Thank you for you all to join our second quarter investor conference meeting. This meeting will be in English. If you need Chinese presentation slides, you can go to MOPS, which is a link to download the Chinese presentation materials. If you want to ask questions in Chinese, no problem for us. Secondly, if you do not want to ask questions orally, you can also write down your question through Team's message function. For the Q&A session, please use the raise hand function, and we will call your name for your questions. This video and the audio contents of the meeting will upload to MOPS, about two to three hours after the meeting. If you cannot download the video or audio contents immediately, please be patient. I think this meeting will start with our CEO's words to investors. Johnny. Okay. Good afternoon, ladies and gentlemen. I am Johnny Shen, Chairman and CEO of Alchip Technologies. Thank you for joining our investor conference today. We appreciate the opportunity to share our Q2 financial result and provide an update on our business outlook. So Q2 summary. Our second quarter revenue came in line with the plan. Revenue increased significantly quarter-over-quarter due to higher production revenue, while the NRE remained very strong. As a result, total revenue reached $242 million, with a net income of $51.8 million and EPS $20.01. A more detailed financial breakdown analysis will be presented by CFO Daniel in the following section. There are a few highlights worth mentioning last quarter. First, our N3 AI accelerator enter mass production and begin shipping in June time frame. The program is under early ramp-up stage, but even with a month's revenue contribution, it drove our quarter-over-quarter revenue growth up more than 80%. We just announced a few days ago our July revenue reached a record high for the company, reflecting the continuous production ramp for this program. Meanwhile, the next generation design also achieved a major milestone and entered the final implementation phase. We remain on track tape-out by the end of this year. In addition to our AI accelerator business, our other production program also performing well. The automotive ADAS program in China continues to see strong demand and is now our second-largest revenue contributor for this year. We are highly confident to sustain this business and further expanding this business as we already secure the next two generation of design from this customer. The first next generation remains on track for tape-out in early Q4 this year. We have also two Arm-based CPU program in mass production now. Shipment volume increased meaningfully in recent months, supported by ongoing global CPU supply shortage. In addition, several consumer programs are contributing steadily to our production revenue, including game application in Japan, smart device applications in both U.S. and China. These program continues to run smoothly, provide a healthy level of business diversification. For future business outlook, overall, like the industry leader and many some of our competitors, we remain very optimistic about the long-term outlook for AI market, particularly in ASIC segment. We believe our competitive position are even stronger than most of our peers because we continue to serve as a sole design partner for our end customer. In addition, our end customer maintain one of the highest CapEx level in the industry, creating a very big TAM serviceable available market for Alchip. On the execution side, we are largely resolved most of the key constraints that previously limited our growth, including engineering resource, manufacturing capacity, production allocation, and working capital. As a result, we believe we are well positioned to catch the significant growth opportunity ahead. Looking ahead, we expect our business to enter a new phase of growth beginning of this quarter. Production revenue will expand substantially, and we anticipate to delivering the record high revenue and earning in Q3. Followed by another sequential increase in Q4 as our major product program continues to ramp. More importantly, we believe this is not simply a single quarter or single year's growth story. Based on the production program already in place, together with our next generation design pipeline, we believe this growth momentum will sustain for at least the next three to four years. For conclusion, I would like to emphasize once again, we believe the most challenging period for the company is now behind us. We regain our growth momentum, are well positioned to capture large share of the rapidly growing AI ASIC market. The industry continues to move toward a COT model, exactly as we anticipate for many years. We believe it is a secular trend play directly to Alchip's strengths. Based on our ongoing customer engagement and business pipeline, we are highly confident in securing another major hyperscaler CSP customer in the near future. Looking ahead for the near term, we remain very optimistic about the long-term AI opportunity. From this year to 2029, we expect our growth trajectory to remain in line with our key customer and industry leading players. We believe Alchip well positioned to deliver sustainable growth and create long-term value for our shareholder. Thank you. Okay, thanks to Johnny. We will start the financial part from this page. For our second quarter, please be noted that the number will be in U.S. dollars. For the second quarter P&L, the revenue in second quarter is $241.7 million, which is 82.6% quarter-on-quarter growth. However, the year-on-year, it is a decline for 18.7%. For operating income, I think, which is quite promising, our second quarter operating income is at $52.1 million, which is 20.5% quarter-on-quarter growth and 38.7% year-on-year growth. For our net income in the second quarter, it is $51.8 million, which is a 14.9% quarter-on-quarter growth and 20.7% year-on-year growth. For the second quarter, the EPS is $20.01. This is the breakdown by application. You can see the second quarter's breakdown is pretty similar with what we did in the first quarter. 