Start Time: 2025-08-27 05:00:00

End Time: 2025-08-28 07:00:00

Question: Could you please elaborate on the underlying factors driving the rapid growth of the company's data center business? Additionally, what are the specific developments within each business segment?

Answer: In recent years, driven by sustained high-intensity investments in large-scale models, AI agents have gained widespread recognition and application, which in turn has further stimulated the demand for computational power in large models. Based on this assessment, we anticipate that the artificial intelligence sector will continue to experience robust investment trends in the foreseeable future. Leveraging our deep expertise in high-speed copper connectivity, the company has evolved from a follower to a technology leader recognized by clients, successfully integrating into the supply chains of major global customers and establishing a brand image synonymous with technological leadership. Concurrently, we are continuously enhancing our capabilities in power supply, thermal management, and optical connectivity products, thereby strengthening our technological competitiveness and achieving sustained breakthroughs on the client side. This strategic approach enables us to drive steady and continuous momentum across our product lines. Additionally, we are increasing investments in intelligent manufacturing to ensure high-quality delivery post mass production. By systematically enhancing our R&D capabilities, manufacturing proficiency, and digital operational management, the company is building a comprehensive core competency and competitive moat tailored for the AI era. Regarding client engagement, we have established relationships with all CSP clients, chip manufacturers, and equipment vendors. However, the depth of engagement varies across product lines and clients, presenting substantial opportunities for sustained growth moving forward.

Question: Could you please share the management's outlook on Lenny's future profitability following its integration into the company? Additionally, how does the company perceive the future development trends of the automotive business?

Answer: We have engaged with Leoni for a considerable period and, through in-depth analysis, have identified it as a company with a strong heritage and solid foundation. Based on these evaluations, we have decided to maintain the current Leoni management team to lead operations, aligning with Luxshare Automotive's overarching strategy for rapid growth. Together with Leoni's senior leadership, we have optimized the corporate governance framework to enhance organizational efficiency and management transparency, driving the company towards a goal-oriented management model while strengthening employee engagement. Throughout the integration process, we observed high employee enthusiasm, growing team confidence, continuous improvement in key management metrics, and positive feedback from clients. These transformations have revitalized the organization and positioned it well to empower global customers in the future. From a commercial perspective, Leoni's operational risks are minimal. The company has established manufacturing facilities across multiple countries, effectively mitigating geopolitical risks. Given the current situation, we believe the Leoni team has significant potential to enhance overall profitability and is on track to exceed our established performance targets ahead of schedule. Regarding the automotive business, we have invested in this sector for many years, developing a comprehensive product portfolio that is now entering a harvest phase. Whether in low and high voltage wiring harnesses, high-speed wiring harnesses, specialty wiring harnesses, or fast-charging connectors, we have achieved strong global momentum. Looking ahead, we anticipate that Leoni will play a critical bridging role in supporting Chinese enterprises international expansion. Certain products can be manufactured by Luxshare in China and exported overseas, creating mutual empowerment with Leoni. Client feedback indicates that our wiring harnesses are highly competitive worldwide, a confidence we firmly hold. Since Leoni's integration into Luxshare, we have secured a prominent position among global clients. Consequently, various controllers deployed domestically—including domain controllers for intelligent driver assistance and smart cockpits—as well as components covering powertrains and intelligent chassis systems, have also gained recognition internationally.

Question: Could you please share the company's outlook on AI edge computing business?

Answer: Leveraging Luxshare's global footprint, vertically integrated capabilities, robust delivery capacity, and quality assurance advantages, we will align existing team resources to meet global market demands and provide high-quality services to both domestic and international brand clients. Currently, acoustic and optical technologies are key focus areas in the market. Given the company's limited resources, we will strategically allocate more premium resources toward AI edge brands and products that we identify as having significant future potential. At present, leading AI brands are already our clients, and we will continue to invest resources to offer strategic support to emerging AI edge brands and products with promising prospects.

Question: How does the company anticipate the future trajectory of tariff policies?

Answer: From the current perspective, the global manufacturing landscape and capacity distribution remain relatively stable. Whether in Vietnam, India, or other Southeast Asian countries, the known tariff policies have largely been established. Undertaking another large-scale capacity relocation could lead to increased manufacturing costs and misalignment of supply chain resources. Previously, during discussions with investors, we emphasized that the extent to which a company is affected by tariff policies must be evaluated within the context of its corresponding global market segment, considering the completeness, leadership, and coverage of its global footprint. For Lixun, we have established capacity layouts across Southeast Asia, the Americas, Europe, and North Africa, encompassing diverse sectors such as consumer electronics, automotive, and data centers. This comprehensive presence enables us to effectively mitigate tariff impacts and maintain our industrial competitiveness.

