Good afternoon, everyone, and welcome to Airtac's 2Q 2026 earnings call. My name is Derrick Yang, I'm the coverage analyst at Morgan Stanley.

Today it's our honor to have Airtac's Vice General Manager and CFO, Ivan Tsao, join us to provide more details regarding the 2Q 2026 results, business outlook, and the industry dynamics. Without further ado, let me pass it to Ivan for the opening remark.

Thank you, Derrick, and good day, everybody. This is Ivan Tsao speaking from Airtac, and welcome to join this conference call.

Please let me brief our second quarter result and current market situation. Pneumatic demand has entered a recovery cycle, and we expect this upcycle could sustain longer than two to three years.

Both shipment and order book amount had better than our expectation since the beginning of the year. Pneumatic component are replacing human beings' direction, and this industry can sustain single-digit growth annually once there's no too severe macroeconomic issues.

By continuous developing new products and new business, improving our brand image, we expect our annual revenue growth rate can be 10% higher than the industry growth rate. As pneumatic products support production line rather than in the end products, as long as customers launch new models or engage in production activities, there will be a greater demand for pneumatic.

In addition, recent geopolitical impact on raw material cost remain within the company's control and won't affect our margins too much. Through ongoing improvement in internal production efficiency and product sales mix, the operating profit margin this quarter continues to raise compared to past couple years.

Moreover, it seems that some investors have misunderstandings about our plans for future market share in the pneumatic industry. At present, we are targeting on 35% China pneumatic market share before 2030.

When we have around 35% market share, maybe there are some consideration at that time, we will base on the market situation and the sales progress of our new business, meaning guide, electrical controller, and electrical actuator situation, then decide whether to continue aggressively increase our pneumatic market share or optimize our product sales mix. This doesn't mean we will slow down our revenue growth rate or just fix our pneumatic market share at 35% in the future.

Just like we expected the market share to reach 30% before 2028 in 2010, and we had adjust to reach market share to be 35% by 2030 currently. We used to deliver conservative numbers to investors and adjust them when we almost there.

It's not necessary for us to provoke our main competitors at this moment. Basically, we can say our market share should be higher than 35% after 2030.

Next, let's announce our financial figures. Unapproved consolidated revenue for the second quarter of 2026 was RMB 2 billion and $620 million, a 25% growth year-on-year.

Gross profit was RMB 1 billion and $303 million, a 35% growth year-on-year. Gross margin was 49.7%.

Operating income was RMB 918 million, a 43% growth year-on-year. Operating margin was 35.1%.

Net non-operating loss was RMB $6 million, including 27 million the disposal loss of our fixed assets and 15 million subsidy from government, $6 million of interest income, and $1 million of asset FX gain. Income before income tax was RMB 913 million, a 51% growth year-on-year.

Pretax margin was 34.8%. Net profit was RMB 713 million, a 49% growth year-on-year.

Net margin was 27.2%. EPS for the second quarter of 2026 was New Taiwan Dollar 16.55.

The fixed assets disposal loss is caused by our demolishing three old one-floor factory buildings reconstructing another two new four-floor buildings to improve our production efficiency, resulting in a loss on undepreciated book value of the old buildings. Such activities won't affect our current production output and shipment.

Unapproved consolidated revenue for the first half of 2026 was RMB 4 billion and $812 million, a 24% growth year-on-year. Gross profit was RMB 2 billion and $354 million, a 34% growth year-on-year.

Gross margin was 48.9%. Operating income was RMB 1 billion and $646 million, a 44% growth year-on-year.

Operating margin was 34.2%. Net non-operating income was RMB $16 million.

Income before income tax was RMB 1 billion and $662 million, a 45% growth year-on-year. Pretax margin was 34.6%.

Net profit was RMB 1 billion and $298 million, a 43% growth year-on-year. Net margin was 27.0%.

EPS for the first half of 2026 was New Taiwan Dollar 29.91. Effective tax rate is around 22%.

Revenues from top eight industries for the second quarter of 2026: the biggest one still was electronics, it's around 27% to our consolidated revenue, it's around 20% growth year-on-year; battery was around 18% 18% to revenue, 56% growth; auto was 9% to revenue, 20% growth; packaging was around 7% to revenue, 17% growth; machine tool was 7% to revenue, 35% growth; general machinery was around 5% to revenue, 28% growth; textile was around 4% to revenue, 39% growth; and energy lighting was around 3% to revenue, it's around 7% decline year-on-year. For current market situation, more and more customers are showing positive views on future demand.

