Horizon Robotics Stock

Greetings, ladies and gentlemen. Welcome to Horizon Robotics 2026 Interim Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Mrs. Xuan Jiang VP and Board Secretary and Head of Investor Relations of Horizon Robotics. Thank you, Xuan. You may begin.

Thank you. Good evening, ladies and gentlemen. Welcome to the investor conference call and audio webcast hosted by Horizon Robotics. On today's call, we have Dr. Kai Yu, Horizon's Founder, CEO and the Chairman of the Board. and Mr. Lei Wang, CFO and Head of the Capital Markets. We will begin with Dr. Kai sharing our latest strategic and business development. This will be followed by late review of the company's financial performance in first half of 2026. We will then proceed to the Q&A session.

Before we start, we want to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of resources outside the Horizon Robotics. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to the company's financial prepared.

I will now turn the call over to our CEO, Dr. Yu.

[Interpreted] Dear Investors, good evening. I'm Yu Kai, Founder and CEO of Horizon Robotics, I'm delighted to be with all of you online on the last day of August to report on our operating results for the first half of the year.

Let's start with -- let's start with the industry. Frankly speaking, China's automotive industry in the first half of 2026 showed a clear structural divergence of domestic demand under pressure as well as high-growth [indiscernible]. According to CPCA data, domestic passenger vehicle sales weakened significantly in the first half with retail sales down by more than 20% year-on-year.

As far as I know that some domestic automakers, they have been declined by more than 30%. On the other hand, export figures were very strong with vehicle exports by more than 65% year-on-year in the first half setting an all-time high, such a complex internal and externally environment poses challenges to every company's operation. Against the this backdrop, Horizon Robotics recognized the revenue of RMB 2.455 billion in the first half, up by 32.9% year-on-year, with gross margin at high level of 66%, while maintaining saturated R&D investment. We have also focused on steadily improving our operating efficiency. The combined growth rate of Horizon Robotics R&D study and administrative expenses in the first half was 23.3% lower than the growth rate of revenue and the gross margin.

This shows that our operating leverage is emerging as revenue grows rapidly. Mr. Wang Lei will walk you through more detailed numbers shortly. I would like to share with you today is more about is some of my reasons.

On the advanced intelligent assisted large market, even though the overall auto market is relatively weak in the first half, the automotive intelligence penetration rates continue to rise. The data we see shows that the intelligent assisted driving penetration rate for passenger vehicles in China has already hedged 76.1% reaching yet another new level compared with 2025 up by 8.5 percentage points. Domestic advances are, of course, the primary driver of this growth but you may not have noted that this year, the intelligence assited driving penetration rate among joint venture automakers of an extremely high level of 80% for the first time, indicating that the intelligence assisted driving to become a necessity in China's passenger vehicle and market for the situation with joint ventures. I will talk specifically about a little bit later.

As for the advanced system, the penetration rate of models [indiscernible] urban and [indiscernible] function has reached about 23%. Please note that denominator here is not a sales of intelligent assisted vehicles, but sales of all passenger vehicles. In other words, among all new cars sold in the first half of this year, nearly 1 quarter was already equipped with urban and [indiscernible] function. And looking at the industry data, during May and June, the penetration rate of advanced intelligence that this is driving already surpassed this level reached at the end of last year. Showing that advanced intelligence business driving [indiscernible] strong growth momentum.

I think the capital markets may make some confusion about the role we play in the advanced intelligence and driving during the first half of this year. In this arena, Horizon is on the offensive, not the defensive. We only began mass production of highway and [indiscernible] solution last year and didn't [indiscernible] to mass producing urban and NOA solution until the end of the year. Take a look in just past 6 months -- in the first half of this year, our market share of computing platform, featuring urban and NOA functions rose to around 23% among Chinese domestic brands, an increase of roughly 5 percentage points and our ranking jumped from the third to the second place within half a year now only after 1 U.S. tech company, although with the U.S. tech company stood at place, this market share fell by nearly 10 percentage points ahead with the full year of last year.