Question: Could you please share with investors the potential impact on the company following the integration of certain assets from Leni and Wingtech?

Answer: Managing a company is akin to solving a complex mathematical equation. Across different regions—be it Europe, North America, Southeast Asia, or China—when the industry, business model, and operational platform are consistent, the potential for improving labor productivity remains universally applicable. Successfully addressing this equation enables us to focus on optimizing workflows and enhancing efficiency. Consequently, during past acquisitions of manufacturing companies, we have conducted extensive scenario simulations in advance to swiftly identify discrepancies in operational processes and pinpoint key areas for productivity improvement. The performance of the recently integrated Laini and Wentai teams has exceeded our expectations. Initially, our goal was to assist them in achieving break-even profitability; however, this year’s results may surpass our projections. Notably, Wentai’s system integration business has demonstrated exceptional progress. Following our team’s involvement, we conducted a vertical integration analysis of the component supply chain, implemented modular optimizations in product development, and engaged deeply in collaborative customer development efforts. These initiatives have significantly enhanced team cohesion and customer recognition. It is also worth highlighting that in the home appliance sector, due to customer acknowledgment of our advancements over the past six months, our designated projects have increased two to threefold compared to when we first took over. Consequently, we have expanded production capacity in the Philippines to better support our clients. Overall, we are highly satisfied with the current phased achievements in integrating these two major acquisitions and are confident that they will have a positive and lasting impact on the company’s future growth.

Question: Please provide a detailed update on the company's progress regarding the acquisition of Wentai System Integration business.

Answer: In early July, we successfully completed the delivery of our primary equity assets. Currently, except for assets in India, Hong Kong, and Indonesia which are still undergoing legal and regulatory procedures, the handover of domestic manufacturing facilities has been smoothly finalized. Following the acquisition of relevant Wentai assets, we initiated a comprehensive review of the industrial, business, organizational, and competitive aspects starting from the beginning of the year. In terms of business integration, Wentai once held a leading position in the ODM industry. Given the intensified competition and severe homogenization challenges in the ODM sector in recent years, and leveraging Luxshare's differentiated capabilities in intelligent manufacturing platforms, we conducted extensive in-depth visits and communications with major ODM brand clients post-acquisition to clearly define Luxshare’s role within the ODM industry. We reached a consensus that the ODM industry must prioritize the end consumer experience; whether in performance, cost, or delivery, delivering an exceptional user experience is essential to unlocking new growth pathways for the ODM sector. Consequently, we conducted detailed analyses and integrated Luxshare’s core teams to drive product innovation across key categories including smartphones, tablets, smart wearables, home appliances, and PCs. Our efforts encompassed innovations in materials and processes as well as incremental innovations in application features, which have garnered positive feedback from numerous clients. On the capability empowerment front, leveraging Luxshare’s expertise in intelligent manufacturing, we enhanced multiple factories including those in Huangshi, Kunming, and Jiaxing, effectively streamlining various cost components. Data from recent months indicate significant improvements across efficiency, yield rates, and the utilization of direct labor (DL) and indirect labor (IDL) resources. Luxshare maintains a respectful and forward-looking stance toward the long-term development of the ODM industry. By applying a business integration approach and harnessing Luxshare Group’s foundational competencies in acoustics, optics, electronics, thermal management, and magnetics, we empower clients and assist the industry in defining a broader range of products—an outcome highly anticipated by our customers. Additionally, we have revitalized the entire team’s confidence in the ODM sector, encouraging members to challenge themselves anew and thereby positioning Luxshare Communications at the forefront of the industry, which remains our steadfast strategic objective.

Question: Could you please share the company's perspective on the anticipated changes in demand within the consumer electronics market for the second half of the year?

Answer: Based on our direct engagement and comprehensive involvement across the entire industry chain—from components to modules and finished products—and our in-depth insights, we anticipate that market demand in the third and fourth quarters will exhibit a stable and slightly increasing trend. Additionally, we have observed that clients demonstrate agility in adapting to market challenges by implementing well-established sales strategies, which further reinforces our confidence. Consequently, we remain optimistic about future market demand.

Question: Could you please provide an overview of the scale and gross margin performance of the intelligent cockpit and advanced driver-assistance system (ADAS) products within the company's automotive business segment?