China government continues to release many stimulus policies and attempt to restore the confidence of people or enterprise. In addition, the China government proposed 15th Five-Year Plan emphasize intelligent manufacturing and industrial upgrading.

Both of those policies will drive demand in pneumatic market. As for the demand of the various sectors of pneumatic, the revenue of the electronics industry grew by 20% in first half of 2026, which is better than our expectation.

Airtac Airtac is not a AI player, but strong demand on AI-related devices need more pneumatic to support their production activities. We expect we could have double-digit revenue growth from electronics for the whole year 2026.

Battery demand, government have announced its development guidance for battery, and customers expand their domestic capacity. In addition, more countries have relaxed their restriction policies on China players, and those China players plan to expand their overseas capacity.

It still could be double-digit growth for the battery in 2026 and 2027. In addition, government still try to develop more ESS-related demand, it's still could pretty strong demand for battery in coming years.

We have improved our brand image on auto customers and enjoy better share gain in past couple years. Even the overall auto industry have not recovered significantly, we have had double-digit revenue growth for years.

We expect this still could be double-digit revenue growth in 2026 and coming years. Moreover, government stimulus policies for replacing old equipment to be new equipment, customers can get subsidy from government.

This policy is still in the market. Those traditional demand, like machine tools, general machinery, textile, and packaging, still can enjoy double-digit revenue growth in 2026.

However, we had some demand issue on solar or energy lighting in 2026. The government have taken action to coordinate the overcapacity issues in solar sectors, and we expect solar and energy lighting revenue decline rate will be much lower than 2025 in 2026.

Next, selective items for selective customers have pricing competition in pneumatic market, but it's still pretty rational or reasonable. We have increased the selling price in overseas market, but maintain stable pricing in China market just try to improve or sustain better relationship with customers and accelerate revenue from various new product and business.

The increased raw material cost still can be offset by our internal efficiency improvement, but OP margin still has to depend on revenue scale and capacity utilization rate. Even we can improve our margins by launching more high gross margin new items, improving our selling product mix, and continue to improve internal efficiency to reduce our production cost.

We define a 100% utilization rate based on working 24 days a month and 21 hours a day with two-shift operator working system. Our current pneumatic capacity utilization rate is around 100%, and the inventory turnover days is around 110 days.

It's very low inventory level, we still will maintain around 100% capacity utilization rate in third quarter of the year. For the development of linear guide, despite the overall weak demand and peers' aggressive pricing in 2000 in 2025, our shipment volume growth still could be more than 20%.

We also had 27% revenue growth in second quarter of 2026, and we have increased our capacity utilization rate from over 20% in 2025 to over 40% currently. Expecting to reach 50% utilization rate by end of 2026.

When we have 20% to 30% utilization rate, gross margin of linear guide is teens percent; 50% utilization rate, gross margin is 30%. Even 30% gross margin from linear guide is lower than our existing pneumatic business, but we use the same sales team to do cross-selling pneumatic and linear guide and don't have to spend too much additional OPEX.

Linear guide won't be a burden to our business from 2027. Our product quality is better than Taiwanese peers, and our pricing is lower, but we miss customers' expectation in 2020.

Our current sales strategy is to enhance our brand image and just compete with Taiwanese and Japanese peers. After achieve a better brand image within one to two years, we will design additional new spec to reduce product cost, production cost, and selling prices to compete with local China players, continuous to improve our utilization rate, enjoy better fixed cost leverage, and implement another aggressive pricing to compete with all the peers.

When we have 80% utilization rate, gross margin could be around 40%. It can improve our consolidated OP margin at that time.

When we have more than 90% utilization rate, we will consider change the current two-shift operator working system to three-shift. Current two-shift, the equipment have to rest by 70 days a year, and once transfer to three-shift, the equipment just have to rest by 20 days a year.

We can increase our equipment working hours and enjoy better output, better fixed cost leverage. Then we can launch another aggressive pricing at that time.

Basically, we still expect our linear guide revenue could be around RMB 3 billion in around 10 years. For our third business, electrical controller, it's a very good business for Airtac with low CAPEX and high gross margin as 60%.

We began to develop and launch this product in three to four years ago, and have had around RMB 400 million revenue in 2025. We also have enjoy more than 20% market share.

There will another three new series product will be launched by end of this year to support higher revenue growth from 2027. Total market cap of the electrical controller in China could be around RMB 100 billion with so many different kind of component, and we will pick up more high-yield product to develop it and launch it, and we expect we could have around RMB 3 billion revenue in around 10 years from electrical controller.

