Investors, friends, good morning. Welcome to Sunny Optical Technology's 2025 Annual Results Presentation.

Today, I will begin with four key judgments to directly address the issues of greatest concern to you. First, Sunny Optical's handset business intends to achieve revenue reverse-trend growth in 2026, building on the solid implementation of our premiumization strategy in 2025 to effectively offset market volatility through sustained ASP growth and market share gains with key overseas clients, thus achieving countertrend growth in our handset business.

Second, we have established full-stack software, algorithm, and integrated hardware-software solution capabilities. We have completed the development and engineering delivery of algorithms across the full spectrum of imaging, real-time perception, semantic segmentation, spatial localization, and 3D reconstruction.

We have achieved breakthroughs with the mass production of system-level products for warehouse automation, robots, AI industrial cameras, and secured a key position in visual perception within practical applications such as embodied intelligence and smart manufacturing. We now possess the capability for large-scale delivery of algorithms and integrated hardware-software solutions required to bring AI into the real world.

Third, in addition to our handset products business and vehicle businesses, we have identified high-certainty growth opportunities for the next five years. Growth momentum will stem from the continued expansion of AI-enabled wearable smart hardware and robotics.

In the long term, we will take optical perception as our core starting point and undertake in-depth strategic deployments across the information chain of perception, transmission, processing, storage, display. By cross-applying precision optical, optoelectronic integration technologies that have been validated through large-scale mass production, we'll unlock broader long-term growth prospects.

Fourth, regarding the spin-off of our vehicle business, which has attracted significant attention, we will fully capitalize on industry dividends through the spin-off. At the same time, by leveraging an independent, capitalized platform, we will maximize the value of the vehicle business, deepen upstream-downstream collaboration across the industrial chain, and jointly build an open and mutually beneficial industrial ecosystem.

Moving on, I will now elaborate on these four core elements, covering a review of our 2025 performance, business highlights, future outlook, and ESG achievements. First, let's move on to the first one: results review of 2025.

In 2025, our company achieved revenue of 43.23 billion RMB, representing a year-on-year increase of 12.9%. Revenue growth was primarily driven by the combined efforts of the three major segments: handsets, vehicles, and the pan-IoT sector, with the company's diversified business layout yielding significant results.

On profitability, our full-year gross margin stood at 19.7%, up 1.5 percentage points year on year, driven by two key factors. First, capitalizing on market opportunities arising from premiumization in smartphone imaging.

The product mix for handset lenses and camera modules, continuously optimized, driving improvement in gross margins of both. Secondly, the continued rise in revenue share of our high-margin vehicle business.

In terms of profit, our net profit attributable to shareholders of the parent for the full year stood at 2.64 billion RMB, a year-on-year increase of 71.9%, maintaining high-quality growth despite a high base. Excluding investment income of 219 million RMB generated from the equity investment in Goertek Optics, the company's net profit grew 37.8% year on year.

In terms of cost control, our overall expense ratio for 2025 stood at 11.6%, down 0.8 percentage points compared with 2024. Selling and distribution expenses fell by 20.9% year on year, demonstrating significant success in cost management.

R&D expenses was up 11.4% year on year as we continued to ramp up R&D investment in handset, vehicle, and AI-related businesses to lay a solid technological foundation for long-term growth. In 2026, our overall expense ratio is set to decrease further, with target range set at 10% to 11%.

Other financial data are detailed in the announcement, I shall not elaborate on them here. Second section: business highlights for the whole of 2025.

Firstly, handset products business. In 2025, this business achieved steady revenue growth, rising 8.6% year on year, outperforming the industry as a whole.

The core drivers of this growth are our continuously deepening premiumization strategy and the ongoing optimization of our product mix. In 2025, whilst shipment volume of HLS and camera modules declined, ASP saw a significant increase, with lens ASP rising by over 10% and module ASP by over 15%, demonstrating the remarkable effectiveness of our premiumization strategy.

Specifically, in 2025, revenue from our glass-plastic hybrid HLS increased by 95.8% year on year. Revenue from periscope lenses rose 20.7%, accounting for 18.2% of HLS revenue.

Revenue from periscope modules was up 54.9%, accounting for 20.4% of handset modules revenue. Continuous breakthroughs in high-end products have laid a solid foundation for business growth.