So next, I would like to share with you on our business model. First is about the Wintel and also our expansion business model on [indiscernible] Android. So first of all, when it comes to retail, we have SoC and also our software. And this is just like the sales model of Wintel. So that is on our direct and revenue. But in the software platform, we have on GP and also [indiscernible] sales model is more like Microsoft. When we involve L4 and L5 and then we believe that our business model and will more becoming subscription model. And meaning that in addition to the Wintel, and we also have the ARM plus Android, the expansion business model.

It means that we can use our IP to earn our revenue. So that is our more indirect revenue. So in wrap up, we have both direct revenue plus our indirect expanded revenue coming from our IP licensing. So in terms of direct revenue and we have our SoC plus our software, our market share will continue to rise. But at the same time, we have our expansion business model through our IP licensing and it can help us to secure long-term partnership and stickiness from our customers. But at the same time, we can continue to keep our extremely highly competitiveness.

So we believe that our competitive edge will come from both our direct market share and also our expanded market share. We will continue to capture the market share from our competitors. And I also believe that the growth rate will be very high. So just reminds me of how share shifted in the ADAS market over the past few years. Do you know what our share was 4 years ago in 2022, less than 5%. And what about the first half of this year?

It broke to 50% for the first time. And our market share is twice that of the #2 player. going from under 5% to 50% took us only 4 years. I think it will be the same in the advanced market. And by next year, Horizon Robotics SoC, that is our direct market, plus a make us in-house chips that Horizon Robotics IP, that is our expansion market will continue to take the #1 position in the advanced market.

In the short term, Horizon Robotics and automakers will together capture more share. And in the long run, how will this industry landscape evolve? My observation is this industry has a relatively low ceiling where the technology curve quickly flattens the lead players technology soon approaches perfection and it becomes hard to advance any further from the top, then that industry's ultimate landscape will most likely be fragmented. No one can build an effective moat.

So everyone falls into to competition and ultimately can only compete on price. But if the industry truly offers a long slope with fixed node with a very steep technology curve and a very high ceiling, then the advantages of the leading companies will keep expanding. The reason is simple, the lead of the top companies multiplied over a longer period, ultimately build a deep moat that latecomers cannot.

I believe intelligent assisted driving is exactly such an industry. From 2019 to 2020, Horizon launched the Journey 2 and Journey 3 SoC, focusing mainly on ADAS products. Then from 2021 to 2023, we launched the Journey 5, our first SoC exceeding 100 tops and began building AD solutions based on rule-based algorithm with R&D expenses totaling more than CNY 5 billion. From 2024 to 2026, we have rolled out 5 Journey 6 Series SoC and 1 integrated cockpit driving fusion, Agentic chip in rapid succession, along with HSD 1.0 and 2.0 and our first agent.

With R&D expenses totaling nearly CNY 15 billion. Look at where we stand today, L3 to L5 autonomous driving has yet to be realized, and the number of competitors has already do. So it means that it's not that highly competitive landscape. So in the long run, I believe that for an intelligent driving player to stay in the game, the first need a world-class SoC and algorithm capabilities. And then every player also needs a stand for long distance rate, the strength of long-term investment and the ability to iterate continuously. Frankly speaking, this is far from easy. Horizon Robotics possesses all of these attributes, and I'm very confident that Horizon will capture larger share in the end game of the advanced market. This is my long-term view of the industry.

We have just mentioned that a leading company's progress curve must be very steep in order to ultimately win out over the long term. As you may know that compared with other in-house and third-party software and algorithm suppliers, Horizon was arguably the last to enter the advanced market. We entered late, but we have built up a strength over time. And now we are delivering on with force. And according to some third-party evaluation, and we are already taking the leadership over other competitors.

For example, in terms of the takeover ratio, and we are already better than our competitors. HSD version 1.0 released last November and HSD version 2.0 released at the end of this year have demonstrated powerful scenario and driving capability, competing with the and delivering a very smooth driving and riding experience for our users. A while back, we organized a series of test ride and test drive events for our investors in Beijing, Shanghai and Shenzhen, allowing everyone to choose their route in the most complex downtown areas.

