Q3 2023 Silicon Motion Technology Corp Earnings Call
Okay.
Good day and thank you for standing by welcome to Silicon Motion Technology Corp, third quarter 2023 earnings conference call.
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After the speaker's presentation, there will be question and answer session.
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Please be advised that today's conference is being recorded.
This conference call contains forward looking statements within the meaning of section 27 eight of the Securities Act of 1933 and section 21 E of the Securities Exchange Act of 1934 as amended.
Such forward looking statements include without limitation statements regarding trends in the semiconductor industry and also that your results of operations financial condition and business prospects.
Such statements are based on our own information and information from other sources, we believe to be reliable you should not place undue reliance on them.
These statements involve risks and uncertainties and actual market trends and our results may differ materially from those expressed or implied in this fall looking statements for a variety of reasons.
Potential risks and uncertainties include but are not limited to continued competitive pressure in the semiconductor industry and the effect of such pressure on prices unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of and any change in that.
Our relationship with all major customers and changes in political economic legal and social conditions in Taiwan.
For additional discussion of this risks and uncertainties and other factors.
See the documents we file from time to time with the Securities and Exchange Commission.
We assume no obligation to update any forward looking statements, which apply only as of the date of this conference call.
And now I'd like to hand, the conference over to Mr. Jason <unk> VP of Investor Relations and Finance. Please go ahead Sir.
Thank you and good morning, everyone and welcome to Silicon motions third quarter of 2023 financial results conference call and webcast joining me today as well as co our president and CEO Wallace will first provide a review of our business key business developments and I will discuss our third quarter results and outlook following our prepared.
In March we will conclude with a Q&A session. Please.
Please note that Riyadh Lai, our CFO will not be joining us on today's call rehab worked intensively on the merger with Max on your over the last 15 months.
We will continue to manage all the CFO responsibilities. He is now devoting his time to prepare for the big arbitration against backs linear as a result, I was asked to lead our investor related activities. We will then conclude with Q&A.
Before we get started I would like to remind you of our safe Harbor policy, which was right at the start of this call for a comprehensive overview of the risks involved in investing in our securities. Please refer to our filings with the U S Securities and Exchange Commission.
For more details on our financial results. Please refer to our press release, which was filed on form 6K. After the close of market yesterday. This webcast will be available for replay in the Investor Relations section of our website for a limited time.
To enhance investors' understanding of our ongoing economic performance we will.
<unk> non-GAAP information during this call we use non-GAAP financial measures internally to evaluate and manage our operations. We have therefore chosen to provide this information to enable you to perform comparisons of our operating results in a manner similar to how we analyze our own operating results a reconciliation of the GAAP to non-GAAP financial data can be found.
On our earnings release issued yesterday, we ask that you review it in conjunction with this call.
As we have previously shared silicon motion filed its notice of arbitration against Max on your for its wilful material breaches of the merger agreement that was signed on May five 2022.
Company is seeking payment of the termination fee of $160 million further substantial damages interest in costs. Please note that the arbitration process is confidential and we will therefore not be commenting further on this matter today with that I will turn the call over to us.
Thank you Jason.
Hello, everyone and thank you for joining us today is a good to speaking with you again after such a long break to provide an update on the progress we haven't made over the past year and have.
<unk> founding nearly three decades ago, the strength of our business and the fundamental drivers of our grill have always been our technology leadership, and the quality and depth of our customer and partnership.
Today the statement has never.
Being truly <unk> emerging technology leadership continue to enable us to win sockets and grow our share.
NAND makers it.
At the same time, it drives them to rely on us more each day.
To all source more in order to talk to you a wider range of end markets.
R&D does not have the bandwidth to support.
Our relationship with our module maker customer continue to deepen to our broad portfolio of solutions enable them to be the most competitive in their respective end markets.
Our technology leadership also paves the way for us to expand into additional markets like Anda, Brian data Center storage.
Commercial industrial and Iot.
And now that it's clear that we will remain a standalone company.
Our engagement with our customers have been steadily increasing as well.
Alright, I'm wording focus on technology leadership will it be will continue to drive our growth longer term and ensure our partnership with both NAND makers and module makers alike remain strong.
With that I will turn to our results for the third quarter.
Our business continued to gain momentum with <unk>.
When you're growing 23% sequentially to $182 million and earnings per idea is growing 7% sequentially to 63.
We saw inventory level begin to normalize across the majority of end market and OEM.
Activity pick up in the third quarter, leading to our strong revenue growth in the quarter.