50% from HPC, 1% from each market, 16% from networking, and 32% from consumer. The reason for 32% for consumer in the second quarter and 36% for the first quarter is because we currently put our autonomous driving chip business into the consumer. We are internally considering to recategorize the autonomous driving chip business into probably the niche or HPC categories in order to better fit its original purpose of the chip. For the process node, because the N3 accelerator started to kick off the production in late May, last quarter. So you can see the 3 nanometer, 2 nanometer process node revenue contribution grow to 47% in the second quarter, from first quarter's 21%. For the contribution, you may see again, the same reason, the N3 accelerator's production in place is the major reason for our 51% revenue contribution from North American region in the second quarter, from 23% in the first quarter. For the second business review, actually there are many parts is a repeat from what we said previously. Again, I want to reemphasize the numbers again. The second quarter revenue, $242 million. For the second quarter growth margin, although it went down on increasing portion of production revenue, however, I would say this way, it is a little bit better than we expected previously. We think although the growth margin went down, the operating margin improves year-on-year, if you do the year-on-year comparison. For our business model, we do believe as the revenue scale keeps on going up, even the gross margin goes down. Because of the increasing portion of the production revenue, the operating margin will keep on growing, given our quite good operating leverage. You may notice that the second quarter OpEx went up. If you do the quarter-on-quarter comparison, it is quite significant. The main reason is because first of all, the headcount expansion and the salary adjustments of our company. Secondly, we do see the expense increase for our EDA tool licensing and our server usage, because nowadays, the design in leading-edge process node requires quite significant amount of server time. For the future, we do believe for the third quarter and the fourth quarter, the operating expense will be pretty similar with the second quarter. But we are very confident that for the yearly OpEx growth, it is still in control. Secondly, like I said, the N3 accelerator business kicks in, starting in late May. We didn't have too much revenue in May from this N3 accelerator. However, as this N3 accelerator business keep on ramping up, we are going to see increasing revenue sequentially in the following months from this product. As for the autonomous driving chip, I would say, overall, the shipment remains very stable. We are still shooting for. Not still. I would say the demand seems a little bit better than what we delivered to the investors before. So we are currently very optimistic for the current autonomous driving chip shipment, and the next generation project is going to tape out probably late this quarter or early next quarter. I think this concludes our presentation, and we are going to enter the Q&A session later. Thank you all. Okay, I noticed that Haas raised hand very early. So Haas, please, you can unmute by yourself. Yes. Thank you, Johnny and Daniel, for the great results. I would like to ask questions just regarding how we should expect your gross margin and operating margin trend in the next couple of quarters as the Trainium 3 or your largest hyperscalers ASIC starts ramp in a meaningful way. Because what we can see is already gross margins declining from 50% to 35%, operating margins down from 33% first quarter to 22% in the same quarter. So what should we expect in the next few quarters when the business starts to scale up with your production business ramp, your gross margins, and also operating margin targets in the next few quarters? Thanks. Okay. I will give you some numbers for it. For our gross margin, yes, it went down to 30 something percent from 50% in the first quarter. I would say this way, since we only have one month of high production revenue in the second quarter. Based on our calculation, I would say for the third quarter and the fourth quarter, the blended gross margin will most likely be about 20 something percent. For the whole year, this year, I think our blended gross margin should be in the low to mid-20s. I would say this way, as the N3 keep on shipping the NRE to the production revenue ratio will most likely be in 10% - 20% for NRE and 80% - 90% for production. Based on this scenario, the reasonable blended gross margin will be in like 20 something, lower 20s. That is the