I heard that some people take the morning rush hour to drive to the biggest hospitals. Some chose to make new terms on very narrow speed like road and others go to Shenzhen's urban villages. I believe anyone who has experienced it can appreciate the difference between our HSD and other intelligent driving solutions on the market. I think the underlying reason is that over the past 11 years, Horizon Robotics has accumulated world-class SoC and algorithm capabilities, which are unique and scale across the entire industry. This kind of comprehensive capability combining software and hardware is perhaps matched only by Tesla. So that's why Horizon Robotics is sometimes called the Tesla [indiscernible]

So as for the collaboration with the different domestic and international brands that everyone is very interested in, especially for HSD. What we can review now is that the progress is pretty good. By the end of the year, basic and -- will account for 70% to 80% of the entry-level AD shipments as the largest new energy vehicle manufacturer and our high computing power SoC plus HSD will also begin mass production and delivery on their advanced platform within this year. So take this year, for example, and we have already seen that our HSD has been installed for Cherry and also China. So actually, our HSD is already available on the top 5 highest volume Chinese brands.

And also for the joint ventures, you know that the largest joint ventures are Toyota and also. And so our HSD has also become the design for these 2 joint ventures. So by the end of this year, we are going to see the mass production and delivery in all these Chinese domestic brands and also the JV brand. So we can see that today's result is the fruit of our input investment and also state-of-the-art technology. And we also believe that this year, because of our HSD, thanks to our R&D investments and high-level SoCs and software and also the design and win will continue to bear more fruit going forward. It is also estimated that starting from next year, thanks to the mass production, and we are going to see our scale up in more advanced markets.

So currently, a lot of investors are also very concerned about the current price war, and we have seen the selling price of vehicles is also dropping and also the profitability is also dropping. So under such circumstances, how Horizon can keep high quality growth. And as a matter of fact, we believe that the current price war is providing a very good opportunity for Horizon because we have our cost and effectiveness, and we can provide high-performance technologies and also very excellent customer experience.

And we believe that with our SoCs and the software and the market can become more rational. And we also firmly believe that in the end game, only 20% or maybe less than 20% of the leading companies can have the in-house R&D capabilities. A great majority of the OEMs will adopt the technologies or products from the independent third party like Horizon. We believe that such advice will accelerate this process, which is beneficial for provider.

So next, I would like to share about the JV and also overseas expansion. In recent years, and as you know, JV has faced fierce competition from domestic brands. But what hasn't received much attention is that the market share of JV brands has actually stabilized at about 35% and has held there for nearly 2 years. Among the existing JV brands plus Tesla, roughly 75% of mass market models, while all the JV luxury vehicles combined account for a little bit more than 20%. The JV brands also have an urgent need for intelligent upgrading. And unlike the past part of overseas technology implemented in China, this round of intelligent technology upgrading comes largely from Chinese suppliers or Chinese partners.

Horizon's partner ecosystem enjoys a very strong reputation in China and has already been the most thriving and active in the market. So as we face opportunities with JV brands and overseas markets, and we have likewise maintained our position as the king of the ecosystem. So now we are working with the former Continental nowmovile. -- and we also have the partnership with other Tier 1 suppliers like SPMo and also Aptiv and also Bosch and also Caron, that is a JV we established with Volkswagen and also Dentsu. So we believe that we are becoming the preferred supplier for many vehicle manufacturers.

So next, among these JV automakers, through Caron, our advanced intelligent assist driving solutions built upon Horizon's Gen 6 Series SoC and core intellectual property will be deployed this year in 7 all new models from Volkswagen and Volkswagen and Volkswagen A, and we'll begin expanding more broadly to Volkswagen's mainstream EVA architecture next year. So all together will be about 20 models. So in the future, you will see that the models from Volkswagen with the price range and about RMB 40,000 to RMB 50,000 will be using Horizon Robotics and Urban and OA. So you can see even in terms of pricing, they are also going to be more competitive.

And also building on our foundation model, we are also empowering to bring Level 3 and Level 4 autonomous driving capabilities in the market next year. And some time ago, both sides also deepened our cooperation at the capital level, Horizon redeemed a portion of the convertible bonds held by Volkswagen, reducing equity dilution by 4.9% for all shareholders. And then Volkswagen car meanwhile converted its shares early to become an important strategic shareholder with a 9.9% stake and voluntarily agreed to a 12-month lockup. So you can see the depth and the breadth of our cooperation with the local market continue to grow.