We expect these trends to continue and are confident they will lead to strong sequential growth in the fourth quarter.
Well the first half of 'twenty to 'twenty three was challenging due to the global micro economy weakness and extra inventory in the channels.
The inventory level across our end market normalizing and OEM demand continued to improve.
I am pleased to say that we are shipping to more customers than ever before.
Working with all of the major NAND maker on the multiple engagements across several end markets and expanding our footprint among.
Market, leading module makers with an innovative solution for the smartphone PC automotive industrial commercial and enterprise markets.
We continuously invest in our technology leadership in coming quarter, you expect to introduce several industry, leading solution for ACD and embedded market that will drive sustainable long term profitable growth for our business.
TLC NAND is essential to further improve affordability of solid state storage, but also posted greater challenging to overcome relating to worsen endurance reliability data integrity and performance.
So the fashion makers continue to rollout next generation higher density <unk> NAND with 200 to 300, plus layers controller technology requirements are scaling up significantly.
Firing to use of more sophisticated L DPC as well as our proprietary three D Ray technology for error correction and recovery data protection and reliability.
These next generation controllers, well requires finer design and manufacturing processes.
To deliver a much higher performance, while maintaining the same low power consumption of the previous generation solutions.
We invest earning supporting TLC NAND and thank emotion has more experience managing the technology than any other company in our industry.
Our leadership in these areas are second to know, especially in the merchant market.
We expect to continue to maintain our leadership in the market.
These next generation solutions and meaningful share of the new product with all new fresh makers as well as all of the leading module makers.
By end market standpoint, actually inventory in the PC and smartphone market have a plague the industry since late 2022, when the global economy weakened and demand slowed.
It has taken nearly a year, whether we believe the inventory level in both the PC and smartphone market normalizing, we are seeing more consistent order pattern from our customers and better visibility that are more closely aligned with end market demand we.
We are optimistic that this trend will continue and that the industry is well positioned to return to growth in 2024.
So let me now discuss our SSD controller business.
Alright, so the controller business grew 5% to 10% sequentially in the third quarter.
Beginning to see the PC marquee rebound and believe that the replacement cycle of cooperate that purchase noble in the early days of Covid beginning.
This should lead to a stronger PC demand in the coming months.
For the current Pcie Gen. Four is a D market. We just began shipping our gen four controller to our newest Korean NAND maker customer.
Their PC OEM customers and we now.
<unk> already contributed to all but the one of the major NAND makers.
Our large expanding NIM flat customer base and our strong share with all of the leading module makers continue to position us well in the PC OEM and channel market with a deep we expect <unk> to.
<unk> continues to be the majority of the PTSD marquee is through 2025, and PC OEM well begin adoption of <unk> for high performance <unk> in 2025.
When Intel and AMD on top of standard and notebooks.
<unk> will enable much higher data bandwidth and performance that will be critical for our next generation <unk> and will also enable new capability such as AI at the edge.
Edge and will eventually become standard.
We already secured design win with other flash maker that are all sourcing controller to merchant supplier and expect to begin shipment in late 2024.
Furniture and fly control there is taping out in this quarter and well served a high performing market with an eight channel solution using TSMC 60 nanometer technology that will deliver unparalleled performance and low power consumption.
OEM expand significantly higher performance, which implies a D C.
Same time power consumption a gen. Four is a D requiring us to move six nanometer process technology to achieve both high performance as well as low power consumption.
It's our newest decontrol, the ASP will be nearly double that of our comparable <unk> controllers.
We expect to tape out our second <unk> Phy and controller for channel solution in the second quarter of next year and became sampling in the second half of next year we.
We expect this solution to help expand the adoption of Gen <unk> into more mainstream PC in 2026.
For the enterprise market, we will sample a mom Titan Pcie Gen five decontrol there this quarter.
Working with several enterprise and data center customer around the world and expect to generate initial revenue in late 2020 core with more meaningful revenue in 2025 and beyond.
Moving to our UMC and European business.
Revenue from these products rebounded strongly in the third quarter and more than double as demand ramp ahead of the holiday season and inventory level in the channel and smartphone Oems are normalizing.
Our diversified customer base of NAND flash makers and module makers have expand our share with our leading handset Oems.
<unk> 3001, as well as in Europe as <unk> solution.
The dominant interface for smartphones and we continue to win new programs with both the flash market makers and module makers.
Your first point is the only adopted by factory smartphone today, and we do not expect to see adoption of UN support into mainstream smartphone until 2025.