For the development of the semiconductors product, based on our strategy, we have not developed semi product by 20 2024, and due to the product can enjoy very high gross margin as around 70% and China government localization policies, and it's better for Airtac, or easier for Airtac to convince semi customers buying pneumatic product from Airtac. We began to develop semi items from early of 2026 to launch them gradually from 2027.

Current development progress is faster than expected, and we can launch some items from fourth quarter of 2026. Also based on past experience, used to take around one year for new product to have a better revenue contribution.

Currently, we can find some product that were developed for other sectors in past, but also can be used by semi customers. Such revenue has increased from RMB 5 million monthly revenue in around one year ago, and increase to current RMB 13 million per month.

We expect we could have around RMB 1 billion revenue from semi customers in around 10 years. We expect pneumatic industry can return to mid to high single-digit growth in 2026 for the whole industry.

We still can have additional 10% revenue growth from market share gain in pneumatic, plus the revenue contribution of linear guide and electrical controller. We still pretty optimistic of the overall operation of our business in 2026.

The shipment in the first half exceed our expectation, and maintains a strong year-on-year growth in July shipment. Even we are optimistic about the market demand in 2026, due to the short lead time of the pneumatic industry, we still provide guidance for 2026 based on a conservative principle, and will adjust them upward with the next quarter's operating results.

We raise our guidance for the whole year of 2026. Revenue growth will be over 20% in RMB terms, and it will be higher revenue growth rate once based on NT dollar terms.

If we have over 20% revenue growth, our OP margin will be around 34%, higher than our previous guidance. We have generate free cash flow for years, also have increased our cash dividend payout from 55% in 2025 to 50 to 65% in 2026.

Our payout ratio still could be higher in coming years. It's my briefing, and if you have any questions, we can discuss it.

Thank you.

Thank you, Ivan, for the comprehensive update and the view on the industry dynamics. Now we will open up for Q&A.

For those who are joining us today, should you have any questions, please type them in the text box, the screen that you are seeing right now, and I will read out the questions for you, and then Ivan will answer them one by one. The first question is from Lance Leng.

It is regarding the 15th Five-Year Plan from China. How is that going to influence Airtac, and is it going to have some implications to all end industries of Airtac's customers?

Basically, the 15th Five-Year Plan, government, they are emphasize the intelligent manufacturing and the industry upgrading. Especially for those new application, maybe they need more automation.

Existing traditional application, maybe they still take advantage of the government policies, they can get subsidy from government. Basically, from second quarter or third from third quarter or fourth quarter of 2025, after US government have the tariff policies to global countries, we have found some traditional customers, they back to China and expand their China domestic capacity.

Basically, once customers still can enjoy higher or better production efficiency, maybe demand for pneumatic still will be higher and higher. Thank you.

Thanks, Ivan. The second question is regarding the outlook.

It goes like, what gives the company a confidence in suggesting that this time the cycle will last longer than a typical two-year cycle, and what end markets are contributing to this growth?

Basically, once just predict the cycle for the industry, maybe we cannot exactly to predict which sector will be better or not. The reason why we have such expectation for this upcycle longer than two to three years: first one, this downcycle from late of 2021, maybe mostly affected by government some abnormal control and geopolitical issue for global countries restrict China players to expand their capacity in their countries.

Once China government, they have realized economy is too bad for too many years, they still have to restore people confidence, and basically, once economy is not good for too long, it will affect social issue, then to affect their political issue. You can find government have begun to release so many stimulus policies from 2024.

A year later, we can find some recovery sign for pneumatic demand. Customers, they just spend limited automation improvement what they have to in past three years.

When they find government continue to release more stimulus policies, they will spend a little more automation CAPEX gradually. You also can find in past 20 years, every upcycle, the demand could be V-shaped or U-turned, but this upcycle from late of 2024 or early of 2025, it just a moderate linear recovered.

Just a moderate linear recovery, it can sustain a little longer. Not just for such think or situation, also have government try to propose 15th Five-Year economic plan.

It also could be good for pneumatic demand. We say the demand in 2027 still could be a good year for pneumatic.

Thank you.

Thanks, Ivan. Next one is let me see, oh, could you repeat the numbers for the revenue contribution and also growth by sectors for 2Q?

The internet connection was with some technical issue, he couldn't catch the numbers.