Also our cooperation with Toyota based on the journey. Also entered mass production in the first half of the year, firstly launched on GAC, Toyota's highest volume entry-level model. Going forward, through DENSO, we will also serve its most mainstream vehicle platforms and deliver advanced intelligent driving solutions, which are expected to begin contributing to sales the year after next. Volkswagen and Toyota and Honda accounted for 50% of the sales volume of all JV automakers and through partners such as Horizon, DENSO and we have already opened up this avenue of growth.

And next, we can talk about going global, which may be a very important trend in the auto industry in the first half of this year. The top 6 auto groups by export sales are highly concentrated and all together accounting for more than 70% of the total share. Meanwhile, there are basically only 3 intelligent driving suppliers capable of supporting these Chinese automakers going global and Horizon is one of them. So you can see this is an even higher level of concentration. So we have already secured 24 brands and nearly 60 export vehicle models covering the top 6 auto groups by export volume.

In terms of the scale, so the new export model we have won over the past 12 months should already account for a very considerable share of our future total exports. So as you may also see in recent announcement by the Bosch and the new HCT, they have each built a brand-new generation of entry-level products based on the J6 SoC. So gaining design wins in the tens of millions and millions of units, respectively. And they have also covered major global markets, including China, Europe, Australia, New Zealand, Latin America, Middle East and Asia Pacific.

So for the J6V, we have already secured the total number of the order of 20 million units. So why does Horizon place such importance on overseas entry-level intelligent driver market? -- because in the overseas market, ADAS is still the mainstream. So we want to secure this mainstream customer base. And also because technology ecosystems are also very sticky. So we hope that by firmly capture the market with entry-level intelligent driving products, and we can gain the trust from the customers.

And also, we can establish a unified software and hardware foundation for the future upgrade of the overseas market to advanced intelligent driving and then we can secure the core gateway for customer onboarding.

And also more importantly, people used to think that the overseas market has low advanced intelligent driving demand. But recently, we have observed that this trend towards upgrading to advanced intelligent driving or EV is beginning to emerge in overseas market as well. 6E and J6M SoC have already been designed into multiple nominated models that are being sold overseas. And although in the overseas market, they are relatively slower than that of the Chinese market, but we can still see some overseas automakers are beginning to plan EV-related vehicle models such as in France and in Germany and also in Japan.

As one of the most international companies, Horizon supported by overseas ecosystem partners ranks the first in the cooperation lineup of many mainstream overseas automakers. So this is the second part of my observations that I would like to share with you.

The third one, I would like to talk about Intel, as I mentioned just now as well as the ARM plus Android business model. So we would like to expand beyond the automobile based on such a business model. So in terms of the Wintel, Horizon has both SoC platform and software platform that is more like the business model of Wintel. And then we also have our HSD and also for our software business model. That is more like the new generation operating system for automotive. So their business model is more like Microsoft once HSP evolves to L4, L5 autonomous driving and the -- becomes assistant in car owners life, I believe the business model for automotive software will shift to charging users by mileage or on a subscription basis, just like pricing models of Microsoft 365 and other software products today.

And then for our ARM plus Android IP licensing model and over the past many years, we have continuously licensed our technology to a number of world automotive customers, supporting capable customers in their in-house development efforts. These include the world's largest new energy vehicle maker, one of the largest auto parts groups in the world and China's largest JV automaker. This business model has very strong stickiness, which roots our customers' products deeply in Horizon's technology ecosystem.

So they keep working with us for products generation after generation. For example, Horizon, our joint venture with both market and the aforementioned one of the world's largest global partner groups have both continued to license algorithm, services and software from Horizon in the first half of this year, and they remain among one of our top customers. I have always believed that the ecosystem should be for the strong because we believe that we have very strong technologies, which can help us to play a leading role. And at the same time, equally important in the ecosystem, which should be open and also helping our partners in order to achieve an all-win result, then partners are willing to work with you because you can genuinely empower them chips software. And then this is the only way we can grow the pie together.