Answer: In the domain of intelligent cockpit-related business, we have established deep collaborations with solution platforms such as Horizon, Momenta, and Qualcomm. Based on the fixed-point projects secured to date, we currently hold the second position globally, which allows us to anticipate a gradual increase in shipment volumes in the coming year. However, whether operating under the JDM (Joint Design and Manufacturing) or ODM (Original Design Manufacturing) models, our profit margins are approximately half of those module manufacturers utilizing NVIDIA solutions, due to differences in cost structures and market strategies among the solution platforms we partner with. For this segment of our business, continued investment and development are required over time to enhance profitability through technological innovation, cost optimization, and market expansion.

Question: The company's data center business revenue experienced rapid growth in the first half of this year. Could you please elaborate on the sources of this revenue and the outlook for future performance?

Answer: Regarding the revenue growth of the company's Communications and Data Center segment in the first half of the year, approximately 60% of the increase was driven by high-speed electrical connectivity products, while the remaining 40% stemmed from power modules and efficient thermal management solutions. This growth is primarily attributed to our deep collaboration with leading key customers. Given the escalating demand for data center infrastructure driven by AI advancements, we assess that this segment holds substantial growth potential and offers promising prospects for future development.

Question: Could you please provide details on the company's capacity layout and expansion plans in India?

Answer: Luxshare Precision's capacity deployment in India is consistently guided by the objective of meeting clients globalized demands and is grounded in a comprehensive evaluation of multiple factors. Currently, the Indian manufacturing market predominantly caters to local mid-to-low-end demand. Nevertheless, the capacity we have established in India is sufficient to support the company's current and future requirements across key business segments, including automotive, communications, and consumer electronics. From a profitability perspective, the Indian capacity is unlikely to generate significant short-term profit increments. However, its strategic value lies in effectively addressing clients needs for localized production or diversified supply chains within India, thereby strengthening and deepening client partnerships and demonstrating our capability for a globalized production footprint.

Question: As the company’s diversified business segments continue to expand, what is the projected range for the proportion of revenue derived from major clients in the coming year?

Answer: The company consistently prioritizes the value created for its clients and the positive impact this has on the stability of its business operations. Currently, with the rapid growth of other client segments, it is anticipated that the revenue proportion from any single client will gradually and reasonably decline over the foreseeable future. This shift does not indicate a diminution of our value; rather, it reflects the continuous enhancement of value across other business units, leading to an optimized revenue structure. Whether it is our largest, second-largest, or third-largest client, each is regarded as an equally important partner. We are committed to delivering uniformly high-quality services and consistently maximizing our value proposition in client engagements. From a medium- to long-term strategic perspective, our development approach remains prudent and well-founded. In terms of risk management, we have thoroughly considered potential risks and have implemented appropriate measures, thereby mitigating concerns regarding our capability to manage and eliminate business risks effectively.

Question: Could you please elaborate on the company's planned or anticipated capital expenditure levels for the current fiscal year as well as for the foreseeable future?

Answer: It is anticipated that the company's capital expenditures will remain relatively stable from 2024 through 2026. Starting in the second half of 2026, a significant decline in capital expenditures is expected to occur.

Question: Could you please provide an update on the company's progress in the data center optical module business?

Answer: In the optical module business, we believe the current challenges lie primarily in business development rather than technology. We are actively working to integrate into the supply chains of leading clients. At present, Luxshare Precision's 800G and 1.6T optical module products are mainly delivered to small and medium-sized data center customers. Although we have yet to secure definitive business cooperation opportunities with top-tier clients, this remains a key focus of our efforts. Additionally, we are encouraged to observe that Chinese companies are at the forefront of the optical module industry, which reinforces our confidence in this sector.

Question: Could you please elaborate on the products that Luxshare offers in the AI eyewear segment to serve its clients? Additionally, how should we assess the potential revenue opportunities associated with AI eyewear in the future?

Answer: The company has established a comprehensive presence in the AI eyewear sector, encompassing both components—including structural parts, optical and acoustic modules—and complete device products. Currently, approximately one-third of the market segments within the AI eyewear complete product category are supported or serviced by our offerings. We maintain deep business engagements with leading global clients and are confident that the company is well-positioned to secure a leading advantage in this business domain moving forward.

Question: How does the company perceive the prospects of copper interconnect technologies such as CPC technology?

Answer: In the data center sector, external interconnections predominantly utilize optical technology, whereas internal cabinet connections primarily rely on copper. Amid the explosive growth in AI demand, we identify copper interconnects as one of the most mainstream solutions currently available. Notably, the CPC (Copper Printed Circuit) approach is poised to supersede traditional PCB boards in the next phase, emerging as the leading technology for high-speed signal transmission within cabling systems. Our organization maintains an industry-leading position in these technologies and has collaborated closely with all major clients through 3 to 4 years of product and technology pre-research. We are now transitioning from research outcomes to product development and scaling up for mass production.

• Luxshare Precision Industry Co Ltd