"Our 2016 fourth quarter revenue, gross margin, GAAP and non-GAAP earnings per diluted ADS were as pre-announced on January 26^th. We reported net revenues of $203.4 million, representing a 6.7% sequential decrease and in-line with our original guidance of a 4.0% to 9.0% sequential decline issued on November 10, 2016 while gross margin and EPS were below the guidance due to an additional inventory write-down. Nevertheless, we still delivered solid results to achieve both top and bottom line growth during 2016 as our driver and non-driver business segments both performed strongly,” said Mr. Jordan Wu, President and Chief Executive Officer of Himax. “Notably, we increased market share in our core driver IC business in 2016 and continued to solidify our leading position through technology advancement and customer engagement. We continued to lead the market in major new driver IC technology trends, including higher display resolution, AMOLED and in-cell TDDI. We have collaborated closely with leading panel makers across China for AMOLED product development. On the TDDI front, we made volume shipments to a leading Chinese smartphone customer and were busy with design-in activities with Korean, Chinese and Taiwanese panel makers. Our non-driver businesses experienced tremendous growth during 2016, primarily driven by the LCOS and WLO businesses due to shipments to one of our leading AR device customers. We also made solid progress in new territories such as 3D depth scanning, IoT and machine vision with our latest CIS and WLO products, evidenced by more design-ins and engagements with certain heavyweight partners.”

Mr. Wu continued: “In the first quarter of 2017, we are seeing weaker seasonality and market demand in associated with our core driver IC business and anticipating near-term headwinds in our non-driver business mainly due to lower LCOS and WLO revenues resulted from our major AR customer’s shift in focus to the development of future generation devices. We also expect our gross margin to be under pressure in the short term due to continuous pricing pressure and less favorable product mix of driver IC products, lower revenues from high-margin AR/VR related businesses and lower NRE income. That being said, looking into 2017, we will leverage our total solution capabilities and focus on major new technology trends to maintain our leading position in our core driver IC business. We also remain positive on the long-term growth prospect of our non-driver business. We are particularly excited about recent developments especially in WLO and CIS product lines where we offer unique and market leading technologies and solutions for IoT and machine vision applications. We have proceeded with the expansion plan for our next generation LCOS and WLO production lines and will start to construct the new office/fab soon. In addition, to meet the strong demand of new customers for our WLO technology, we are accelerating our WLO capacity expansion. After many years of R&D and product development, we may see significant business progress in our non-driver business to contribute to both top and bottom lines out of WLO and CIS areas as early as the second half of 2017. Taken together, we remain committed to our long-term strategy to diversify our product and customer base with innovative technologies, which ultimately, should increase shareholder value.”

Fourth Quarter 2016 Revenue Breakdown by Product Line (USD in millions) (unaudited)

The fourth quarter revenues of $203.4 million represented a 6.7% sequential decrease and a 14.3% increase year-over-year. Revenue from large panel display drivers was $67.7 million, down 6.0% sequentially, and up 9.0% from a year ago. Large panel driver ICs accounted for 33.3% of the Company’s total revenues for the fourth quarter, compared to 33.0% in the third quarter and 34.9% a year ago. The sequential decline was the outcome of one single customer’s inventory adjustment. Nevertheless, the Company’s large panel products actually enjoyed 9.0% year-over-year growth thanks to strong demand from Chinese and Taiwanese panel customers during the quarter. In China, the Company’s driver IC business for large panel grew more than 10.0% year-over-year during the quarter. In comparison, worldwide large-size TFT-LCD panel shipments declined around 1.5% in the same period. It is especially worth highlighting that the Company’s engineering collaboration and design-in activities with large panel customers across China, Taiwan and Korea all remain robust and Himax expects these trends to continue into 2017.