So beyond automobiles, we have found that the underlying technologies developed for vehicles have strong applicability and extensibility. They can enable all kinds of visit real-world applications on terminal devices. For instance, we have helped embodied intelligence companies empower robots, wheeled robots and also the quadrupled robots and more, help home intelligent agent companies create a household job that becomes a true home assistant. And also, we help unmanned logistics vehicles improve logistics efficiency.

To give you a more concrete example, through our associates, Robotics, we have already empowered over 100 downstream robots categories, serving over 400 customers and covering more than half of the embedded intelligence companies in China. Horizon Robotics focuses on the DPU and AI foundation models from automobiles to robots and licensing them externally under an ARM plus Android model. DE Robotics meanwhile places customers across thousands of industries to achieve the commercial monetization. Horizon Robotics and DE Robotics have rapidly become the greatest common denominator of domestic robot computing SoC plus model foundation.

Our open source embodied models have so far been tested or used by more than 100 academic institutions and companies, including NVIDIA, Meta, Microsoft, , Alibaba, Unit Robotics, Tsinghua University, Zhejiang University and Shanghai University. Within 6 months, we will also release the next generation of brain and -- models that integrate a world model with a general purpose understanding model.

Looking ahead to the second half of 2026, we are confident of reaching a 70% to 80% share on our core customers' entry-level AD vehicle models and of completing mass production and the delivery of high compute SoCs plus HSD on their urban and OA models, the cockpit driving integrated solution based on the Star chip and --, we also entered mass production as scheduled in the fourth quarter of this year, maintaining our record from the very initial design to the mass production in a very quick -- in a very few months.

Friends are interested in the progress of the Journey 7 SoC, which is our strategic product targeting L3, L4 autonomous driving scenario. On the technical front, Journey 7 has achieved several key breakthroughs in architectural design. Not only has its computing power increased substantially, but more importantly, it has been natively optimized for the local deployment of our next-generation HSD intelligent driving model with a larger number of parameters as well as our local LLM cockpit model. R&D is currently progressing smoothly, and we expect to complete the tape-out early in the second quarter of next year.

Even though the product is still in the R&D stage, Journey 7 has already attracted tremendous attention in the market with a number of leading automakers and Tier 1 suppliers proactively reaching out to us to express their interest in collaboration. This indirectly confirms the market's high expectation for this SoC, which represents the most advanced level in the industry. We are confident that together with these partners, we can make Journey 7 a new world benchmark for autonomous driving chips.

So actually, in terms of L3 and L4 SoC, actually, we are also working with another partner to test our L4 robotaxi. So we hope that we can continue to test the potential of the application of this advanced intelligent driving software. But actually, when it comes to L4, whether it is a private car taking from A to B or it is a robot taxi and taking it from A to B, it doesn't matter at all because in terms of the underlying foundation, they are coming from the same source.

Even though the industry environment remains full of challenges, based on our assessment of the business landscape in the second half of the year, we are confident of achieving full year revenue of more than CNY 5 billion. We will also build a solid pipeline for next year. So starting in 2027 at Horizon SoC, together with the automakers in-house chips supported by Horizon's IP, which means direct plus our extended market share, we will collectively rank the first in the market share in the advanced segment.

So here, you can imagine that Horizon's own advanced SoC plus the extended market share, which is the automated in-house chips supported by our IP and also coupled with our applications going forward and the entire ecosystem put together, which means that Horizon Robotics will be even more influential in the market.

Thank you, Dr. Yu. I will now -- sorry, go ahead.

11 years ago, we set out from a very small idea. And having come this far today, we have proven that this pathway works. The road ahead of us is still very long, so we need to remain humble and open-minded and altruistic and continue to do what needs to be done in a solid and solid way. Thank you all.

Next, we would like to invite our CFO, Mr. Wang Lei, to give us a brief overview of more detailed numbers for the first half of 2023. The floor is yours.

Thank you. Thank you, translator, and thank you, Dr. Yu and Xuan. I will now present the key financial results for the 6 months ended June 30, 2026. To be mindful of the length of this call, I will focus on the main items in our discussion today. I encourage participants to refer to our earnings release, which was posted on our Investor Relations website for additional details. Back in July, we published a preliminary range of our first half financial results. I'm pleased to announce today that both our revenue and gross profit for the reporting period hit the upper end for the guidance that we previously provided.

