Risks and Countermeasures Associated with Concentration of Purchases or Sales
1. Procurement

The Company is a fabless professional IC design house, with its primary procurement item being wafers. In the semiconductor industry value chain, IC design companies, in order to secure reliable and stable production capacity, as well as to address considerations such as process technology, yield rate, production capacity, and delivery schedules, generally maintain long-term cooperative relationships with designated wafer foundries. This is a common practice in the industry. The Company has maintained a long-standing relationship with Powerchip Semiconductor Manufacturing Corp. (PSMC) and Supplier A, with whom cooperation has been smooth and stable. Looking ahead, the Company will continue to collaborate on new product development and mass production in order to mitigate the risks associated with procurement concentration.

2. Sales

The Company’s primary sales market and end customers are located in Mainland China. Given the vast territory of Mainland China and the variations in local business activities and trading practices, the Company has evaluated market characteristics and determined that leveraging distributors with local networks, relationships, and service experience in end-product applications can provide faster service to end customers and facilitate new market development.

The Company closely monitors the operations of its distributors and requires prepayment for transactions to improve cash flow turnover and reduce the risk of accounts receivable collection in Mainland China. In addition, the Company provides direct technical support to end customers to ensure timely understanding of customer needs, thereby reducing the potential risks of sales concentration through distributors.

Furthermore, with the future launch of genetic sequencing detection chips and other related image sensor products, the Company expects to broaden its sales scope and expand its business scale, which should help mitigate the issue of sales concentration among specific customers.

Impact of Technological and Industry Changes on the Company and Mitigation Measures

Leveraging its long-standing strategic partnerships with suppliers, together with its in-house R&D capabilities, the Company is able to quickly grasp industry trends and gain access to market intelligence ahead of its peers. As a result, technological changes and industry transformations have had a positive impact on the Company.

The Company’s core products have been widely adopted by customers, with market demand continuing to expand. To maintain competitiveness, the Company actively enhances its R&D capabilities, strengthens outsourced production capacity, closely monitors industry dynamics, and keeps abreast of competitors’ market developments, while implementing prudent financial management strategies.

Looking ahead, the Company will continue to monitor relevant technological changes and evaluate their potential impact on operations. The Company will make timely adjustments to reinforce its business development and financial position, thereby ensuring sustained competitiveness in the marketplace.

Future R&D Plans and Estimated R&D Expenditures
1. Future R&D Plans

The Company’s core technology lies in the research and development of CMOS image sensor–related sensing circuits, including analog, digital, and mixed-signal design, ranging from circuit design and process technology to optical simulation, in order to provide customers with optimal solutions. Tailor-made designs and processes can also be offered to meet specific customer requirements. Leveraging Taiwan’s advanced semiconductor processing capabilities, the Company is committed to developing CMOS image sensors for specialized applications. Future R&D plans include:

          A. High-performance CMOS Image Sensors
          B. High-resolution CMOS Image Sensors
          C. Global Shutter CMOS Image Sensors
          D. Low Power Consumption CMOS Image Sensors
          E. Design and development of application-specific sensors

2. Estimated R&D Expenditures

The Company’s future R&D expenditures will be allocated according to the scope of internal research projects. Adjustments to the R&D budget will be made based on project progress, technical complexity, and interim results, and will be reviewed and approved through internal management meetings.