Electronics: 27%, 27% to revenue, 20% growth in second quarter. Battery: 18% to revenue, 56% growth.

Auto: 9% to revenue, 20% growth. Packaging: 7% to revenue, 17% growth, 17% growth.

Machine tool: 7% to revenue, 35% growth. General machinery: 5% to revenue, 28% growth.

Textile: 4% to revenue, 39% growth. Solar and energy lighting: 3% to revenue, 7% decline year-on-year.

Hey,

thank you, Ivan. Next one is that given the offset between lower raw material prices and lower utilization in 3Q, can we expect the gross margin to stay above 48%?

We do plant production. Basically, utilization rate is just one of the factors of gross margin impact.

We have discussed this issue earlier. We still will sustain around 100% utilization rate in third quarter because the low inventory level.

Basically, gross margin won't be affected too much in third quarter, even is the low season of the year. Hey,

thank you, Ivan. The next one is, could you talk a little bit more about the new product in semiconductor in second half 2026?

How many SKUs, and who are your main customers? What's your new guidance for semiconductor in 2027 for Airtac?

We have not launched any specific items for semi customers. We also have discussed this issue earlier in this conference call already.

We schedule to launch from 2027, but based on current progress, we could launch couple items from fourth quarter of 2026. Our current monthly revenue from semi customers, all of those items just developed for other sectors, also can be shared to current semi customers.

We have not gave any guidance from semi revenue in 2027, even coming years. We just expect we could have around RMB 1 billion revenue in around 10 years.

Thanks, Ivan. Maybe I can quickly have a follow-up question on that.

Our target is to have RMB 1 billion revenue in 10 years, and at that time, what will be our market share, or in other way, what's the total market size for pneumatic components for semiconductor in China?

Currently, it could be around RMB 5 billion to $6 billion revenue from semi demand. Whenever Airtac enter a new sector or new industry, this industry overall market size should be declined because our pricing could be much lower than current market price, and maybe our peers have to decline their selling price to compete with Airtac.

Basically, once based on current demand volumes, maybe couple years later, the market size would be declined to 4 to 5 or just around RMB 4 billion in China semi demand. Hey,

thank you, Ivan, very clear. The next one is, may I ask about the 2Q OPEX?

Are there any nonrecurring items in the quarter driving the total OPEX amount higher on a quarter quarter-over-quarter basis? Also any thought for second half '26 OPEX or OPEX ratio that we can expect?

Once you based on RMB terms, our OPEX have not increased too much quarter-over-quarter, but all except selling expenses. Around 30% to 40% of our selling expenses could be sales team's bonus.

Sales team's bonus, the key KPI could be revenue growth rate, OP margin, forecast achievement. Basically, we have a higher revenue growth rate in second quarter, and margin also could be better in second quarter.

Sales team's bonus could be better than first quarter. Got it,

got it. Also, I think the second part of that question is regarding any OPEX ratio guidance for second half.

No, we just have annual guidance. Got it,

got it, very clear. The next one is, what are the three new products to be launched before end of 2026, and the estimated revenue contribution for those products in 2027?

Basically, those three-series electrical controller have been prepared and ready for sale. Still the same issue, whenever we launch a new items, used to take around one year, then a better revenue contribution.

We don't have any guidance for such product in 2026 revenue, sorry, 2027 revenue.

Got it. Those three new products would be electrical actuator, electrical controller, and...

With so many different kind of new product, please tell me what kind of or which new product are you indicated? Oh,

got it. I think the investor was saying that because in the prepared remarks, it seems to mention that there will be three new products to be launched before end of 2026.

Yes, it's electrical controller, three new three series.

Oh, okay, got it.

We have three new business except pneumatic: second one, linear guide; third one, electrical controller; fourth one, electrical actuator. We still continue to improve our brand image of linear guide and try to convince more customers buying linear guide from Airtac.

Electrical controller, we could have pretty strong competitiveness already, and we just launched five series product in around three years ago and enjoy RMB 400 million revenue in 2025. Those five series product revenue could be around RMB 500 million in 2026.

Fourth quarter of 2026, we will launch another three new series electrical controller. And 2027, we have another revenue growth engine from those three new series product, but the revenue contribution, how higher it will be, still depends on how fast of customers place orders to Airtac to buy those new series product.

We have not launched electrical actuator. Basically, we have developed most of the key parts of electrical actuator already, and we could launch electrical actuator in 2028 or 2029.

