The core focus of the performance forecast is a net profit median of 250 million yuan for Q3, a 22% decrease compared to the single-quarter profit of 320 million yuan in Q2. The company explains that the decline is due to some customers transitioning their mid-to-high-end products from DDR4 to DDR5, which affects short-term demand due to the time required for solution adjustments, leading to a slight slowdown in Q3 performance growth, followed by a continued rapid increase.Firstly, DDR4 prices have been rising since mid-year, and current prices are significantly higher than those of DDR5. This phenomenon is common in the memory market cycle, primarily influenced by capacity shortages and supply-demand relationships. Many of Rockchip’s downstream customers are price-sensitive, which is one reason why the RK3588 can quickly gain market share due to its cost-performance ratio. Therefore, the price increase of DDR4 will inevitably lead to a wave of board redesigns among downstream customers. The reason provided by the company is credible and aligns with industry practices.Secondly, there are two types of customers involved in the board redesign. One type consists of products that have been continuously shipped; these customers need to redesign their boards to support DDR5 to reduce costs. While these customers will continue to ship their original DDR4 products, the shipment volume will be constrained by how much DDR4 supply they can obtain at acceptable prices. Thus, before DDR5 motherboards go into production, the procurement volume will inevitably decrease. The other type involves entirely new product designs that were initially designed for DDR4 but were redesigned to DDR5 due to trends in memory pricing. These customers originally planned to launch their projects in Q3, but they will be delayed until Q4 or even next year. There are very few customers in the industry designing motherboards that are compatible with both DDR4 and DDR5 due to the high costs associated with compatibility design, which only non-price-sensitive customers can afford. Generally, the speed of these redesigns depends on the company’s hardware design and layout capabilities, which can take as little as three months to complete or as long as six months or more. Therefore, the impact of this redesign wave is expected to gradually dissipate by Q4, with a full recovery not anticipated until next year. It is unrealistic to expect Q4 to quickly compensate for the business volume loss in Q3.Finally, the Rockchip chips that support DDR5 are the RK3588, RK3576, and RK3568J, all of which are mid-to-high-end series within the company, with relatively high gross margins. Therefore, it is expected that the gross margin and net margin for Q3 will decline compared to Q2, meaning that net profit will decrease by 22% quarter-on-quarter, and revenue may decline by less than 20% quarter-on-quarter.From a stock price perspective, the current valuation is already high, and such a high valuation requires sustained growth to support it. The company’s Q3 performance forecast will have a short-term impact on market sentiment, but it does not affect the company’s core competitiveness in the long term. What is truly concerning is that the growth momentum of the existing product line, primarily based on the RK3588, is continuously declining, making it difficult to replicate the significant growth seen in the past two years. The company’s new product co-processor and the RK3688 set to be released next year will be crucial in determining whether the company’s operational scale can reach new heights, with the rapid production and scaling of the co-processor being key to bridging the gap between the RK3588 and RK3688.