Phison Electronics Corp. (8299) Earnings Call Transcript

Hi. Good day, everyone. Thank you for joining us today for Phison's Second Quarter Earnings Call. My name is [ Tore Chan, ] and I am semi-analyst from [ Sinopec OST. ] Today, we're very honored to have KS Frost, the CEO of Phison. In today's call, KS will first provide some updates on the second quarter results and business highlights and end market outlook. And after that, we will open the floor for the questions. As a reminder, if you have any questions during the call, you can write down the questions in the chat box, and we will raise questions for you later. And now I would like to turn over to KS for the comments. Thank you KS.

So. Good afternoon, good morning. Ladies gentlemen, thank you for joining Phison, our Q2 '26 earnings call. Okay. This will start with our Q2 performance. Since CET1, we defined a new category in AI ecosystem solutions, which including the enterprise main drive put adaptive and working as -- this Q2 has around 38% of our total business, which 68% Q-o-Q growth. So we're still gaining a lot of good demand from the enterprise and the AI ecosystem business. The second route is embedded, mainly is a PC OEM, customized drive for the PC gaming, security and also the mobile use. This has 32% of our Q2 revenue, but we have over 2x of a growth Q-o-Q. . The third largest is industrial modules, which has 78% and retail is down to below 5%. Controllers, we segue to 6% just because the revenue growth too much. By net amount of a controller, actually, we are increasing in the Q2. So you may know the moon PC OEM shipment declining means Fatonweare gaining the unit share of our controller in the PC and also in the smartphones. So Pfizer, we are proud that we have the record high in the Q2, not in revenue but also in our market share in mobile PC OEM and also big growth in the AI ecosystem business. Okay. Financial results. I think you just read from our announcement, so I want to spend time here. I need to highlight the gross margin, we grew Y-o-Y over 7.5x, okay, which is record high. And this is already show the good performance of our engineers, that many years are hard investing our new projects. Revenue-wise, it's TWD 67.8 billion is all time high.The first half, we hit TWD 100. Again, this is -- actually Phison, tried to map Phison 2025 to hit TWD100 billion we sell, but we make it in the is first half. Gross margin, we hit 65.3%, but this also we have a company policy. We try to be more conservative. So we have a rate of 1.1% is the inventory write-down okay? So the component we keep for my policy rides for a certain period, we read them and to make sure our inventory is clean. So first half average is 63.8%. Earnings per ship by C2 is which we include the 14 from our -- the ones the so-called investing tent. So [ TWD 118 ] is also the all time and the first half, we are [ TWD 187 million. ] Okay. In our income statement, by revenue wise, you can see we are big growth. This part, I just want to share with you especially in our R&D investment, some shareholders may have a cogent complaint about the investment R&D. But again, since many years ago, Fieninsist, we need to focus in our R&D investment. So you can compare this Q2 versus the last 2 is around 6.5x, close to 7x of the investment. Why? Because the AI coming. We need to keep customers a lot of a new design. By second half of this year, we have many new tape-out controllers for the high-speed PC OEM for enterprise for the bridge some and also the mobile UFS 4, 5. So we gained the market share. Why? Because the last 5 years, when market no -- metal market good or pet, we keep heavy investment in R&D. So that's why we can show the good performance here. So again, in the second half of this year, Phison will keep same momentum in R&D, make sure we heavily invest and we are able to create a new application and try to lead in this market, okay. By the balance sheet, I think first of all, by cash flow by Q1 and Q1 Phison, we are cutting cash -- but turn to CQ2, we are now better. The AR is coming back, and we have 1 CB $800 million by CQ2, which happened. So cash flow now, we are doing okay. Inventory-wise. I just shared with you, company policy, we try to keep equivalent of , which we carry every month. So I don't know if you believe or not, and flash is getting much difficult to ask for supply. No matter you pay how much a price, the supply now is really a big issue. So our policy is to keep some amount of the SP equivalent every month to make sure our design projects we are able to ship. But unfortunately, by end of this year -- early next year, we got so many new inquiry from the CSP neocloud OEM, we still try to work hard to get upside supply to fulfill what our customers ask. So inventory-wise, if you ask me, do we enough inventory? I'm telling you, most likely, we still shot in the past, some part by end of this year and the early next year. Okay. We'd like to share some [indiscernible]. But basically, you can checking here is not much different. It's all about the our option. -- is by our financial policy. So we not have much stock option to the employee. So the difference is quite small here for the labors. Okay. We'd like to show this page. For many years, I think your guys also expert to know memory cycle, recycle. This is all predictable. Why? Smartphone, you can focus a unit, the content PG. But from now on, by the way, smartphone PC is declining by unit this year and next year. But our controller shipment increasing means we win the major share in this industry. I think this is about last 5 years, Phison keep investing, okay? Never sold them keep investing. That is why the PC OEM, the NAND manufacturer, the trust profit, they're willing to work closely with the Phison. So we believe 2 more years, consumer market smartphone PC will bounce back, right? Because the phone you use may end of life in certain period after 2 years. So demand will back. If Phison '26,'27, we are able to keep winning the unit share of controllers. Means '28 '29, definitely, we can enjoy the good return in the period. But what we have to pay is heavy R&D investment. That's why we keep pushing investment into R&D. Okay. things keep different is I think I will spend too much time, I don't want to waste the time here. The AI