Leveraging MOB, MOC ultra-miniaturization packaging technology and AOA ultra-high-precision optical alignment technology, we have successfully overcome numerous challenging technical bottlenecks, enabling mass production of multiple products. For instance, our high-performance, ultra-large-aperture, segmented-prism periscope solution utilizes our proprietary AOA multi-group, high-precision assembly technology to achieve a multi-group 30XX [30-axis?]

technology breakthrough, and is now supplied to a certain high-end model. Another example is our integrated lens and actuator module technology, which has successfully enabled mass production of a quad-cut lens module with an ultra-low TT design, achieving module miniaturization and weight reduction, and has been successfully adopted in a domestic client's flagship high-end models.

Furthermore, in 2025, we completed the integration of business units for a major overseas client, achieving key breakthroughs across multiple projects, laying a solid foundation for future growth. Next is vehicle products business.

In 2025, as the penetration rate of advanced intelligent driving continued to rise, vehicle optics sector is entering a period of rapid growth. We have seized these industry opportunities, steadily increasing our market share with key clients, which has driven a 21.3% year-on-year increase in vehicle revenue.

We have successfully achieved mass production of several new products, including 17-megapixel ADAS cameras, long-range LiDAR transceiver modules, and large-aperture glass-plastic hybrid projection lenses. In terms of internal collaboration, our lens and module teams worked together to tackle key challenges.

Several projects, including variable-aperture solutions and active-cleaning solutions, have passed validation by multiple leading clients. The relevant technological achievements are being rapidly converted into mass production projects, laying a solid foundation for the continued expansion of our vehicle business.

Third is the XR business. In 2025, overall revenue from the XR business declined year on year, primarily due to weak demand in the VR, MR sector and adjustments to the product launch schedules of major clients.

However, revenue from our AI smart glasses camera modules surged by 800% year on year, effectively offsetting the impact of the decline in the VR, MR business. At the same time, overall gross margin for XR segment reached 19.6%, up 7.8 percentage points year on year, representing a significant improvement in profitability.

In terms of internal synergy, we built collaborative capabilities across multiple subsidiaries, optimized management models for engaging with top-tier international clients, and established a unified service interface to achieve end-to-end coordination across demand response, technology R&D, and product delivery. In 2025, we achieved several milestones.

Firstly, we successfully entered the supply chains of major overseas clients for display-equipped products. Second, we achieved mass production of smart glasses whole device based on Qualcomm AR1 and AR2 systems.

Third, our solutions became the reference design for top-tier international clients. In 2025, through a share swap merger, we completed a strategic, mutually beneficial arrangement with Goertek Optics that leverages our complementary strengths.

By aligning equity interests, we have achieved efficient synergy in technology, talent, and industrial resources, delivering two key strategic values. First, we're closely collaborating to overcome core technological barriers in the near-eye display, establishing a world-leading AR waveguide mass production platform covering the entire process from micro-nano design to master mold processing and front-to-back-end manufacturing, thereby consolidating our core strengths in technology and scale manufacturing.

Second, by leveraging the industrial expertise of both listed companies, we have achieved mutual empowerment in terms of customer, resource, and capital strength, establishing a complete chain from technology R&D to market implementation, and jointly drive the development of AR optics industry. Four: pan-IoT business.

In 2025, our transformation into a provider of complete smart optical system solutions for robotics yielded substantial results. We completed the device development and commenced mass production and shipment of AI industrial cameras and AI wearable cameras.

In the robotics sector, we established end-to-end development capabilities, spanning from core modules to whole device, with collaborative projects with leading clients achieving stable mass production and shipments. It is worth noting, in warehouse automation projects for leading overseas clients, we have progressed from mass production of individual hardware modules to that of interconnected, system-level products comprising multiple devices.

This has enhanced our capabilities in development, certification, and overseas servicing of system-level products, enabled us to successfully enter core supply chains of major overseas clients' smart warehousing operations, laying a foundation for expanding further high-value system-level projects. Fourth: the precision optics business.

In 2025, we achieved a breakthrough in mass production capacity for integrated planar optics prisms. At the same time, our group formally established a precision optics company to further strengthen core competitiveness in the fields of ultra-precision optical machining and molded glass.

Through our proprietary high-efficiency molding technology, precision molding cycle has been significantly shortened, production efficiency was up 40%, and cost per unit fell 21%, laying a solid technological foundation for future expansion into new market segments. Finally, I would like to highlight our achievements in 2025 regarding the implementation of AI technology and the development of our core capabilities of integrated hardware and software.

In terms of AI implementation, we focused on scalability and scenario-based applications to drive empowerment of AI across the entire production process, forming a closed-loop system encompassing data governance, model training, production line application, and data feedback. Multiple AI application scenarios have been successfully implemented.