We're working on our own yogurt solution also using a six nanometer process technology to deliver higher performance, while maintaining the same power consumption in the U S industries all one.
We expect to tape out a product in early January and saw some building in the first half of 'twenty 'twenty four.
With the mass production starting early 2025.
We are already engaged with the flash maker as well as a module maker targeting leading handset OEM and <unk>.
On track to meet their expected ramp for use with four in 'twenty to 'twenty five.
We are also seeing expanding use case of EMC in Europe is beyond smartphones and have a significant wins already in the automotive Iot commercial industrial market with NAND makers as well as module makers. We believe we are well positioned to continue.
Significant opportunity beyond just smartphones and P. C to continue to grow our business and the success. We are seeing in the automotive market across all our product groups is a good example of the attraction we have been making.
Overall, we are pleased by the progress, we're making is pine micro economy hired wins for the industry. This year, our focus on technology leadership has yielded strong customer attraction strong sharing the market, we serve and diversify the end market our products are using.
Combine we spent all of this to drive growth in 2024 at the end market and the nanny slash industry economies improve.
No I would turn the call over to Jason to defer financial result in outlook.
[noise], Thank your wallet and good morning, everyone.
Discuss additional details of our third quarter results and and provide our guidance. Please note that my comments today will focus primarily on our non-GAAP results unless otherwise specifically noted a reconciliation of our gap to non-GAAP data is included with our earnings release issued yesterday.
And the third quarter, we grew sales, 23% sequentially to 172 million SSD controller sales grew 5% to 10% sequentially.
M C and your first control ourselves more than doubled sequentially as we benefited from ramping holiday season, built and normalizing inventory levels Ssds solution sales decreased 5% to 10% sequentially gross margins in the third quarter were stable sequentially and remainder 42.5% operating expenses in the third quarter, where 49 and a half million dollars.
One and a half million dollars higher than the prior quarter, primarily from higher R&D expenses to support our technology leadership.
Operating margin in the third quarter was 13.8% an increase from 8.3% in the second quarter are effective tax rate in the third quarter is 22.8% an increase from the 12.7 per cent tax rate in the second quarter earnings for <unk> for 63 60.
67 per cent higher sequentially stock.
Stock based compensation and are operating expense, which we exclude from non-GAAP results was $3.8 million in the third quarter.
We had $353 million of cash cash equivalents restricted stock in short term investments at the end of the third quarter compared to $305 million at the end of the second quarter.
Inventory decrease against sequentially in the third quarter to $199 million from 251 in the second quarter earlier. This week, our board declared a new annual dividend of $2 per <unk>. The first 50 cent installment will be paid in November.
Now, let me turn to our fourth quarter guidance and forward looking business trends in.
In the fourth quarter, we expect revenue to be up 10% to 15% sequentially to approximately $190 million to $198 million, we expect SSD control ourselves to be stable in the fourth quarter, while EMC and you are first controller sales will increase fourth quarter gross margins is <unk> is expected to be stable and be in the range of 42, and a half to 43 and a half per cent.
Fourth quarter operating margins should be in the range of 35% to 55% fourthquarter effective tax rate to be approximately unchanged from the third quarter and the fourth quarter, we expect stock based compensation the range of $6 to $7.2 million.
Let me provide some additional color to our fourth quarter expectations are business will continue to rebound in the fourth quarter and sequential revenue growth is expected to be stronger than normal seasonality.
Gross margins are expected to be flat to up slightly we expect your gross margins to improve gradually over the next few quarters as the financial health of.
Of the non makers and the memory market overall slowly improves most of our <unk> module maker customers have been selling them products below their cost since early this year and even.
With the sharp increases in Nam prices, we've seen lately it is still challenging, especially fernand makers.
Our pricing is somewhat reflective of our customers challenges and as their financial conditions improve we believe we can gradually improve our pricing in our margins, but it will take time or cost of goods, especially wafer prices remain high but we believe we can extract some additional manufacturing cost improvements over the next few quarters as well combined with an improving mix of new products.
Including the new are Neogen P. C IGN, four and five controllers and U F. As for solutions. We believe we can gradually returned to our historical gross margin levels for operating expenses is Wallace mentioned, we will be taping out three new six nanometer controllers are a channel pcie Jen five control this quarter R. U F F four controller and the first.
Porter and R. R for channel Pcie, Jen five controlling the second quarter. The total investments to get each of these products to market is more than $15 million. So we expect our operating expense to be elevated for these three quarters, and then come down a bit in the second half of next year driving additional operating margin leverage.