influence output was a tax is a kilobyte. Now users start to go to the image. It's a megabyte. Some already have a video, the short video from China from U.S. is Chicap, unfortunately, if we go to the agent okay? If you start to use AIHA in your play for no matter on the big TC on premier service server or go to the cloud, you are creating terabytes of content. So I don't know how people are saying that the rest can supply -- they make a miles by '27 '28, and I don't think so. Why? Because AI agent is coming. So this is defined by the media, the fire level of the AI. What is a Phison's role? I think you have to take a look into this, what Phison's our growth position in this industry. First of all, we have our controllers. Controllers not only mobile, PC, but we have a lot of adaptive and also enterprise. And some customers controller NPU in this layer to -- we also provide different kind of modules, main drive, good drive, okay, to the so-called infrastructure. At the end, Phison, we have adapted -- now we transformed to the Phison AI data platform is AI applications. 2 weeks ago, our Board members also approved Phison start established corporate VC. The first investment is $20 million, equating to the TWD 600 million. We are going to start invest a lot of staff as ISV who are designed the program on top of a Phison. So in this player, Phison played a role from chips in farm and also new applications. So we are transforming ourselves. So -- we are now limiting Phison. We turn to. I don't want to spend time in today. Next quarter earnings, next quarter earnings, we are going to show you what Phison doing in the Phison. So this is to show you in the first generation, we are in the controller consumer modules. Then we move to the customer modules, enterprise, which we are doing now. But next, what is our next -- next is mainly in the air storage and the AI platform, which we have to show here show later, okay? So CQ2 -- this is to show what our role in the enterprise. This is enterprise put. In the last few months, our press release, we named our put is like 40 times growth, 6x growth, right? You can see here, AI networking, just only this quarter, we have 6 new design wins program. It's a big plan. And in the no matter CSP OEM recently, we just win the SRA 2 OEM and the AirSystem partner, the near cloud, we have 2 new design win Infra, we have 1 new design win. I chipset we have 1 new design win. This is a project. Move to the main track. We also cover a lot of design win OEM, ASO system. In farm. We have 2 new networking, which is a win special 1 of a big program of an AI networking Mandino drive, okay? So in the AI ecosystem, we played a role, Mandie creating a lot of SP. But drive create a lot of customization. So we are now the key player in this field. Okay? So please recognize Phison is normal in consumer. We are in the AI ecosystems. This is our new design wins, just to show her okay, we are in the 5G base station with our EMC. We are moving to the medical, and we are going to a lot of automation. Share something with you about compute tax, what our exposure. We have enterprise PCI GMV already in MP, which create around 30-plus percent of our revenue. AI letter show you what is our potential revenue in the future. Gen 6, we have controllers sample bag by January. We are going to show our Gen 6 enterprise SSD by November, okay? So this is going to move into the AI ecosystem. And by the way, we have pending orders already, unfortunately opportunity, we have a pending order not small amount. But now we have to make sure we can get the supply. Client Italy is the best performance in the world. We win a several big OEM projects recently. Mobile, this is a 30 -- just I want to remind you, Phison is a very key player in the mobile storage controllers. And this is what we have shown in the habitat 2 45 terabyte. But this is products good to MP, but recently, customer able to buy while the price is super expensive. Now customers now move back to the 64 terabytes. Actually, which is good to us. we can sell more units, more controllers, more systems. This is our gensets controller. Firstly, we're going to MP directly without any ECO. This again, to show that Phison engineers is very solid. How to make it solid again, heavy R&D investment. So this project, we are going to show to the November. And again, to repeating, we already have a pending order. But we still don't know if we can get enough read to ship and this is a 64 terabyte payment. This is our E37. We showed a lot of reviver saying that this is the best, fastest, best power consumption in the world, okay? And we win several PC OEM and also the name company's OEM business. Okay. This is adaptive. We keep saying there for many years. So I think you -- if you follow us, you know what about this, right? So we have a product go to the market. Okay? And we are working a POC with Minetec to use our URI controllers with the Minetec to deploy the adaptive in the mobile phone and POC part POC doing good. We are able to let the MPU, which asking for 24 giga downsize to 12 gigabytes but still can execute the models to run inference which using our UFS as a catch. So this POC done. Hopefully, we'd like to see this go to the market by end of next year. So this is also Phison innovation. Okay. Carbotex, Phison co-promote, the Intel platform with a Phison adaptive, and you can check this from the YouTube. You can check what I do want to spend time here, but go to check this -- this small PC within is ARPC on device can run their 120 billion model with 32 gigabit of advent. You know DRAM shortage, right? So with fully believe AI on device means AI on PC letup, desktop is going to happen by next year, but unfortunately, DRAM is sorted. So adaptive is the only solution. And we also show the mature products to the market with our branding partner MSI outsourced at Avantec and SRC. And this is already go-to-market, not just on our concept, okay? And this is our server partners, which enterprises being by AIC pickup song and WD. Okay. I'd like to show you what is Phison achievement many quarters, investors for managers, why is a revenue? Again, revenue is a relative small right? Because this is a totally new ecosystem. We need to have a lot of hardware software implementation, and we need a lot of