Through AI-driven defect volume reduction, we have achieved an average 10% increase in UPH on production lines without modifying equipment. Through AI recommendation for sheet metal forming machine parameters, we have shortened product development cycles by over 30%.

Through AI-SP visual monitoring, we have achieved 100% real-time closed-loop interception of non-compliant operations and abnormal risks for critical processes such as plasma cleaning, thereby improving product acceptance rates. In terms of core capability development, leveraging our in-house full-stack R&D expertise across optic, device, electricity, and computing, we have developed a multimodal, embodied optical perception system, establishing end-to-end technological capabilities spanning perception, processing, and application.

All core technologies have undergone successful product validation. This system is based on our proprietary multi-sensor visual sensor matrix and high-precision spatial vision sensing solutions, combined with AI-driven imaging enhancement technology and edge lightweight intelligent perception algorithms, and has already covered scenarios such as object detection and biometric recognition.

Currently, related products have achieved mass shipments. Core algorithms have been platformized, successfully reused across multiple projects.

Furthermore, we have mastered high-precision multi-sensor calibration and multimodal data fusion technologies. Relying on a full-stack, in-house development architecture, we have established an integrated system design featuring hardware-software synergy, thereby fortifying our system-level delivery barriers.

Building on these system capabilities, we have developed a robot vision solution featuring deep energy between perception hardware, intelligent algorithms, and whole-device system. It has been delivered in a customized way to several leading clients across various industries, receiving positive market feedback.

That concludes our overview of our business and capacity-building achievements in 2025. We will now move on to part three: outlook for the future.

Firstly, handset business. Although the global handset market is forecast to contract by 12.9% in 2026, we're confident that our handset business will achieve growth against the trend.

This confidence stems from the sustained increase in ASP driven by the solid progress we made in our move towards the premium segment in 2025, as well as the optimization of our customer structure. In 2026, we'll continue to drive growth from both the product and client sides, further consolidating our growth momentum.

On the product side, although shipments of low-end modules are expected to decline, we'll continue to strengthen our core technological advantages and deepen our vertically integrated solutions to drive sustained volume growth for high-end products. As the unit price of high-end products is several times that of standard products, we can effectively hedge against industry fluctuations through continuous improvement in ASP.

We forecast that by 2026, revenue from glass-plastic hybrid HLS will grow by over 150%. Periscope lens revenue will increase by 40% year on year.

Periscope module revenue will rise by over 20% year on year. Revenue from integrated actuator modules will grow by over 50% year on year.

These products will deliver stable and predictable profit growth to the business, becoming the core drivers of countertrend growth in the handset sector. The growth trajectory for our client side is clear.

Firstly, we'll continue to increase our overall market share amongst leading clients such as Huawei and Samsung, with this growth primarily concentrated in the premium product lines. Secondly, we are achieving continuous breakthroughs in cooperation with major overseas clients, with our lens market share steadily increasing.

Substantial progress has been made on relevant main projects. More encouragingly, we have expanded to whole product lines.

Revenue from major overseas clients is projected to grow by over 100% in 2026, injecting significant revenue and profit growth into the handset business. In 2026, we anticipate that revenue for our handset business will grow by 5% to 10% year on year, with gross margin for handset lenses stabilizing at 25% to 30%, gross margin target for handset camera modules at no less than 8%.

Next is vehicle business. Vehicle optics have become a core necessity for smart cars.

Driven by AI technology and the concept of software-defined vehicles, smart cars are evolving from a mere means of transport to a third space that encompasses the entire journey. This fundamental shift in nature places high demands on driving safety, reliability, immersive in-cabin experiences, and natural human-vehicle interaction, and vehicle optical solutions are the core foundation underpinning this industrial transformation.

Based on our firm conviction regarding the long-term growth potential of this sector, and to further unlock the development potential of our vehicle business, our company is pursuing a spin-off listing of the vehicle business on the A-share market, with a scale of public offering not exceeding 15%. The core objective of this spin-off is to utilize an independent capitalized platform to further amplify the intrinsic value of the vehicle business, attract global talents, and simultaneously introduce cornerstone investors with synergistic industrial resources, thereby deepening our company's global footprint and collaborative capabilities within the vehicle supply chain.

Subject to the Hong Kong Stock Exchange's disclosure rules regarding spin-off listings, this results presentation will only provide core official information regarding the vehicle business without delving into further details. Please refer to our company's official announcements for subsequent developments.