Then we not just can support more existing pneumatic customers from their pneumatic demand, linear guide demand, electrical controller and electrical actuator demand, and when we have electrical actuator product, we still can support robotic arms and humanoid demand on their product, not just support their production process. Thank you.

Thanks, Ivan. The next one is, do you see any downstream demand accelerating or decelerating from 2Q?

What is the revenue contribution from linear guides in RMB terms in 2026, and what is the current price gap of Airtac linear guide versus peers?

This investor's questions, he said the demand in second quarter was decelerated. Why?

How? Who tell him?

I think he was referring to the YoY growth for electronics and the battery sector on a YoY basis versus the first quarter, not on a sequential basis.

Basically, electronics, year-on-year-on base, second quarter of 2025, the electronics just growth 6%. Second quarter of 2026, the growth rate was 20%.

Why is decelerated? Linear guide, we had 27% growth in second quarter of 2026, and it just 10% revenue growth in 2025 of second quarter.

I don't know why this investor say the demand of second quarter or revenue of second quarter was decelerated.

No worries. Then, from the same investor, do we have a guidance or any view regarding the linear guide revenue this year for 2026 on a full-year basis?

No, we don't have any guidance for linear guide in 2026 because I have missed my guidance for five years, I don't want to give any guidance for linear guide in 2026. Year-to-date, we had 24% growth already, and just what I mentioned earlier, we continue to improve our brand image and convince more customers buying linear guide from Airtac.

Such brand image improvement, we think, is good enough, and still could be better and better. Then once linear guide peers, they try to raise their selling price, but Airtac still will keep similar pricing.

We can have a higher pricing gap to be lower than peers, then convince more customers buying linear guide from Airtac. In addition, current linear guide pricing situation, maybe most of linear guide players, they also produce ball screw at the same time, and ball screw demand or ball screw pricing have be raised obviously.

As we know, linear guide pricing still not have been raised across the list. Just smaller customers' pricing have been hiked.

Bigger customers, most of their demand, the pricing still keep similar. We are happy to see linear guide peers increase their selling price, then we could have a better revenue contribution from linear guide in coming quarters.

Thank you.

Then maybe a quick follow-up. What's the price gap of Airtac's linear guide products versus peers right now?

We began to decline or decrease our pricing from third quarter of 2024, and we also divided our customers to be four levels. The biggest level, the pricing could be around 20% lower than Taiwanese peers.

Got it. Then the next one will be, with the low inventory level, what's the plan for the utilization rate in second half versus the current 100%, and what's the sensitivity on the margin of, for example, additional 5% utilization increase, how much could that help on the gross margin side?

Basically, the utilization rate cannot be quantified to gross margin 1%, 2% higher or not. We do plan production, and different process have different situation.

We said our inventory turnover days just around 110 days at end of second quarter of the year. It's too low.

It used to be around 140 days in past couple quarters and 160 days in 5 to 10 years ago. Shipment was better than our expectation in past two quarters.

Even we have sustained around 110% utilization rate in first quarter and second quarter, but current China unit electricity expenses is pretty high, and we prefer to keep 100% utilization rate in third quarter. It's good enough to support our shipment forecast, but we can adjust our utilization rate easier, maybe in a week.

Basically, utilization rate still based on the shipment volume situation in next couple months. Basically, we will keep 100% utilization rate in third quarter to keep a little healthy inventory level.

Thank you.

Hey, thanks, Ivan. The next one is that looking into second half 2026 or 2027, which business segments do you perceive the potential growth accelerating or decelerating?

Basically, once AI devices demand still is good, we still can benefit from such demand, and customers need more pneumatic to support their production activities. In addition, in our electronics revenue, around 25% to 30% is smartphone-related, including international brand and local China brand.

As we know, this key international brand, they just launch special spec in this September, and regular spec or common spec maybe will be launch in first quarter of 2027. Based on past experience, when smartphone customers they launch a new spec, the pneumatic demand could be around three to five months earlier.

Once the customers launch the common spec of new smartphone in first quarter of 2027, maybe second half, the demand of electronics in second half still could be better than first half. Smartphone demand or smartphone revenue in first half was declined by low single-digit year-on-year, and we expect those common spec, the volumes could be higher than those special spec, which will be launched in third quarter.

Basically, maybe smartphone pneumatic demand will be better in second half than first half. Battery, we also have mentioned, China government, they still try to develop more ESS or battery application, and we heard from our customers, battery customers, their total demand still will be higher in 2027 than 2026, but it's still too early to tell the battery revenue growth rate year-on-year, because the base could be a little higher for 2027, but as the information we got from customers, it still could be double-digit revenue growth in 2027 from battery demand.