ISV. That's why -- okay, what's ISV independent software [indiscernible] -- so that's why we established our CVC corporate VC is to start invest to the staff to help them to design their application into our adaptive. So revenue wise, again, I'm still cannot tell you the net amount, but this is showcased. Again, I want to repeat, this is not a POC, okay? This is already in a commercial. We ship our AI server, we adopted with SSD with our proprietary service, the software platform application customized in Taiwan, more than 10 banks, okay? And definitely, this at some even, but revenues are small, still were small. We are expanding these design service products to every bank in Taiwan, every, okay? We expect if they are on premium AI solution, Phison most likely is only capable company to provide. Hospital, we have more than 30-plus commercial product shipment to the hospitals, which is with Phison adaptive Air data platform and FHIR systems. Today, I don't plan to spend time here, you interest go to check Internet, what is FHIR. Next earnings call, Phison is going to spend more time to tell you what our achievement retails in this IDP Phison AI data platform business. We also shipped over 20-plus of SME, whats SME, small, medium size of company and enterprise, we ship our server service to them. So we are going to expand this business. By this year, we have a confidence to win commercial business to bring in Phison AI data platform, adaptive service to the new -- our potential customer bank, government, enterprise, hospitals and education, okay? And we also start to work with the AIDC AI data center to put Phison our software platform into data centers. This is totally our new business. So we tap Taiwan because all engineer is Taiwan, right? Now we show our performance in Taiwan. We have a bank -- we have a shipment bank, hospital, enterprise. Now we start to move to North America Phison already have office in the San Jose in Colorado. We start set up office in the Vancouver in Vancouver started to hire the team, transfer our products to that our design today, mainly into the U.S., North American potential B2B SME business. At the same time, Phison has a new foundation in Malaysia, a human. We use them to start look to the Southeast Asia India, we have a JV called MiFi, which transferred this tenogy to them to help them service the local SME as our new business. So again, next earnings call, we are going to tell you more. So this is a go to the IPC, AI on device, a lot of activities, a lot of after compute tax from not on to CES loss activity to promote the so-called AIPC or genetic notebook, okay? This is happening and Phison adaptive is the only solution. Okay. So investors keep asking about the revenue, yes, not yet happened in March, but coming. This is the trend, and Phison has a heavy investment into here. Okay. Shareholder may get complaining, but we keep even first half group profit, we still have a 22% investment in R&D, which is still by among its record high, we keep to push for more R&D development. So versus last year, the whole year, the investment was a 13 BNT, -- now first half already 24 BNT. So this is commitment. We are very consistent. So we keep hiring more engineers again, not for chips, not for firmware, but for our AI data platform because we can see this will be our next future big growth in our revenue. So again, this pad to show you we are heavily invested with the R&D activities to make sure we are able to grow in the coming years. Okay. Last, I'm going to show you, we define a new business platform called Phison data platform. This already ongoing, already have a commercial business. A lot of engagement is happening. So again, I won't spend time translation now what we are doing next quarter, you will see more, okay? This is -- we call Infras a hardware CPU server from ODM EMS with a Phison our own storage server with our SSD. We develop every software we have HCI, a lot of function. We licensed this to our partner to the customers to data center. We develop revenue function modules to make sure it's good to use, then we start our CVC to engage, develop, support a lot of new to design application in Phison AI data platform. So size in-house, we are now pushing internally to use our AI on premise with AI server in Phison server room -- their engineers start to heavily every month, they will push them to use more service from our in-house AI service by soon Phison head count engineers, okay? Just 1 month, we are able to tap back every server investment. You can't believe, okay? So this is happening. And what we are doing in our on-premise AI we use mainly as an AI agent and AI copilot okay? I don't want to go details, but this to show you what we are doing in our AI activities. By ranking, we have a lot of engineering activity here using AI to improve our cycle -- design cycle and also the performance. Since I realize Phison we name is agentic hub, this is so-called agenting hub, okay? I can sell a lot of head count -- we Phison place a big order to our ODM Taiwan to buy NVIDIA more than $50 million of a GPU car and servers. We are going to step-by-step install into our server room. And also we are going to rate data center outside to put the server there. What is the purpose? The purpose is target, we are going to sell close to 500 head count engineers by end of this year, by AI service. So we are not going to hire them many ASIC designers for designers, software designer. But we only increased a lot of AI deployment software AI promotion business development to our new AI data platform business. All the chip design product design, we are going to be like all the new AI server, which we just purchased around $50 million. So this past will show you why we insist to go on premise. We're not going to cloud. We made a simulation, we used our -- our application, the input token, output token. We compare to the cloud sonat and the chippers China Service, we found if we have a good utility, let's use 100% myself my cost is here. This is a case of a key medias across sonic okay? So at the end, if you are the heavy users, you only choice is go to on-premise. After your server or depreciate -- that means that the compute power is all you can eat by free, you pay only the power supply fee, okay? So this to show you Phison