outlook for our gross margin. Secondly, as I mentioned, our business model enjoys pretty good operating leverage. So, when our scale reaches a certain point, I am targeting our operating margin to be in high teens. Am I answering your question? Yes, that is very clear. Thanks, Daniel. I think that gross margins guidance is actually way better compared to your previous Trainium 1 project when you started to ramp. Would you be able to provide some more detail regarding how you are able to lift the gross margins while you are ramping your production business to 80%- 90% in the second half of this year and even into 2027. Thank you. Okay. I would say for the pricing, for the gross margin, for the margin to a given project, I cannot disclose into the detail, into the narratives. But I would say, first of all, I think the customer started to appreciate our value. We are providing much better value generation by generation to our customer. That's one reason. Secondly, our position within our suppliers, within foundry, within the OSAT is getting better and better. From customer, from supplier, we do have the room to stretch our gross margin a bit. Thank you. Yeah. Yeah. What Daniel said is exactly right. I think, Haas, to answer your question, I think we have the confidence to outperform the gross margin compared to our first high-volume production. I think this statement is true. Okay. Yeah. Just relatedly on Trainium, on your follow-on projects, which you said will be tape out later this year or early next year. I was wondering if you could just provide some more detail on the scheduling for the engineering verification and also the timeframe for mass production for that project. And whether the customers would further appreciate your work, and your gross margins for that project could be staying at similar level or even better compared with the current ramping chipsets. Okay. Haas, I think the design schedule for this design, I think, is very sensitive. I don't think customer would allow us to share anything. But I can tell you, the design is unlike before. The design is heterogeneous. It's like a chiplet design. One design require multiple tape out. All tape out is not going to happen in the same time. Yeah. As you know, the turnaround time for N2 will be much longer than two, three. So it allow us to tape out two, three later. They also may have an interposer tape out, a lot of tape out by Apple together. So I think overall, customer are very satisfied with the current status. Yeah. As I just mentioned before, the current target is still by the end of this year. Yeah, we try to meet this target and production similar will be by the end of next year. That's the current plan. Okay. Just a quick follow-up before jumping back to the queue is that, it sounds like you are going to be the one in charge of the next generation chiplet as well. Would you be able to discuss about the content opportunity and also the volume opportunity there, since your customers recently also mentioned they are going to be more aggressively selling the chiplet to the external customers in addition for their own use. Thank you. Yeah. The continuity, I think is the most important, like I mentioned before. I think right now, the relationship between us and the customer, we can say, is getting better and better. I didn't sense any urgency for this customer to pursue other choices. Again, the precise schedule, it really depends on the manufacturing availability, and most likely it will be the A series. Also, customer need to decide for the IO chiplet, for the memory chiplet, which technology they are going to use. So I think prior customer make a decision, we're going to have another test chip similar to the previous one, to do test chip first. I think that happened on the previous generation. The test chip scope, we are under discussion now. Got it. Thank you so much. I'll be back in the queue. You are welcome. Goku, please. Goku? You can unmute. Let's go back to Goku later. Charlie, please, you can unmute by yourself. Hello? Hello. Charlie, please. Yes. Okay. First of all, also congratulations for good results and also looking forward for the next generation Trainium for tape out. First question is really about this year. Previously, company provided some expected revenue range, right? With that Trainium 3, I feel like the mass production is kind of slightly ahead of schedule, starting from late May. Will the company revise up the original guidance for the Trainium 3 revenue contribution this year? I would say for this year, Trainium 3 is pretty much the contribution from N3 is pretty much as we mentioned to investors. Because, as you may know, the lead time for this product is very long. Actually, at current stage, we almost place all the orders of this project this year. I will not change the guidance for the N3 project contribution this year. But for next year, yes, we do have chance. Next year, you mean a chance to grow or a chance to revise up your original target? The chance to revise up the previous assumption for next year's shipment and the revenue contribution of this N3 project, for sure. Okay. What was the original target for next year's growth for this project? Charlie, I cannot set the number here. That's the requirement by the authority. Sorry. Okay. Yeah. Okay. Sure. Yeah. Also, Johnny, you mentioned about Alchip fits