Auto still could sustain double-digit revenue growth, because we have improved our brand image, and we also can enjoy better share gain from auto customers, especially for those traditional auto customers. Thank you.

Thank you, Ivan. I think the next one is regarding the bonus for the sales team.

Is that calculated on a QoQ or YoY basis, or I think the question is that whether or not we are going to have that really high bonus expenses into the third quarter.

Sales team's bonus was accrued by monthly, and the revenue growth rate is based on year-on-year base. Budget achievement based on our budget for the whole year by month.

OP margin, we have additional bonus frame for OP margin level. What kind of OP margin they can enjoy, different kind of percentage of the bonus.

Basically, the third quarter quarterly revenue still could be lower than second quarter of the year because the seasonality of pneumatic, but once based on year-on-year base, third quarter still could be pretty strong result by year-on-year. Also based on such sales team bonus plan, third quarter bonus number should be lower than second quarter because the revenue amount, basically.

Got it. I think the next one is, could you repeat the target for the semi-related sales in the longer term, and what would be the price gap between Airtac versus the Japanese suppliers for these semi products?

From current items to support semi customers, but those items was developed for other sectors, also can be shared by semi customers, such items, our pricing could be around 60% discount compared to our biggest competitors. Those new items, the pricing had not finalized because we have not launched that.

Just to make sure that we get the number right, it's 60% lower than the Japanese competitors?

Yes, just 40% of our competitors' pricing. That mean 60% discount to our peers' pricing.

Got it, thank you. We expect

we could have RMB 1 billion revenue in around 10 years from semi customers.

Got it. The next one is, what is the expected growth rate for pneumatic markets in China in 2027?

It's a very short lead time business for pneumatic. We even cannot quantify the industry growth rate for fourth quarter of 2026, even in 2027.

Basically what we mentioned, we used to based on government policies, customers' feedback, and our experience to predict the industry growth rate. We just could say, or we expect, the whole year of 2026, the total pneumatic industry could be mid to high single-digit growth for the whole year, but we cannot give any quarterly numbers to the market, because it's the short lead time business.

Got it. The next one is, what's the impact of the rising social security cost in China this year on Airtac's OPEX and gross margin?

Basically, local government just announced and ask corporate have to increase the social security accrued percentage in this May. Different government have different policy: some government ask company have to accrue such percentage from beginning of the year, but some local government just ask accrue such expenses from this June.

Our total impact for such policy in second quarter was around 1.8% on OP margin level. In second half, we have to accrue around RMB 7 million by monthly.

What's the impact to monthly OP margin depends on monthly revenue, but basically we said such impact could be much lower than second quarter, because we still can continue to improve our internal production efficiency to offset or dilute such social security's impact in second half or from second half.

Got it, thank you, Ivan. The next one is, regarding the account receivables for customers in China, are they paying on time, or are you seeing any delayed in the payment?

Yes, basically we choose customers and choose orders, and we still can keep very high quality of our receivable situation. Maybe you can see our receivable balance could be higher than past couple quarters, and it's caused by we could have a record high monthly revenue in past four months.

Once based on our regular receivable turnover days, it's around 120 days, and receipt the past four months, our revenue in past four months was around RMB 3.5 billion, and it's very similar to our receivable balance at end of this June. It still can indicate our receivable still pretty stable or in high quality.

Thank you.

Thanks, Ivan. The next one is that according to China's NBS data, the manufacturing equipment FAI started to weaken in the past two months.

Do you see the potential risk of automation new orders slowing down in second half this year?

FAI sectors with so many different kind of component, pneumatic, we say second quarter always is the biggest season, or high season; third quarter could be mid to high single-digit decline quarter-over-quarter. Basically, even the seasonality still will affect our quarterly revenue in third quarter or in second half of the year, but based on year-on-year base, it's still pretty strong, because it's the similar seasonality in 2025.

Once the demand is weaker in coming months or coming quarters, we still can get more shares from the market to sustain pretty good revenue growth or revenue number in coming quarters. Thank you.

Thanks, Ivan. I think we have answered most of the questions online, and for interest of time, we are going to wrap up the call here.

Thank you, everyone. Thank you, Ivan, for joining us today.

Should you have more questions, please feel free to reach out to me or Ivan directly. Thank you for joining us today.

Thank you, Derrick. Thank you, everybody.

Have a good day. Thank you.

Thank you.