was users. Unfortunately, we came by solution, we force ourselves become provider -- now we are a developer from user to developer. We develop our AI solution type SEF, our all head improved cycle -- now we turn to provider. So that's what next earnings call, I'm going to share with more, okay? So what is that next step, Phison want no small, medium-sized enterprise, B2B, AI on premise total solutions provider, not only for Taiwan, but also aiming to North America, Southeast Asia, India. Hopefully, next year, we are able to enter worldwide. Okay. Summary. I did not need to spend time here to tell how difficult to get supply. AI is changing everything. Phison is from controller consumer embedded computing now enterprise storage main drive. Now we are going to as a system solution providers, okay? That's why we need to keep heavy investment in our R&D. And we are going to build our own ecosystems. Of course, we also need to engage with every key player. We believe our SME B2B business can attract a lot of suppliers, system regulators users. This is our next growth and our opportunity, but we invest this over 3.5 years already. Finally, we can see something is going to happen. Okay. So last, Phison is an invasion company. We keep very consistent, invest, find the right way to help Phison to grow our business and to keep the good profitability. Okay, few Q&A here, let me close, then we can go to live. Dividend, we board member decides -- actually, we have a debating in the bone members, okay, which is good. And the last policy, we try to match 55% of the net profit. But this time, we decided not to do that with. Phison, we need a lot of cash to help to grow our business. To help Phison to bring -- to get more market share to help Phison to transform from 2.0 to 3.0 to help us from modules application to the total system suppliers. So we need cash. So we like to use index as interest rate okay? Based on yesterday's our stock price, we -- based on the TNT is a half year 2.87. Second half, I believe I go competence. We still have a very good earnings. Hopefully, next first half, generally, Phison, potentially, I hope we can make a more earning. We are a little bit cash rich. We can consider to have a more dividend by ratio at the next January. But again, this comment depends on our cash flow and our business and how good we are able to get that cash from the business, okay? So some shareholder minority, but some shareholders came to me to ask me don't pay that much. They wish the cash keep in the company to help companies drive much faster rapidly to get the better return. So let me clarify. In the last many years, base, we are good in the earnings per share. We give 55%, everybody happy. But unfortunately, opportunity now we are tuned to special turbomoles in revenue, in profit, in market share, in applications. Okay? This for what these 2 mature Phison can lead in the market and can enjoy at the last few years business returned from the market. So please understand, we understand the ask from shareholders, we keep 2.87% half year the year, but we need to keep the cash to run the business. to met our shareholders get the more returns, not only from the interest but also for the capital gain. So again, analysts, not some few, maybe one, keep asking Phison as a module house. Answer is yes, we are motor house. So what -- but Phison module House is a different wide definition of our module house. Traditional motors by sell, buy assembled by self. Phison is a module house, all activity starting from R&D fundamentally design. But the revenue wise coming from modules, so you can Nimthis is a module house. okay. We used this example for many years. Again, I have to use this. We led to the Apple and [indiscernible] they are chip designer. These are the chips most likely revenue not selling chips, they build models, okay, revenue from modules. So when I talk to analysts 2 weeks ago, he said no, no, no, no, you Phison different, different. You are motor house and with our module house but they are in-house technology. I say, hey, Phison controller also in our technology. They say, no, no, no, no, no, you controller is only small bump call. The rest is a flash or you see the company on media is all about the design. If you read the report last week, NVIDIA new were performed memory home cost, 62%. So what's the difference, okay? I just want to tell you, we are really consistent, develop our controllers, heavy investment -- but good thing is our revenue coming back from the modules. So come module houses are okay, but we are able to generate the value in the market. generate value to the ecosystem and generate value to the shareholders. So please study more and please understand what we are doing for company, employees and shareholders. So Phison from everything 100% in-house going to the products and we go to the revenue by modules. And now we transform ourself to trade is Phison AIr data platform. I hope I can show you more numbers, more visibility by next earning call. Again, I have to use this as completion, okay, how far able to keep growth our technology, simple. I mean you can see shorter may complain, -- this is all about our R&D investment versus our revenue. And we just go to the Bloomberg to search Apple, NVIDIA they're not small. They big. I mean they have a big revenue. So if you go to net amount R&D, they're also big. But Phison is a tiny small company, but we have a much higher percentage. -- means what? It means we aim to rally long term, and we are able to grow by what by revenue of modules, which analysts may not happy to see much of that, unfortunately, this helping us to make good enough profit. So thus, please understand, we are motorhose but different with the module house you mean. This is our inventory. Again, we have by 229 plus billion inventory, most likely enterprise, okay? There about ODM and industrial. I think retail Phison in the coming 2, 3, 4 quarters gone, okay? Retail manpack by 2028, when the markets start coming back, Phison is going to use our resources to gain the business -- and the time, if I ask business means the profit definitely had to be good. If not, why I spend my resource there. Add to the ESG, we keep doing all our best, okay. Every index, we keep improving. Okay. So thank you. Let's go to the Q&A.