better for customers needs for COT business model, right? I think, besides your current big customer, there seems to be another big CSP are trying to considering the COT, right? What do you think is going to happen? Meaning the same, for example, TPU design, you cut into several compute die, IO die, and everyone can have their parts or, it will be like several different SKU, right? Just like today, right? You have a TPU v8t, v8i, and what other SKU go for COT? What is kind of a likely development for customers COT efforts? Yeah. I think the COT is already happened. To be honestly, our end customer, you can consider, is one of the typical COT model. They are doing the front-end design, doing the architecture. They try to find the design partner like us, foundry partner like TSMC, and we work together and find out the testing and packaging partner together. I think another customer, I think Google, eventually, is already doing that. Unlike the original pure ASIC model, doing with the Broadcom. Broadcom doing everything and Broadcom dictate the unit price. But the COT doing reversely, they try to figure out the cost of each element and add together and plus a margin then to providing to the service provider. I think Google has so many different generation. They already try to minimize the dependency from the Broadcom type of a pure ASIC model. Eventually, I think all CSP, Google included, will going toward the COT model. When the volume continuously increase, I think that's unavoidable. We receive a lot of inquiry from this account or even from other accounts. To answer your question, I think it's already happened. Okay. But, is it likely that one project you have two design series on the same products or it will be kind of different SKU and customers looking for one design series for one SKU? Charlie, I'm guessing you are referring, if it is a possibility for Alchip responsible for, I'm just using an example, like Alchip responsible for the physical design of the compute and the other company responsible for the IO or- Yes, exactly. Yeah. I will let Johnny will comment on that. Yeah. I think sooner or later, that's the right trend because the issue inside contain so many element. From customer perspective, they want to diversify their dependency. So you are right. Some discussion, one of the potential customer discuss with us. We can do compute and working with other people to do the IO chiplet. So at the end, we can provide KGD type of a model back to customer when they can do the integration by themselves, or the ASIC house like us can do the final integration. So many variety, different models under discussion. I think the main purpose for customer is the cost saving. Yeah. Without those being the case or the facts, back to these core questions. Why Alchip can be a better choice for a customer's COT business model? If I can name some, your Asian competitors, one of them very aggressive in pricing. I think they got one CPU project, right, at a very low margin. Your another Asia peer. Since they have their own proprietary SerDes IP, help these customers to migrate to EMIB-T, right? What's Alchip's value proposition? For this new TB service? I think the design capability, schedule control, and quality control is all good. You'll hardly find any service provider doing it more efficient than us. If you look at the track record, Alchip is the one taping out the most CoWoS design in the industry. Talk about the track record, talk about the design turn around time, and customer satisfaction. I have a confidence to outperform most of our competitors. And also the pricing. We consider, even our customer consider we have a very competitive pricing. Yeah, I don't think, in the short term, any IC vendor can come closer to us. It's another story if a customer capable to do everything by themselves. They only require a service provider to doing the manufacturing only type of business. Then I agree with you, so many competition. This kind of model will be very bloody. For us, it's not what we are concentrating. I'm still thinking about we need to provide value to our customer in order to make this business sustainable and more sticky. If I do only doing a manufacturing service, I don't think we provide too much value. At the end, the pricing competition, will be a lot. Very rich. Okay, one thing from me, Charlie. I would say by comparing Alchip with the industry peers, I understand that many other companies, not many, the other companies probably addressing the IP or another company also address their excellency in 2.5D advanced packaging. Please note, until today, in Taiwan or in Asia, not too many company have the track record to do the CoWoS production or design. I would say until today, Alchip probably is the only one in Asia who has the experience of doing the advanced 2.5D or even 3D packaging. If you are talking about the expertise within the design and the advanced packaging, I would say, Alchip probably should be ahead of anyone in Asia. Mm-hmm. Yeah. Just very last pandas question. You seem suggest that you are very good in CoWoS, right? What if the next generation TPU might still want to stick with the EMIB-T? Would that change the dynamic? I will go back to the queue. Thank you. Okay. For EMIB, I talked with many investors for EMIB. We have experience. For our 7 nanometer accelerator, whose high volume