Specifically, for the first half of the year, we recognized revenue slightly less than RMB 2.1 billion, representing a year-over-year growth of 32.9% compared to the same period last time. Our gross profit for the first half came in around RMB 1.4 billion, also reflecting year-over-year growth of 32.9%. This implies that consistent with the same period last year, we remain and sustain a robust gross margin of 66%. Our revenue is composed with revenue from product solutions plus license and services. Despite a 20.2% year-over-year decline in domestic passenger vehicles retail in the first half of the year, our shipment volume but this headwind, growing by 12.1% to reach approximately 2.2 million units, driven by our gains in the market share.

As a result, revenue from our product solution reached RMB 225.6 million, representing year-over-year growth of 14.8% and turning to our license and service revenue, Horizon and Group world's largest automotive parts company continue to license our algorithms and software and both remain among our top 5 clients during the period of time. Our license and service revenue reached RMB 1.1 billion, representing year-over-year growth of 52.7%. As we mentioned earlier, our overall gross margin stood at 66%. Breaking this down by segment, gross margin for product solutions was 36.2%, while license and service delivered a gross margin of 90.4%.

As we shared with you before, in the near term, we have been bundling the sales of domain control units together with our core products in order to accelerate the mass production ramp-up for HSD and early clients. This bundling of noncore products has had a dilutive effect on our gross margin. However, this is a onetime impact. Excluding this onetime effect, the actual gross margin for our Product Solutions was 48.1%, an improvement of 3 percent points compared with the same period last time.

And now let's turn to the major expenses. The R&D expenses include SBC came in slightly more than RMB 2.7 billion. Total combined SG&A expenses were RMB 634 million. Together, 3 expenses amounted to RMB 3.3 billion, an increase of approximately RMB 650 million compared with the same period last year. Essentially, the vast majority of this increase was driven by the cloud-related training costs. This resulted in operating loss of RMB 1.7 billion. If we add back noncash items such as SBC, we arrived at an adjusted operating loss on the non-IFRS measurement of RMB 1.3 billion.

And finally, let's turn to the bottom line. As we noted in our previous earnings preannouncement, the fair value change arising on the carried convertible loan resulted in a substantial gain for us. Under IFRS, the company recorded a profit of RMB 3.8 billion for the reporting period. If we exclude the fair value change from this convertible loan, adding back the impact of SBC and deduct the onetime impact from the deconsolidation of D-Robotics, our adjusted net loss to RMB 1.67 billion.

And now this concludes our management's presentation. I will now turn the call over to the operator to facilitate Q&A session. Please.

[Operator Instructions]

The first question is from Tim Hsiao of Morgan Stanley.

[Interpreted] So my first question is about the project wins into second half because with the chip shipment weighted to second half this year, could management share a bit more details about the project wins at the major EV new platforms that management just briefly touched on. In the meantime, could I also confirm that which product trains would drive stronger revenue growth? Would it be like a Journey 6 midrange or the high-end 6P? Any additional colors about the upside coming from the new design breakthrough would be highly appreciated. That's my first question.

Thank you very much for your question, Tim. So as we just reported to everyone in the second half of this year, we will see the volume ramp-up on the entry-level AV platform of a leading NEV company and J6M will be the main driver in terms of the volume. But sales volume growth is only part of our revenue growth. What further drives our high revenue growth is our higher-value products, high compute G6 and SoC and also 6P in particular and also 6H and also our HSD software solution.

So it's also related with our new design and with high computer chips plus an HSD 600, there has been exciting progress. We recently made breakthroughs with 2 leading Chinese automakers -- our HSD platform now covers the top 5 Chinese domestic brands and the top 2 joint ventures, covering almost all of the highest volume customer groups in this market. So if you look at the entire industry, I believe no other company can achieve such positioning across both the leading domestic brands and top 5 and joint venture at the same time. And Horizon is very unique. These design wins will begin mass production at the end of the year, and we expect them to deliver significant revenue contribution next year.