Thank you Ks for the encouraging updates and congratulations to the strong results. [Operator Instructions] My first question is about the NAND demand supply dynamic. As you just mentioned, NAND supply remains quite tight and you were actively adding supply resources -- supply sources. Can you give us some update on your current supply condition. For example, how many suppliers, do you now have LTAs? And how it compared to what you see in the last quarter. And what can we expect for the incremental beta allocation for maybe second half this year or 2027?

Okay. To be honest, the last 9 months, I spent too much my time by either view, by TV, by everywhere, keep talking about supply demand. So I don't want to go deep, go details today. Supply/demand, no solutions for many, many years, okay? We're still able to get supply. But unfortunately, supply not enough to what we need. So last week was FMS in Sense, we made every suppliers there. They recognize Phison value. I'm talking them Phison not going to take their flash, the modules and sell the modules we are now converting ourselves to end users. Just now I mentioned, we are having our business in the so-called AI data platform, and this is a number we show to them. They are very surprised what we are doing. I'm telling them the NAND what we purchase is not only for selling to others, but we build to the systems. This can bring more values. So we can't disclose what kind of LTA, how many is by? Because if I said something here, my competitors may go to as the same amount. So I'm not going to do that. But -- just a commitment here, we have enough we have supply, but supply is still not enough what we need, okay?