As well as mentioned our business is steadily improving as and market demand stabilises, an inventory levels normalized will continue to invest to maintain our technology leadership with best in class next generation storage controllers are broadening part product portfolio and diversified customer base will further solidify a strong foundation for continuing revenue and profitability.
Growth.
We are optimistic that industry conditions will improve and believe we are well positioned to benefit from these <unk>.
Improving market dynamics. This concludes our prepared remarks will now open the call to your questions operator.
Thank you.
As a reminder to ask that question. Please press style one one on your telephone and like C. A name to be announced.
Can reach all your question. Please press saw one one again.
Oh first question comes from the line of Medi Husseini, Sam S. I G. Please ask you a question.
Yeah. Thanks for taking my question to for me first in terms of technology migration.
Among the done manufacture I wanted a better understand huh increase adoption of Q and see is helping you and how should be compare that to them and market system unit trend that I know the words smartphone.
Notebook unit.
<unk> was fatally Qantas migration to cue and see and my second question has to do with a strong cash and what would you take the company to work for the Board then the company to become more aggressive in a stop by the bank.
So what I'm answering your first question any you go ahead and kill see we've seen a trance all named make are going to have a Q L. C. <unk> and brought up by late twenties on the floor. So we see Q O C. Initially all tradition two kinds of D.
And we believe in Taunton notify probably better line more than 80% of the value of line is D. Well I'll adopt two all seen 20th when you're fine and we we've seen that kills he tried anything to mobile phone would take time and I <unk> I believe the leading smartphone <unk>.
Which will try to adopt mchugh I'll see but when you're going to be mass production when will create a meaningful volume. We don't know yet all the name me K as trying explode opportunity, but we also believe <unk> enter data center sometime twenty-twenty figured out <unk> on your seven that's why I keep.
He becomes very very important and it becomes a major I'll put it for the <unk> up to 2026 27.
And many to answer your second question about the share repurchase you know as you know our share repurchase program has been opportunistic in the past we did not have a program in place today, but the board has always evaluating ways of returning cash to shareholders and share repurchases something that they will continue to look at.
If I may just a quick follow up to <unk>.
Let me rephrase My first question, let's say if units yourself, a smartphone notebook would to go flattish next year could the migration to two of C. Four client assist the drive growth is that something that could.
What additional growth drivers.
I think that we believe our customer will gain market share in 2020th floor. Although the total union full of P. C. <unk> grill very much maybe just a single digit.
2% to 3% because of our strong technology can kill L C and supporting with our major to control to foot boat June four G and five have gone, helping us to transition to take additional monkish here in 2024.
Great. Thank you.
Thank you.
Next question comes from the line S. Quinn Bolton fan need him and company. Please <unk>.
Hey, guys. Congrats on a nice results and outlook I guess, maybe at first.
Walton Jason can you just you know maybe expand on on your outlook for gross margins I know, you're looking for sort of a gradual recovery as the market improves but you know can you can you give a little bit of shaped to that gradual is that sort of 50 basis points quarters at 100 basis points quarter, what what what kind of trajectory would you see.
Any thoughts on when you might get back to kind of 48 to 50 per cent.
Gross margin would be would be helpful.
Yeah, Yeah. So like you know obviously as you know there are still a lot of challenges in the NAND flash industry now makers are still struggling economically.
Economically and our goal is obviously to continue to gradually improve our gross margins and get back to where historically, we were and as the industry's health improves we believe our pricing our gross margins will also improve and as we roll out new products <unk>.
The products that we talked about just a little while ago rice on the new <unk> for Jen five and you want that four controllers as those come out to market that will also have an uplift to our gross margins.
Yeah, but we haven't provided specific guidance for next year and certainly as we move into January report, our fourth quarter will have a better view on what that longer term gross margin profile looks like for next year.
Great and then just you know I'm looking forward to that.
Kind of the the E M M C and U F. S market can you kind of give me your thoughts on.
Market share looking forward I think one of your customers just tried to in source U F. S. Four does that have a significant impact on on your outlook or or do you think it's just you know there's some put some takes but but you still buried feel very confident about your overall market share position and you <unk>. Thanks.
We believe.
One of them made your customary partner named me cause they have a union to no solution consulting for you. If his floor seemed to four years ago that we know that but I as you know we working closely with this particular partner.
Because.