Third is the 2026 plan for the XR business. In 2026, due to the launch schedule of new VR products by major overseas clients, the MR-related business within the XR segment will continue to face pressure, with full-year XR revenue projected at 2 billion RMB.

We remain confident in the segment's long-term growth, primarily due to two key certainties. First, the dual support of growth in core business and the expansion of strategic layouts.

In 2026, we'll continue to deepen cooperation with leading industry clients to consolidate our globally leading market share. Addressing the industry pain points of lightweight and highly integrated AR glasses, we'll leverage our cumulative capabilities in optical miniaturization R&D and large-scale mass production to drive the development of ultra-compact optical engines, AR system integration modules, and other products, aligning with the new product development lifecycle, with gradual mass production commencing in 2026.

In addition, we're jointly developing optical engines and waveguide lens combination products with top-tier international clients, with mass production of these products scheduled for 2027, which is expected to become a key growth driver for the XR business that year. Furthermore, through our strategic equity stake in Goertek Optics, we're securing a strong foothold in the core AR optics sector.

In 2026, Goertek Optics' overall revenue will reach a new level. Currently, they are advancing projects with several major consumer electronics clients in the AR optics sector, whilst simultaneously pursuing product R&D across various technical pathways, covering etching solutions for diffractive waveguides, nanoimprint solutions, and different substrate materials such as resin, glass, and SiC for the commercialization of client products.

Regarding the whole-device business, we'll continue to iterate on products based on existing projects, refine our multi-platform delivery capability, and drive breakthroughs in more application scenarios. Secondly, the large-scale proliferation of hardware for real-world AI personal assistants.

The strong sales of overseas clients' AI glasses in 2025 have made it clear to us that with the further development of AI technology, hardware AI assistants are moving from concept to practical application. For such AI assistant to create real value, the first step is to see the world clearly.

Only by accurately perceiving physical scenes through vision can they achieve understanding, decision-making, and value output. The camera is the [unclear] for the proliferation of such interactive AI devices, serving as the eyes of AI.

The industry is currently exploring a variety of directions, including AI glasses, AI pins, smartphones with visual capabilities, and desktop AI hardware. Regardless of which category achieves mass market adoption in the future, visual perception will remain a core feature.

Consequently, the logic behind the industry's growth is clear: as AI technology continues to iterate, demand for AI assistants in real-world scenarios will rise rapidly, driving continued expansion of the consumer AI hardware market and fueling steady growth in camera shipments. At the same time, edge AI vision is subject to stringent constraints regarding computing power, power consumption, and form factor, with its performance being highly dependent on the quality of raw data from front-end visual perception.

Moreover, the more powerful the AI capabilities, the higher the demands on accuracy, efficiency, and environmental adaptability of visual perception. These factors will drive the evolution of cameras towards miniaturization, low power consumption, high dynamic range, high robustness, and low distortion, thereby continuously enhancing technical specifications and value of individual camera units.

Currently, building upon our core hardware capabilities, we have established a lightweight, edge-side visual algorithm system for consumer-grade AI hardware, featuring technological capabilities such as edge-side image enhancement, spatial semantic understanding, 6DoF spatial pose tracking, and high-precision 3D reconstruction at close range. Through deep synergy between algorithms and hardware, we have established a core competitive advantage based on the integration of software and hardware, thereby enhancing added value of our products.

At the same time, we're able to provide customized solutions tailored to clients' diverse needs, thereby continuously strengthening our technological barriers. This represents one of Sunny Optical's high-certainty growth opportunities for the next five years.

Fourth is robotics business, a strategic sector in which we are focusing our efforts and will continue to invest heavily. Currently, we have established end-to-end development capabilities, ranging from core robotic modules to whole device, for typical applications such as warehouse logistics, lawn mowing, and swimming pool cleaning.

Through in-depth collaboration with industry-leading clients, we're continuously building up core visual perception technologies and refined visual perception systems for humanoid robots. In the future, we'll leverage the technical expertise across these four scenarios to extend our capabilities into more complex scenarios, providing critical visual support for practical implementation of the robotics industry.

In 2026, our pan-IoT revenue grew rapidly, with revenue growth exceeding 60%. The above outlines the strategic positioning and implementation pace of our various business sectors.

Overall, in 2026, the group's revenue and operating profit are both expected to achieve growth of no less than 7%. Next, I would like to share with you our long-term strategic assessment of the convergence of AI and optics.

For the intersection of optics and AI, information is a common cornerstone. Light serves as the fundamental carrier of information in the physical world, whilst AI represents the intelligence paradigm for information processing.