shipment in 2024, the last new batches of the 7 nanometer accelerator, we applied EMIB. If the customer wants EMIB, we can support it without a problem. Okay. Thank you. Thank you, Charlie. The next one, Goku, please. You can unmute. Yeah. Hi. Daniel, can you hear me? Yes. I can hear you clear. Okay. All right. Thank you. First question, for your follow-on 2-nanometer project for your current big ASIC customer, I think, as Johnny mentioned, it is a heterogeneous kind of design project. Could we talk a little bit more about Alchip's level of involvement? Are you also involved in the I/O die process, or that will come from external vendors? It looks like there are multiple I/O interconnect options. Secondly, for the final packaging integration, including the I/O die, compute die, et cetera, would Alchip be the primary backend vendor for all of these interconnect options, or the final packaging vendor would be different for different interconnect options? Okay. Yeah, Goku, your statement is correct. Yeah, like I mentioned before, we are the sole design partner for this design. Yeah. As you know, if there are any party doing the I/O die or whatever the chiplet die, they need to work with the main die. All the interconnect need to line up. Yeah, unless another party doing everything by themself. Otherwise, whoever working on the I/O die need to work with us. I think that's common sense. But right now, schedule is so tight, we do not even have a chance, we do not even have a time to deliver the original scheme. No way this customer can work with the other vendor to do any alternative solution at this moment. You are asking for the possibility, if our chip tape out and go after the prototyping, are they consider about using other I/O chiplet to apply for CPO or for other solution? That is possible. But definitely, not at this moment. Both of us do not have any bandwidth to taking care any other approach. The design, I think in the final implementation phase, all the resource are very concentrated on the current implementation. Understood. Johnny, if I may clarify a little bit. The final package design, including, 2.5D packaging, et cetera, will all be still Alchip, not really going out- Correct. You are correct. Okay. All right. Compute die, back-end design, and final packaging. I/O die could come from other vendors depending upon the interconnect option. No, everything is done by us. Oh, okay. So even interconnect I/O die will be done by Alchip now? You are right. Okay. That is interesting. Thank you. Secondly, on this new major hyperscaler customer that you now are sounding a lot more confident, how does this business model fit? Like you mentioned earlier to Charlie's question, are you happy to be a KGD provider in this business model for the compute die? Or you think that you can have a chance to engage in the final packaging design as well? Okay, Goku, if you are referring to the production only, which means in the industry, we call it GDSII. If the project comes from the CSPs, we will support the project. We will compete for the project. However, we want to provide a value. The GDSII project, usually the value we can provide it to the customer is low, so it could be a very bloody battlefield for us. We will consider the GDSII project to be a knocking door project for us to penetrate into the, we call it PD1, design plus production project. If you are referring to, if we are sharing accelerators, different part with others. Yes, we are interested in, as long as we can provide digital design value or others to our customers. Mm-hmm. Understood. Just to follow up on that, I think earlier, Johnny, mentioned the packaging capability, which obviously Alchip is much better than most of the companies. Let's say the SerDes IP still is proprietary from one of your competitors. Are you able to still apply the packaging side? Is that kind of a supply chain possible, where the SerDes can still come from a proprietary vendor? Or, typically, the SerDes needs to be third-party SerDes if you want to do the more disaggregated COT kind of models? Mm-hmm. Yeah, we still believe many third-party IP vendors, they are working on their SerDes. Yeah, we all know that the reason people consider some competitors can sustain a project because of IP. I think we've been working with our customer very closely. We are looking for variety of solutions. Yeah. We can sourcing the IP, do the integration by ourself. We have even considered about using the KGD model like you mentioned about. I think starting from the next generation and generation beyond, I think this will become a lot of a new working model. Yeah, I believe it's not only happen to our customer, but also happen to other CSP. As you know, if you look at those kind of expensive IP, most of the high-speed interface IP is all implement in the I/O chiplet. But the area contribute the most expensive part, still the compute die. Starting from last generation, compute die is four-reticle. I /O maybe one third, maybe one quarter of the size. I think maybe customer is willing to pay higher margin for the I/O chiplet. But for the compute die, I think go to the COT is the market trend, because there will be very limited dependency, pure logic, and Architect may be only use IP for the interface. They are very variety of business model. I think all of them we can adopt. That is very