So according to the recent media, you can see has launched their U.S. mono ID6, which is also equipped with our chip and also HSD software solution. So if we put them together, next year, next year and also going forward, we will see significant ramp-up of our revenue.

My second question is about the return on investment and also profitability. As Horizon stepped up 2026 budget for higher spending on both on vehicle and -- side large model training and the next-generation chip development. How would you balance return on investment? And when should we expect a visible inflection in Horizon's profitability? That's my second question.

Regarding the investment, and we will continue to maintain our gross margin level. And our logic and our observation is that we need to continue gross margin at a very high in order to keep our competitive edge in order to lay the foundation for continued high investment going forward because this industry is a long-cycle industry. And now we have seen our H1 revenue. That is thanks to our R&D investment and also our implementation. So today's revenue is fruit by investments made over the past few years. So the financial statements reflects the realization of past investment. R&D investment determines the ceding of future statements.

So -- and we must maintain high intensity and saturated investment, and we have no dilution of luck when it comes to securing ultimate victory in the future because if we do not make a high level of investment in the future, we will be restricted. So we will keep a very high level and saturated investment in the long term. It is not an easy job. But if we do not make a very high investment in R&D, for example, so if we only make investment of just RMB 1 billion or RMB 2 billion in R&D, so we cannot see a very high bar or high threshold in this industry. So it also means that it is going to be a very easy game for everyone. So that's why we believe that our industry has a very steep technology curve. So that requires resilience, strength and integration.

And for example, so with R&D, so if we only have low R&D, maybe it's not going to affect our P&L. Maybe it is a very good working in the short term. But actually, this is a very fast-moving technology. So we need to make investments for our future. So for example, with RMB 10 billion in revenue and a 60% gross margin, that means RMB 6 billion in our gross profit. So if we make all these gross margin into our R&D for our SoC chips and also AI, then it is going to exceed that of the vast majority of other automakers. -- is it good or bad? Of course, it is good for us because if other automakers cannot bear it, then it means that the technology will be dominated by the independent third party like Horizon. That is beneficial and conducive for us.

So this is the first part of our investment. The second is about how to make improvement on our profitability. So we would like to align the objectives like before. We will continue to work hard to reach the breakeven about 2028.

The next question is from Yuqian Ding of HSBC.

[Interpreted] Two questions. First on HFC with strong major OEM progress, how should we think about HSC volume in '26 and '27? And what are the key milestones for that ramp? Second question is on Journey 7. Scheduled SoC tape-out completed scheduled in second quarter next year. How should we think about the time line and contribution from tape-out to customer SoC and the mean for revenue and volumes then.

[Interpreted] Thank you for your question. So regarding the HSD, so we can see that with the gradual mass production of HSD and the rapid improvement in its technological performance, HSD has already become Horizon's core industry name for OEM customers and the market reputation continues to rise. With the domestic Chinese OEM brands, we have already achieved design win breakthroughs with all the top 5 domestic automakers, covering the most the job -- the majority of the domestic brand sales volume, completing full coverage of mainstream leading local automakers.

So actually, for one of the leading NECs, so actually, we have already covered their entry-level AD and also their urban AD. So they have already entered the mass production by -- at the same time, in the JV segment, we have also successfully secured core project design wins with 2 leading JV automakers, as I mentioned, the top 2, further diversifying our customers' mix so that we no longer only relying solely on local domestic brands. So we have achieved a key breakthrough in the JV market. And then in terms of the chip shipment, I can give you a little bit of guideline. So this year, we are going to achieve around 5 million units this year. And also next year, we try to hit more than 7 million units next year.

Then regarding the second question. So currently, the R&D is moving forward very smoothly. So it is expected to be launched next year in 2027. So currently, it has already attracted great attention from the leading automakers and also Tier 1 suppliers, and it is highly expected. And also, we are very confident that we can work with our partners to launch journey 7. And also some of them are going to launch their model in the debit model. So we hope that we can build it as the world benchmark in the advanced market.

We are reaching the end of our conference call now, I would like to turn the call back over to the company for any closing remarks.

Thank you. So due to time constraints, we will now conclude today's call. Thank you again for joining us today. If you have any further questions, please feel free to contact our IR team. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]