Currently, the focus of competition in AI is shifting from which model is larger or greater computing power to which entity better understands the laws governing the evolution of the world, and which can integrate AI more effectively into real physical systems. Optical systems serve as the core gateway through which AI acquires real-world data.

Their performance determines the depth and precision of physical AI's understanding of reality. Based on this judgment, we have divided the evolution of optical perception into three progressive stages, with Sunny Optical completed the corresponding strategic planning and implementation at each stage.

The first stage is seeing the world clearly. For intelligent systems to perceive the real physical environment in a stable and reliable manner, they must not only recognize the appearance of objects, but also grasp their accurate spatial-temporal context.

Relying on high-precision optical perception systems, we are constructing a four-dimensional spatial-temporal coordinate system that is perceptible, interactive, and verifiable. Core optical technology capabilities enable AI systems to capture detailed information from the physical world with stability and precision, and our core products in this field have already achieved a leading global market position.

The second stage is understanding the world. True understanding relies not only on algorithms, but also on the information-capturing capabilities of sensors.

Traditional RGB vision technology struggles to capture essence of objects. For example, it cannot effectively distinguish between an icy road surface and a wet road surface.

Therefore, technologies such as multispectral, hyperspectral, and polarization sensing are required to deeply obtain the physical properties of objects, ensuring that understanding is built upon a more reliable foundation of optical perception. Our proprietary Guangyun AI algorithm platform possesses the capability to search, develop, and implement algorithms for full-chain modeling of optoelectronic imaging, multimodal physical information perception, high-precision spatial pose estimation, and 3D scene geometric reconstructions.

This enables rapid, cross-scenario reuse of core algorithms, providing unified, underlying technical support for a wide range of integrated hardware-software solutions. The third stage involves active participation in execution.

As the dimensions of visual perception become richer and data volumes increase, the traditional model of transmitting the entire video stream to the back end for processing can no longer meet the requirements for low latency, high security operations in real-world scenarios. Consequently, optical perception systems must evolve towards a sensing-computing integrated architecture, deeply integrating into the perception-decision-execution closed loop, enabling optical modules not only to transmit raw video streams, but also to output structured semantic streams.

Through computing power and algorithms integrated at the sensor end, semantic segmentation, causal reasoning, and rapid decision-making are completely executed locally, forming a low-latency fast-response mechanism. Currently, our warehouse automation system-level products, complete robotic systems, and AI industrial cameras have all achieved closed-loop implementation from perception to execution.

As I mentioned earlier, with light serving as the carrier of information, optical perception represents the core entry point for data. We'll take this as our starting point and develop a comprehensive strategy along the information chain depicted in the diagram: sensing, transmission, processing, storage, display.

Today, I will focus on the core hub of this chain: the transmission stage, specifically introducing the optical interconnect technology that is of such interest to you all. Our natural extension into the field of optical interconnect is underpinned by the fact that the manufacturing processes for optical sensing and optical communication devices share a high degree of commonality.

The technological and process advantages our company has accumulated over many years in the traditional optical sector can be directly transformed into core support for optical interconnect industry chain, primarily manifested in the following two aspects: First, the reuse of optoelectronic packaging and active alignment technologies. Our large-scale application of COB processes, as well as our independently developed high-precision six-degree-of-freedom AA active alignment and adjustment equipment, enable sub-micron coupling and alignment between optical chips, lasers, and optical fibers, ensuring high yield rates and high consistency in optical module packaging.

Secondly, the reuse of ultra-precision micro-nano optical manufacturing capabilities. Leveraging our deep expertise in ultra-precision machining and coating processes, we can mass-produce core passive optical interconnect components such as microlens arrays, microprisms, and high-frequency fiber arrays, meeting the core requirements of low loss and low crosstalk in high-speed optical communications.

At the same time, to meet the ever-increasing demand for high-speed interconnects in computing networks and data centers, we have established a strategic focus on silicon-based optoelectronic chip technology. We have already achieved significant milestones in the R&D of core optoelectronic integrated devices, such as high-speed optical modulators and optical switches.

In summary, by leveraging the synergies of these technologies and our forward-looking strategic positioning, we'll be able to establish a clear competitive advantage in the field of optical interconnect. Our core high-precision packaging technology will further evolve into the cornerstone for the future manufacturing of intelligent optoelectronic hybrid sensors and photonic chips, laying a solid foundation for Sunny Optical's rapid development in the AI era.

Moving forward, we'll continue to take optics plus AI as our core driving force. Leveraging our robust technical capabilities and engineering and manufacturing expertise, we'll continue to deepen our strategic positioning along the information chain, unlocking long-term growth opportunities for the company.