And my second question is about the NAND price in the second half. How do you see the price trend in the second half compared to the first half? I remember our like peers and disk, they said in the earnings call that price increases will moderate that does match what you see -- what you are seeing now? And how should we think about the gross margin in second half and onwards?

I remember by March I already saying that the memory company, the gross margin bottom line, 80% easier. 85% may happen. Now I'm telling you if to the 2026, 90% gross margin may happen, but I don't think this is healthy to the industry. And my sincere request don't do that. if you ask component for 90% gross margin, industrial potentially will be killed. Like you can see the IoT, you can see the consumer die, okay? So I don't want to comment what price is going supply high demand too strong, price definitely will still going up, but 85% more than enough okay? .

I already see some investors online. Maybe next question is from Charlie Chan, Morgan Stanley.

Yes. I mean myself, KS, [indiscernible]. Yes, I -- first of the want to congratulates for a very strong results. And let me probably just get straight to the point, right? For your AI-related business is a 38% revenue may know whether SSD is kind of make most of that business? And how big can that SSD revenue exposure into next year? .

This 38% mantra is about 30 plus, okay, because these are more in the revenue generator. [ Foot, ] we win a lot of program and shares so Butalayed a big role, no matter in the AI system or the networking, okay? And again, adaptive digital solution is still small, as I mentioned, right, this is totally new. We need to spend out of time. But -- now we convert this to the AI data platform. Hopefully, hopefully, from CQ4 CQ1, CQ2, we can see the significant number in the revenue .

Okay. Yes. So I guess 2 follow-up questions, right? So it seems like this ESS business is going to see meaningful growth, right? Do you have a kind of rough roughly market share. I'm not sure what is how big is the TAM, but do you have a kind of rough market share for your SSD business and another follow-up question is actually to Esoria question about the NAND price trend. I just want to get a sense whether the consumer NAND and the NAND price has some correlation. I ask this is because I agree to me that Phison is no longer the consumer-related player. But my concern is that if a consumer net market price some weakness, whether it would also impact your current AS rate price. Yes, that's my 2 follow-up questions. .

Phison, we are not a NAND manufacturer. We are not aiming to the enterprise SSD market share because we are not named supply amber the NAND is shortage, right? We take our limited supply. I mean limited quite a lot, mainly go to the customize okay? -- even go to the main drag, most of that is customer products. This we can enjoy the much better gross margin, okay? I read the report. I read a report is a pay report, U.S. report Phison is about 1.9%. This is why we had, okay, 1.9% of the enterprise SSD. This is the 1 I can share with you. So you can go share the report. Back to the so-called consumer NAND AI NAND or I'd like to more easier [ Sanken and Gund. ] [indiscernible] the price also increased a lot and their supply declining a lot well. . Okay, back to the history, when the 2D NAND, every 18 to 24 months, they have a new NAND generation. The generation not mature yet earned plus 1 coming. So every period, they have lots of tuned. But now 3D NAND, the longevity getting much longer. You can believe that NAND produced by the 6 name vendors, the era can be 90-plus percent. -- or my people report to me, they have some wafer with 95% of a good year. Means what means the downgrade part declined a lot, okay? So I don't think this consumer -- your NIM consumer angle will impact to the AI NIM who is going to make consumer congrato the AI system. And again, you keep saying that the market price spot market dropping, go back to Check YouTube, which I already take by March. The time I already hit -- after June, Shenzhen Module House is going to dump their wafer, Why? Because they are missing, 90-plus percent are in the consumer -- consumer debt. Any revenue, if they're public, they need the venue. So they buy wafer, they sell wafer okay? And this is happening. And I share with in the June, July, Phison we spent our cash more than $450 million to buy the net wafer from Santen module house. Of course, the price is much cheaper than the NAND enterprise, if not why I'm buying there, right? Why they sell because Phison a solution, I buy. I don't know how okay? So on tech that spot price is a regular price because NAND is not going to decline the price. Okay.