comprehensive. Thanks, Johnny. Just one last clarification. For your N2 project that will go into production end of next year, will that be using 400G SerDes or it is lower speed than that? Yeah. Goku, we cannot give you. This one cannot tell. We know the answer inside out, but sorry, we cannot tell. No worries. Thank you. I'll go ahead, thank you. I see. Okay, next one, Laura, you can unmute your microphone. Yes. Hi, good afternoon. Can you hear me? Very well. Yes. Mm-hmm. Yes. Hi. Thank you, Johnny and Daniel. I just want to follow up. I hear that, Johnny, you mentioned that CPU, you got the two projects. Can you share more with us? What kind of the spec and the schedule? Would that relate to the new customers or existing major customers? Yeah. In the earnings call, we tend to not disclose the names. Yeah, sure. Laura, I can share with you one for server CPU, the other for consumer type of CPU. I think both of them are doing very well, ARM-based CPU. Yeah, sure. Also, maybe from technology perspective, can you also share with us process node? Going forward, are you also seeing that these projects on ARM-based CPU may also require advanced packaging? Does Alchip have a better chance to get more of that kind of business? Yeah, I believe so. Yeah, the current generation I can share with you is N5. It is not so advanced. Nowadays, I think the CPU design, to be honest, the design complexity is much lower than TPU. If you look at the CPU program and also the internet, it's pretty much each of a generation about the same, similar to application processor. If a customer has enough design resource, most of our customer can do it by themselves. For the hyperscaler, if you look at the current generation versus scale 2D implementation, most likely, the CPU opportunity will be the GDSII only. Yeah, because customer do not need so powerful design resources to do the implementation. But CPU now, I think, is also considered about using 3D. Yeah, if 3D technology becomes popular, I think it will become our strategy. It will be our strength to implement the CPU. Yeah. Any customer also discussed with us on this area as well. Sure. Thank you. My second question is also about our 2 nanometers of the next generation's AI accelerator. I think, Johnny, you mentioned many times that the design complexity is substantially increasing, and the die size is also getting much bigger. Can we assume Die size is same. It's a four-reticle. Oh, okay. A reticle, sorry. Yes. Reticle is getting much bigger. Can we assume that for the next generations, the 2 nanometer projects we are doing right now, we'll see that the multiple ASPs comparing to this generation. How should we look at the potential, the revenue scale in, say, a two, three years perspective? Also because of the capacity, supply chain management is getting more important. Is there any restriction in terms of the capacity or even a working capital requirement to secure the next few generations AI accelerator? Okay. Laura, I cannot talk to you into the specs or floor plan of the next generation N2 accelerator, but I can provide you some clue. First of all, nowadays, starting from the N3 accelerator, the die size is into the four-reticle. So the die size for N2, N3 remains the same at the same four-reticle, 800 sq mm. However, the number of the compute die are different generation by generation. And the architecture of the chips generation by generation are different, like 2.5D or 3D or the chiplet architecture, something like that. But for sure, for the N2 accelerator we are designing, the pricing will be much, much more expensive than the N3, the N3 one. And the volume of the chip in shipping will definitely be higher than the N3. No matter the price or the potential shipment, both of them will be bigger than the previous generation, which is N3, currently in shipping. Right. Yeah. Yeah, sure. Can you give us a rough idea how you see that this potential in terms of the business scale, say, in maybe two, three years? I would say if TPU is to be told, the serviceable market scale is $80 billion, $100 billion. I would say probably for the N2 project, the scale could be at a similar range. Okay. Following question is that, in terms of the working capitals requirement, the supply chains, capacity, demand, also since the market is getting so big, we are also seeing that more of the participants in this business with these customers. Okay. For capacity, I would say this way, as we mentioned, it is a COT model. Yeah. Actually, our customer receive very, very good support by the supplier, such as TSMC, for both wafer and packaging. For now, for the next generation, N2, I believe in 2027, 2028, N2 capacity will also be very high. However, we are very confident that our customer will get really, really good support from TSMC. Yeah. Also, in terms of competition, like I mentioned many times, we have a high confidence to sustain the design position for this account. I think because the relationship we have been doing for multiple generations, customer did try other vendor, they come back. They start to realize how reliable we are. Nowadays, as you know, literally only two company produce a good ASIC volume. Whoever has a plan or competitor, whoever plan, they have a high volume. They all share the part from the other customer. Yeah. But for our end customer, we are the sole design partner at