Now we move on to the fourth part: ESG outcomes. In 2025, we continued to deepen our commitment to ESG, maintaining an AA rating from MSCI ESG, a globally leading position in the industry, whilst our FTSE Russell ESG score rose from 3.5 to 4.0.

At the same time, we formally published our first climate-related disclosure report and updated the group's carbon reduction targets to reach carbon peak emissions by 2028, reduce total carbon emissions by 20% by 2030, and achieve carbon neutrality by 2050, thereby putting corporate social responsibility into practice through concrete actions. Ladies and gentlemen, investors, the curtain has risen on the AI era.

Optics serves as the core gateway through which AI enters the real world, and Sunny Optical stands at the very center of this pathway. We possess mature technological expertise, proven business achievements, a clear growth trajectory, and a well-defined long-term strategy.

We very much look forward to working with all of you, our investors, to seize the historic opportunities in the optical industry during the AI era, and to witness Sunny Optical's long-term growth together. That concludes my presentation.

We'll now move on to the Q&A session. Thank you all.

Thank you management for the presentation. Now we will proceed to Q&A.

If you want to ask questions, please raise your hand and then introduce your name and your organization. The gentleman on the first row, on the left, please.

I'm Huatai Securities' Huang Leping. Congratulations on your very good results.

I have two questions. First question: on the last slide, there are five development stages: AI plus optics development plan.

My question is, first, right now, looking at last year's R&D expenses of 2-odd billion, what is your future R&D plan in the future? Now most of your revenues are from perception-related products.

If you want to realize revenue, apart from those perception-based products, what about transmission-based products? How much revenue will be realized in the future?

Let me answer your question. Originally, concerning our plan, well, it is made in relation to the industrial operations.

Starting 2025, apart from making plans in the industry, our business departments have made many different plans and deployments. As we will establish many research institutes in Shenzhen, in Europe.

Of course, we have other plans which we cannot disclose now. In terms of core semiconductor production and packaging, in areas where this is more advanced, we have already made some plans and deployments.

Our consideration of this matter is that we have been paying attention. Back then, the volume and the scale was not big yet for optical modules, like 100G and so on, that are a bit more established, then the investment and also the launch products are not many.

Now, opportunities have emerged. Now for our handset business, it has declined.

That is because of the internal storage. Where is inner storage?

It has gone to the computing power. For computing power development after that, well, originally, in terms of technology investment and output, in the past, return was not that good, but now it has changed to a more positive situation.

I have to solve a number of problems, for example, power consumption and also power supply. That needs new technology.

I think now we have a very good solution to the problem. If you talk about the optical transmission, the information volume is a few hundred times, not a few times.

When it comes to resources consumed, it is totally different. Now for computing power center, we have intelligent systems, and now they are very active.

How do you put it? I think we need to make use of intelligent ways to enhance and ensure ourselves.

We think that this is the broad direction. However, at what time are going to see how much sales or revenue?

I cannot give you an answer now. There are many big manufacturers.

If you ask them, not even they can tell you the answer. I think that it would be quite fast.

It is not true that we did not know about it in the past. In the past, the input-output is not satisfactory.

Now everybody is developing in this direction. The big companies are striving to promote this direction.

We think that there will be many opportunities. Establishment of research institutes, both domestically and overseas, is something that we will be working on.

In the future, there will be some new updates from us. Second question is about XR.

Now, for VR, it is already quite stable. For AR, apart from the first one in the US, the second manufacturer is also launching many open platforms and new platforms.

What do you think about the XR market? This year, revenue declined slightly.

When product format changes from VR to AR, then what would be the change in the volume for you? Then in the AR product line, if volume rises, then at what time do we need to pay attention to what, so as to embrace an explosion stage?

Thank you. Now looking at the current situation, for VR, it is already fixed in shape.

It is an expansion screen, mainly to solve the gaming experience and scenario needs. In the market, there are already many products in use.

For example, Quest series that Apple Vision Pro, and also in recent years, for whole-device client, a lot of immersive glasses have been produced. Whether these products can sell or not, how much is the DAU, how many—what is the number of DAU?

For Vision Pro, the first day I bought it, I found it very exciting. I spent the whole afternoon working with it.

Then on the second day, I spent two more hours to sort things out. On the third day, and then on the third day, I find it too heavy.

Afterwards, I no longer used it. It is a good product.

Of course, you can use this kind this kind of glasses in other scenarios. Now for VR, well, in the past, the perspective was about experience.

