuilding their data centers to support high-density architectures required for continuous inference. This shift is driving an accelerated rebuild cycle rather than a simple refresh, characterized by the adoption of 800 gig and 1.6 tera Ethernet switches to manage the extreme bandwidth needs for GPU cluster on site. On the device level, edge AI is seeing scaled deployment, with AI-enabled industrial PC to handle localized tasks in manufacturing and health care. To future-proof connectivity, many organizations are initiating Wi-Fi upgrades, making Wi-Fi 7 and multi-gig routers and switches mainstream as they provide the essential low-latency foundation for AI native campus environments. The next are questions from Nick Lai, Citi. Could you share view on your networking business outlook, especially on managed switch and GPON solution for this year? What trend would you expect to trigger accelerating demand for your high-end networking solutions? The outlook for Realtek's networking business this year remains positive, with consistent growth anticipated in managed switches and GPON solutions due to new wireless standards, rising bandwidth needs, and ongoing infrastructure upgrades. Customers continue to invest in new managed switch designs and positioning themselves for future expansion. In the high-end segment, core and aggregate switches have already adopted 10 gig technology and are progressing toward 25 gig and higher speed, setting managed switch vendors for further growth as network bandwidth requirements continue to climb. Globally, the PON market is shifting from 2.5G PON to 10G PON, especially in China, North America, and Europe, where operators are speeding up 10G PON rollouts. In emerging markets like India and Southeast Asia, price sensitivity sustains strong demand for more affordable 2.5G PON options. For 2026, total GPON market demand is projected at about 193 million units, breaking down to about 136 million for 2.5G PON and 57 million for 10G PON. While storage and shortage of memory and substrates are impacting GPON shipments and squeezing growth margins, the forecast remains positive for revenue growth in high-end GPON products, particularly as leading operators in Europe, North America, Japan, and Korea accelerate 10G PON deployments. The next question is from Mike Young, Bank of America. Regarding Realtek's optical products, when does the company expect a 100 gig optical module controller IC to start initial revenue contribution? How should we think about the ramp up and the level of revenue contribution? Well, currently, our optical module product is centered on 25G and 25G times four, up to 100G solutions. While we continue to engage with customer for advanced technology like 112G, SerDes, and future 400G, 800 Gb per second products. At present, 100G optical modules and their controller ICs are primarily utilized in cloud data center and telecom networks and have not seen widespread deployment. Meanwhile, many enterprise servers are transitioning from 10 Gb, 25 Gb per second, setting the stage for the industry-wide rollout of 100 gig at server NIC level. We anticipate that the initial revenue for the 100 gig, 100G optical module controller IC will coincide with the enterprise server market shift to 100 gig. A transition that has not yet occurred, but is expected in upcoming product cycles in 2027, 2028. The ramp up is likely to be gradual, with revenue growing steadily as the industry continues to migrate toward higher speed optical modules. Next is a question from Aaron Jeng, Nomura. Regarding the new growth drivers for the company, what could we expect for next wave of strong growth or new products in next two to four years? For example, server or humanoid robot related opportunities. Over the past 40 years, Realtek has experienced consistent and robust growth, a trend we are confident will continue. We firmly believe that all of our connectivity solutions, whether facilitating device to device or human to device interactions, are well positioned to drive future expansion. The pace of growth for each area will ultimately depend on how technology and their related applications develop over time. Currently, Realtek networking and connectivity solutions have already been deployed in servers and humanoid robots as we speak. We continue to enhance these offerings with close collaboration with our customers as the underlying technologies and markets for servers and humanoid robots evolve and mature. Our future success in these sectors will be closely linked to the overall growth and advancement of the server and humanoid robotics market in the year ahead. There are two questions related to automotive business. First, Bruce Lu from Goldman Sachs asks, "What is Realtek's latest view on China versus non-China auto market in 2026 and 2027? How should we expect the EV penetration among China and non-China to trend in 2026 and 2027? Well, looking ahead to 2026, this year, and next, 2027, China's automotive market is evolving into a mature export-driven sector, where regions outside China face an even progress, electrification, and ongoing trade challenges. According to the China Association of Automobile Manufacturers, CAAM, domestic growth in China is expected to slow to around 1% in 2026, prompting local automakers to pursue aggressive expansion in emerging markets such as Southeast Asia, Latin