Next question is from Chatbox, Bruce. The investor wants to know Lonza's recently exceed a general DRAM offload solution for edge devices with union so and is also collaborating with AMD on HPLC plus SPU. How about Fis? This is the first question from Bruce.

Okay. In the March 20 something. They have a so-called China FMS. The Chairman [indiscernible] was my previous speaker and the next. A surprise, he said, he got this been something when I onset, said, "Hey, don't copy you are a big company, you are innovative company, why you just copy come to talk. So this is my comment. I don't care. Anyone want to copy. We have our weapon. We have a solution, but we see how Phison react, I don't care. But we win everything cause that we are the innovators. We are the inventors, the worldwide now. We started promoting since 3 years ago. So no hurry. We work and see at least in world, many countries still respect to intelligent property. Okay. .

Next question from Bruce, I think as a follow-up. He said Apple is -- Apple builds on SSD off specifically to ship Apple Intelligence, but most laptop OEMs clearly don't have that kind of capability -- so AMD Q2 partner with launches, while Phison choose partner with Intel and MediaTek. .

How about going this -- I think the okay? We don't spend time here, okay. First of all, April is April. It's all proprietary, so no comment. Unit AMD those loans is wrong. This only happened in some AVM China launches. You go to ask AMV Austin, what happened today, okay? I don't want to comment here. Phison choice partner, Intel, MTK Okay. No on rush, a lot earlier there, you work and see okay? I just saying that don't copy be a man. Okay? Then we go to the next.

Next question is from Simon , Bank of America.

Congrats, great result, great number...

We work so hard -- so much. When we're talking nobosy listen.

We are listening to you, sir. .

That's a joke.

Yes. So maybe, number one, how long do you think the NAND price still rising, right? So when you will start -- you mentioned that makers profitably. .

[indiscernible] asked me call to your Korean friend, okay? I wish 85% gross margin is really good. Don't ask to 90%. .

Okay. So you think it is time to see more stable enterprise these days .

It's not stable. What I'd like to mention is a saturate, still rising, but the ratio getting smaller and eventually saturate. .

Saturate means...

Means to point gross margin there. supplier is happy, then they start to pick up who they are going to ship. .

Okay. Sorry, so NAND price still some room to see the enterprise increase second half this year, but how about the next year so stable, right? .

Let me ask you, if the next year, nobody doing things, right, the gross margin of a memory company go to 95%. Do you believe this is going to happen or not. .

Theoretically possible, but I think like Taiwan foundry, short there, but they are not raising the price aggressively anymore. .

Memory is a different.

I see. Okay. So you are feeling that the shortage of NAND will continue into next year.

Many years not next years.

Many years. but you don't see quite significant NAND bit growth per wafer with 300...

No, no. You go to asset manufactures I made the 1 name, the top-level guy, hey, from investment to produce to production 2 years -- it's 4 years than -- yes, no easier. I realized not easy. .

Okay. And then the adjusting case, I'm double checking sir. So your inventory value of TWD 90 billion it's a lot. Just a market, just a book barrier .

We never revalue, okay? We Phison policy never revalue -- we only write down. .

Yes, Okay. Following the gap, that's great. And then would you recap the -- your recent convertible into issuance because your competitor issues last night the consensus indicates that the -- maybe your competitor need extra cash to buy more land chip for the enterprise solution -- the working capital increase .

Yes, they're the control company...

Because enterprise solution needs to land chips because it's a module business. Enterprise solution...

Yes, Charlie, can as they buy a lot of name help our gross margin. .

Gross margin usually the controller should be higher because only the fairness business model -- module theoretically should be lower, but it is growing very strongly. But anyway, I think my question is would you recap your previous funding was ECB $500 million well acuity .

Fully used .

Already used. So .

At 1.5x rate 1.5x .

Okay. So it was a USD 500 million equivalent. Sorry, would you remind us sorry. .

$800 million ECB.