Now, I think everybody is quite clear of it. I don't think there is the possibility of achieving breakthrough in volume growth.

For AR, it's different. It is still evolving.

For new products, new launches, there are many. As we all know, international big clients, they have different numbers and they are achieving leap forward.

For companies that are not working on hardware, they may have too rosy picture about the world, but then things are not that fast, really. Then their mentality has changed.

In the past, we're talking about display, but then later on, when there are new products launched, it is not related to display anymore. For display, I think it is about information delivery.

It is still needed. I think XR is going to see very good development.

With these glasses, they are used to acquire and collect data. I think this kind of uses will increase.

Besides, it is like the AI brain and it is then connected to your own brain. It is like the hub linking these two sides.

If this is the perspective, then I think the AR glasses will see very good development. Of course, we need other market favorable market circumstances.

When it comes to volume explosion, just now the investor asked a question. There are other big companies doing a lot of promotion.

Our plan is that we will start mass production in 2027. Now we are doing preparation because there are many ecological or ecosystem software issues.

There are more and more companies participating in the field. This shows that this industry will develop even faster.

In the past, I thought it would happen five years later, but then now it would be within five years. I think within or after two to three years, we'll see a stage change.

That would be the situation. Next question, please.

The gentleman on the first row. Thank you management.

I am Tony Zhang from CLSA. Recently, I can see that your company has cooperation with different subsidiaries in terms of equity.

For example, the vehicle business. Now, regarding investment strategy, in which areas will you cooperate with external parties?

Are you going to bring in new investors? Which new business development will you aim at?

What is the outlook and plan, please? Right.

In my results presentation just now, basically, I had already given clear explanation on this point. For vehicles, we would bring in many ecosystems, supply chain, working partners.

Now, at present, we would like to make our company more open, and then we hope to achieve win-win with more synergy in ecosystem development. In the past, we did not have this kind of equity or shareholding change, for example, M&A or spin-off or collaboration.

We did very little in the past, but in the future, we'll do more of this. We think that in this world, we cannot only rely on ourself fighting the battle.

We have to work with the ecosystem so as to achieve further development. Then each party can capitalize on its own strength.

That is a better method. I also explained about some new technologies.

You will notice that some technologies are developed jointly by us and our partners. That would be better.

All right. Next question, the gentleman over there on the first row, thank you.

My name is Hu Guoqiang. I want to talk about optics plus AI, that slide with the five components.

You have a saying that optics and AI being combined, this is a future era. Now we are in the perceptual dimension.

Just now, you also said that in the future, you will gradually extend from physical world to transmission, processing, and even intelligent agent. My question is, for Sunny Optical, in the future, regarding value layout, how is your plan and deployment?

For the long cycle, in which areas will you focus more on in your development? Thank you.

This is a very good question. This is also an important issue in our long-term strategic plan and consideration.

Internally, we have gone through a lot of discussion and consideration. Now, what we have described includes things that we have considered.

How should we explain in easier terms? I think I can talk about the change process of our thinking, and also our collaboration plan.

We work on mass production, optical products. I think you have much understanding.

In the past, you saw our large-scale production, highly efficient production, and automated production, large-scale production. Many of our technologies are developed towards this direction.

In the next stage, first of all, we'll continue to insist on this direction, because it doesn't only bring us cash flow, it is also a fundamental support for our long-term development. However, with the AI era, we know that between optics and AI, there can be favorable combination for joint development.

Then, of course, we have to give deeper thoughts to this matter. Regarding mass production, precise, large-scale production, we will turn it to production and system solutions.

Both will coexist. A few years ago, we started to make this point already.

That means we want to develop towards system solutions. The core is software and algorithm.

What is the difference with other people's software and algorithm? This is a problem that we need to solve.

We focus on optic perception, optic solutions. Regarding software and hardware, our core modules and optical instruments, well, they can be strongly connected with our algorithm and other capabilities.

We can enhance is efficiency and also it can achieve low latency. A few years ago, I already said that our microscale image detection AI glass software is even faster in recognizing image than many internationally acclaimed AI professors.

I asked how come that's the case. That professor said that this is definitely possible, because you are using hardware and optical parameters, efficiency can be enhanced.

Your algorithm speed is faster than mine. This is definitely possible.

Optical front-end hardware and the real software algorithm are combined. Then I think we have the advantages comparing with the pure software.

In the future, in future optical perception intelligence system, I think this will play a very important role. That's the first point.

Secondly, we're working on optic hardware and core components, so that means we use the optical method to reach evolution. Many technologies are actually common.