least. Yeah, sure. Thank you very much. Very clear. Thank you. Thank you. Next one, Jerry from UBS. Jerry, please, you can unmute your speaker. Hi, can you hear me? Oh, yes, please. Oh, yeah. Thank you. Thank you for taking my question. Just want to follow up on, previously, I think Laura and also others have asked about the N2 projects, because apparently, Johnny and Daniel mentioned that the ASP could be pretty high compared with N3. My question is, how will this impact your margin going forward? Because N3 projects mentioned that the gross margin planned and can still maintain somewhere around the low twenties. As we go into N2, if the ASP of the wafer or the overall design further increases, how should we think about the margin once we move on to N2? We are just into the commercial terms discussion with customer. I cannot give you the answer, but overall, the feeling right now is, we can feel that the customer really, really appreciates our design efforts. It is a very, very difficult design, as Johnny mentioned many times. With the value we provided to the customer, I would say we kind of have the consensus with the customer. That is, this, no matter you call it ASIC model or COT model, we are partnership relationship. We are in partnership kind of relationships. Customer kind of agree with it. When customer success, we succeed. We follow this kind of spirit, so we don't worry too much about the gross margin for the next generation. For the working capital, we do have ways to talk with the customer, to talk with the supplier. At the same time, after the GDR we offered, like one month, two months ago, our balance sheet is getting better. With all of those things, we think we don't worry too much, at least at the current stage, about the working capital for the N2 accelerator. Yeah. For gross margin thing, we just described, the current generation design, N3, is much more complicated than our previous design. So our gross margin improved a bit. For the next generation, the design capacity, I think is increased a lot. I hope, I believe we can maintain or improve the gross margin accordingly. Yeah, I think the gross margin thing changes very dynamically. I think it depends on the competition, it depends on the overall size. But I still believe Alchip provides the most reasonable margin compared to most of our competitors. Okay, got it. That's pretty clear. Follow-up question on the, I think you mentioned about another CSP customer. Based on your discussion, can you give us some indication about the likely timeframe for this business to kick in? Because apparently, the customer is already working with U.S. and also the Taiwanese fabless. There are some product, it's already been worked, for this year and maybe for next year, it's pretty much finalized. So I'm just wondering, if you're going to get involved, when should we start to see this to contribute on your P&L? Jerry, again, we cannot discuss the schedules here. Okay. Those are really sensitive things. I really want to provide you some thinking. First of all, if those CSPs want to do COT in order to reduce their cost, actually, they have to be capable. Everybody knows right now that for the major four CSPs in North America, who are capable and who are incapable of doing their own front-end design. If a CSP is capable of doing their own front-end design, when they look for the physical design partner, obviously they will talk to almost everyone who are capable to offer these kind of services in the market. Actually, we are one of them. Now before, you can consider NRE is a place, a very important role during the entire budget. But nowadays, you can see all the CapEx. The NRE become totally insignificant. So customer are willing to have multiple supplier. I think that's their strategy. Once they have a capability to do the chip, they're going to invite more and more vendor. I think that's what they do. Everybody has a piece of that company. That's the reality. That's what they plan to do. Okay. Okay. Jerry, because we have really limited time, we want to go on with- Okay. For the other investors for the question. Sure. Okay. Thank you. Sure, no problem. Thank you so much. Thank you. Okay, next one, Lucas, KGI. Please, you can unmute your microphone. Hi, can you hear me? Yes, we can hear you. Okay. Thanks, Johnny. Thanks, Daniel, for taking my question. The first question is that, given that your revenue concentration from your largest customer might exceed maybe 60% or 70% of total revenue, does Alchip have maybe specific strategies in place to mitigate single customer risk? Okay. Lucas, let me give you a very quick answer. The reality is, if we want to diversify this customer, there is only one customer we are going to pursue. Otherwise, no any given customers in the world can diversify this customer. I guess you knew who is the potential customer for diversification, and we are working really hard on it. Mm-hmm. Got it. I think all our competitor were facing the same question and same challenge. Starting from next year, you will find out for the ASIC revenue, majority of the revenue coming from one customer. For me, just like what Daniel said, if we want to diversify our business concentration, we have to win another. I am thinking about this way, to sustain the current customer, I think it is the most important task. That is why I keep emphasizing