America, and Middle East. Areas experiencing annual EV sales growth exceeding 50% based on various market reports. Despite a reduction of purchase tax exemption to 5% levy, EV penetration in China is projected to remain robust at 50%-60% by 2026, 2027, as noted in a recent March report from the Oxford Institute for Energy Studies. Meanwhile, non-China markets present a more complex picture. Europe anticipate battery EV will account for 23% of the market in 2026, and 28% in 2027 to meet the carbon dioxide targets, according to the T&E EV progress report from March 2026. In contrast, the U.S. is seeing slower adoption, held back by the expiration of incentives and elevated interest rates. Globally, the industry is shifting toward a more competitive environment, with Chinese OEMs leading the way in digital-first vehicle architecture, while established Western brands focus on localizing production to navigate rising tariffs. Next, Kevin from Mizuho would like to ask, "What are our major growth drivers for 2026 and 2027 in automotive business? If their market share gain, market growth, Ethernet or switch penetration rate increase, ASP increase, or more products launch? As previously mentioned, the global automotive industry is increasingly shaped by the transition toward software-defined vehicles, zonal E/E architectures, and a technology revival of hybrid systems. These developments are driving the adoption of automotive Ethernet and AI integration, both central to Realtek's automotive offerings. We see decent opportunities ahead to expand our presence in the automotive Ethernet market. Additionally, we are expanding our automotive portfolio to go beyond Ethernet, now covering A2B, Wi-Fi, Bluetooth, audio DSP, smart cockpit SoC, and even display retimer solutions. This diversification responds to the growing demand from customers for advanced smart cockpit features. Furthermore, Realtek is developing new automotive products in areas such as high-speed SerDes and display controllers, with additional details to be shared in due course. The next question is related to PC from Astoria Chen, CLSA. Is there any changes on our outlook on PC market, given the component prices continue to hike and PC brand seems to raise the price in second quarter? What is the impact on Realtek? Looking ahead into 2026, the PC market is trending toward higher average selling price, but lower overall unit volume. A perspective now widely reflected in the assumptions of leading brands and analysts. Persistent increases in component costs, especially for memory, CPU, and packaging or shipping are expected to drive vendors to raise prices significantly starting in the second quarter and beyond. This dynamic may dampen unit demand, particularly in the entry-level segment. For Realtek, the impact is mixed, but remains within our expectation. As total PC shipments may decrease, our growth is likely to come from gaining market share and increasing content per PC rather than from rising overall unit volumes. On the margin side, we are incentivized to focus on providing differentiated solutions, even often powered by AI, to help our brand partners enhance their product offerings, particularly in a tight supply environment. This approach requires us to work closely with our customers, strengthening our strategic relationship with those who choose to work with Realtek. A follow-up question by Astoria. Apple launched MacBook Neo and continues to raise forecast recently. Do we see entry-level PCs gaining higher market share in overall PC market? Will this trend slow down the spec migration this year? Okay. The launch of Apple's MacBook Neo has significantly disrupted the entry-level PC market, especially in the sub 600 segment. Leveraging procurement advantages and efficient component choices from its iPhone and iPad lines, Apple's aggressive pricing has made it increasingly difficult for Windows-based brands to compete. Rising component costs are pushing mainstream PC models above $1,000, forcing brands to either raise prices or lower specification, while Apple's presence is drawing attention away from traditional low-cost offering. Major PC brands are responding by both expanding low-cost offerings through new ODMs and shifting attention to higher margin mid-range or feature-rich models. This dual-track approach suggests that brands are cautious about over-committing to the entry segment due to margin pressure and Apple's competitive threat. While Apple's shipment forecasts for MacBook Neo are rising, potentially taking share from both Windows PC and Apple's own higher-end MacBooks, the overall PC market is expected to see a decline this year as previously reported. This is likely to lead to a polarization. Entry-level dominated by Apple and mid-high end by legacy PC brands. With specification upgrades concentrated in premium models and slower spec migration and an uncertain outlook for entry-level PCs' long-term market share growth. Success in 2026 will depend on supply chain agility, brand positioning, and the ability to offer compelling value at each price tier. For Realtek, we see overall spec upgrade opportunities remain intact moving forward for our PC-related solutions, including Wi-Fi, Ethernet, USB, as well as audio and video-related products. Thank you, Yee-Wei. Due to the time constraints, 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.