In the future, the algorithm will be multidimensional information collection. Now we are RGB, and then I think in the future, physical information and then spectral information and so on.

In the future, we'll be a perception intelligent agent on multidimensions. I think that is our broad development direction.

In the future, our glasses and our personal assistants will be equipped with these. Then the second area, well, if you refer to this slide, after perception, transmission, well, if you talk about these technologies, perception, transmission seem to be separate.

However, many fundamental technologies are the same. We are talking about the optic glass functionality.

We always consider different light sources and also optoelectronic conversion. Basically, when it comes to transmission, storage, computing, these are all related.

We have to make use of the unique characteristics of optics to do the work. In the future, in the area of optics technology, we will achieve more breakthrough and we will do more research, so that in the future, in the AI era, our capability and technology can meet the huge needs.

These are our two directions. One is the perception intelligent agent.

Second, on the foundation of optics, we will expand and layout the fundamental pathway, so that in the future, in the AI era, we will possess strong optical fundamental capabilities. We'll become a optical perception intelligent agent company.

Next question please, the lady on the second row. I'm Bernstein, Alex.

My question is about AI optic communication. In the future, will your products be within traditional optic modules or it will be in CPU packaging technology?

The direction is definitely the latter one. It is possible that in the former one, there might be some connection, but we will definitely develop towards the latter direction, because if I still focus on the former one, then it is not that meaningful.

In the PPT, you listed out some processes. In which area are you going to increase volume?

Is it about coating or the microlens? Have you set strategies to build research institutes, or is it true that your products are already in late-stage research and then next year, the year after next year, there will be commercialization?

I don't know how to differentiate the stage. Definitely, we are not in the planning stage, because as I said earlier, we already have colleagues doing the advanced work because it was early.

Now, there are more and more opportunities. People come and ask whether we can do this and that.

In last year, no one asked these questions. People still have a lot of doubts.

What is the value behind? People still have doubts, but this year, it seems that the situation is different.

The technology is different. There are some investor companies which are very good.

Their products are already used very widely. We have to seize the part in which we are more competent in.

We should not do things that we are not strong in. If you talk about optic modules, right now, the light is very small engine.

The others are points. We will connect this with optoelectronic conversion.

You just talked about optic fiber, matrix, and so on. Those are our major directions.

I believe, in 2027, 2028, there'll be a lot of new things coming out. Of course, we have to work with our clients.

We do have internal plans and schedule. I think it is not the right time to disclose.

Yeah. My next question is about handset.

Overseas handset customers, this year, may enjoy big increase in revenue. Is it true that it is related to North America variable aperture or that there is some progress with Korean customers?

I did not mention the North American customers and Korean customers. Definitely, it is a big customer overseas and there is some certainty in the growth.

You cannot say more, because otherwise, if I give too much details, I will be fined. Thank you.

The lady on the fourth row, because of time, this will be our last question. Thank you.

Good morning. I'm Wen Hanting from CICC.

Because of time limit, I will ask a more detailed question. This year, we can see that storage has caused impact to consumer electronics.

For high-end camera, this year, there won't be a big threat to the business. This year, regarding handsets, regarding pressure faced, if you do a breakdown in different price ranges, what do you think?

Thank you. Handsets, correct?

You want me to talk about handsets? For handsets, you are worried about sales decline, but as I already said just now, we will not suffer from a decline.

Of course, we have to work hard, and we will be able to achieve our established plan and targets. Just now, one question was about overseas big clients.

I won't talk about it. For our Chinese clients, they did not all decline.

There are companies which enjoyed very good growth. For that company, we also have very good business relationship.

With their growth, we also will enjoy a growth together. This is a very important point.

Such growth is high end as well. About that customer.

There is this only client for Chinese brand that is growing. At the end of last year, their plan was 50% growth.

In the first half this year, they will still have some new plans coming out. Under these circumstances, it is not easy to achieve such high growth, there will still be growth.

Then for storage issue, some people are of the view that in the second half of the year, it will be alleviated, especially starting from Q4. The point is for new storage solutions, are there any other new storage solutions that will come out?

I think that things will not happen all of a sudden. In Q4 last year, all of a sudden, they realized that there was not enough, that's not possible.

I think the tight situation has been there already. In the future, I think that there would be some alleviation.

For handsets, we do admit that this year, this business is not good. In fact, the situation is very painful.

Many people have changed to other business or industries. I think we have taken a lot of time already.

We will conclude our presentation here. Thank you for your participation.