our position is much stronger than most of our competitor, because of the relationship. I think I have a competence to continuously provide our service. We know each other for all levels. So I think that is one of our value. To diversify, to be honest with you, I have so many payback, about 20 payback a year in terms of the customer count. We can say we are pretty much diversified. If we talk about the revenue, I think it is no chance. Only two company produce the highest ASIC revenue. Okay, got it. Very helpful. I think the industry is also observing a growing demand for custom ASIC among Chinese automakers. I see design firms specializing in autonomous driving and maybe smart cockpits. Applications even expanding into robotics. Could you share your perspective on this trend and how the company is strategically positioned to capture these opportunities? Yeah. Literally, every single EV car maker in China think about the robotics. Robotics can be all kind of form. I think we discussed with our end customer, the human type of a robot or the industry type of a robot. I think we can discuss the chip. It's about the same. The beautiful beautiful thing is the design we are doing, first of all, they put in a car. Eventually, they can put on a robot. I think everybody, our customer, and also their competitor are thinking about this as well. Okay. Can we move to the other? Because we really have limited time. Okay. Thank you. Sorry for that. If you have further question, please feel free to call me directly. Thank you, Lucas. Sure. Thank you. Okay, next one, according to the team sequence. Charlie, please. Oh, I can let James go first. If we have time, I can do the second round. Thank you. Okay. Then James Roda, you can unmute your microphone. Thank you. Thank you. James. Thank you, guys. Yes, can you hear me? Yes. Yeah. Just in terms of next two generations chip for the major customer, how do you think of mix shift between those customers, between your product and the GPU? How can it change? Then a follow-up question, which is related, how do you think about total or how does the customer see total TCO of the ASIC chip versus the GPU? Thank you. I would say for me, I cannot give you a very detailed answer, but based on our knowledge, the customer is working on increasing the percentage of their own ASIC usage for their AI data center. But I cannot offer you the exact percentage or number of the chips or number of the machines. But we knew the trend that the ASIC usage is getting up because of the cost. Yeah. That is the public information. The CFO also mentioned in the conference, the saving is quite significant, like 3x-4x saving compared to their current supplier. Mm-hmm. James, do you have a further question? Yeah. 3x-4x, is that on what basis? That's chip level basis. Which means from the cost perspective, to get a similar TCO, you pay only 25%-30% of the money by comparing with you paying for the GPU. Yeah. Do you have a sense of how that translates at a rack level or full TCO to serve tokens? No, we are just doing the chip design. I know. We don't. We do some rough calculation for fun, but it's not presentable. Sorry about that. Yeah. Probably, you have to ask those system providers. Thank you. Okay. For the last one, Charlie, thank you. Please unmute and ask your questions. Great. Thanks, Daniel. To clarify, the Q&A from Laura, you mentioned that the 2 nanometer T AM could be $ 80 billion-$ 100 billion. Was that your comments regarding the scale of these projects? Was that your comments? Can you repeat again? The scale of the N2, nanometer volume or revenue. Did you provide any comments on that one? No. Honestly, we do not know the scale because we do not have the information yet from the customer. Even we do, we cannot share with you today. If you really want a number, because the N2 project, we can feel the ambition from the customer. If the customer's competitor or tier has $80 billion for its market scale, I do not think our customer will be very, very far away from the number. Oh. I got your point. The overall number, I think they still maintain the highest in the industry. Yeah. Okay. Now I got your point. Is that the life cycle TAM, or is it annual TAM can be that much? It's a fair question, but I don't have an answer. Okay. Honestly, we don't have the position to answer this because it is customer's decision and strategy. Right. Yeah. But in terms of spec, in terms of schedule, I think our customer has a very high confidence. Right. How about your expected allocation? I am not sure if I get this right, but I feel like your production allocation given Marvell, Qualcomm, getting to provide this production service. I guess your 3-nanometer production market share is probably 30%-40%. Charlie, we are just entering the discussion with the customer. Right. The customer will definitely listen to the audio visual content of this earnings call. Okay. Yeah, so that's do further discussion later, not in the earnings call. Right. Okay. That's exactly why we are focused. I hope to deliver very good news in the near future. Okay. We look forward to that. Thanks, Daniel. Okay. Thank you, and thanks for everyone joining our second quarter earnings call. We do appreciate your participants. Thank you, and we will see you all again, probably three, four months later. Thank you. Thank you very much. Thank you.