For each of <unk> <unk>, probably suppor one to two generation name. So they have when you have a new generation men and there's opportunity we think and so we'll continue to cause a future opportunity, we this customer and to spend even to see.
Additional new legacy U F Institute out two or three though she the one as well the potential newer newer generation, including you have is <unk>. In addition, we have engaged in Moneyball near me could not just one for you. It says so we are targeting a new customer and mean production Sunday.
Q1 already too too and so I think because of our technology expanded and because they're more named coming to the market and we Bethany benefit for more <unk>, they make it which I don't have a resource onto the <unk> <unk> until the legacy of emotion to health and gave we use a smartphone mark.
<unk>.
Got it thank you very much Walsh.
Thank you.
Next question comes from the line of Anthony <unk> credit, calling please ask you a question Anthony.
Thank you <unk> you you gave us some info on what you expect P C growth and that you expect to grow faster for taking chair.
I'm curious if you'd offer something kind of overall, including smartphones auto et cetera, where do you think 2024 growth might be for for Silicon motion then I had a couple of follow ups.
Well.
I think that's a good question, but I think we will waive far too for Saturday and go would give you guidance, but we'd domine and looking forward to continue growing joint on your floor. It and what is scaled I think that will give our guidance when that's turning call.
Okay and then following up on the comment on large Korean Vanmaker now back in I believe you said in Q3 can you give us a sense of kind of design activity you have with a customer for 2024, what percentage of their share you think you'll you'll have.
Well, we were not able to common regarding pretty good customer, but overall, we see Stephen Grill was opportunity with all slash, Maine Coon.
There's some <unk> consolidation, but we believe will continue to see opportunity, hoping forcing emotion to go out <expletive>.
Our customer.
Okay. The last question for me you know over the last year or so with the Max linear.
Proposed deal you felt that some of your customers were opting or thinking about moving to their own <unk> solutions are external it seems like they're they're reengage I guess I'm trying to figure out if you lost share in terms of designs maybe for.
I don't know of 2024 or something just based on the Max linger deal and deposit that may have created.
Yes on the legal <unk>, we cannot common any of my teen years related question, but I think you know very well for any conventional MMA <unk> sort of impact for the customer if a customer has a do not understand.
<unk>, so they have some fear and concern.
I cannot give us how really impact for our business, but Ah Daphne every company you have some can have some loss, but overall the <unk>. We will continue came monkish here and there was more opportunity and especially after July is when you say, we do see the moment and become stronger.
Perfect. Thanks wallets.
Thank you.
Our next question comes from the line of Tsuji Desilva Ross and can please go ahead tsuji.
Hi, Wallis Hi, Jason So congrats on the progress here so.
M M C U F. S market smartphone you had very strong results this quarter, you're guarding for that just can you give a sense of the sustainability of the recovery in the end market and.
<unk> and demand perspective versus you know is the channel restocking and our channel inventories typical levels now or are they actually leaner than typical.
Yeah, let me comment above the smartphone market based on my argue.
Channel inventory is it becomes normal and healthy position.
Wade W. C grow rebound, but both EMC in U F as product and we also see will again more sure was he you with this in 2024 and although I seen you mentioned in particular customer you have eternal controller that is S. A U F. As four does zeal for.
So next year as primary as <unk> as well as the two down to four four G smartphone and we see we have more customer jumping into the market and that's why we are able to gain market share and in addition, we are working directly with a smartphone <unk> to tailor certain soft film way and too, especially.
<unk> for southern requirements that gave us that advantage compared with <unk> to provide the solution for specific customer. So we're very happy for our position as being inserted detail. If we are able to will release during the next quarter I'll tune.
Okay well. Thank you that's helpful. And then my other question is on the the operating expenses tasting I think you talked about the R&D being elevated for the next two to three quarters can't give a sense of what it comes back to after that in the second half of 24 is it back to sort of the 40 million level in the second quarter or but just just to understand you know.
What it reverts to after the elevated spend in the next three quarters.
Yeah, well, obviously provide more color on that in the next earnings call by the world's temporary back a little bit as we said you know the.
Total is the investment costs for each of the six nanometer products is north of 15 million. Obviously all of that not that entire cost is is is is byrd in one single quarter does get spread out over several quarters, depending on the time frame of the investment process and it's about a new controller.
Well it will step back a little bit in Q3, and Q4 next year, but will provide more color on that and next next quarter next owners call until I can give you a dish and they'll give you. Some a reference signal me to tape belt normally that probably has about 30 to 40 <unk>. It will be two to three times more expensive than Tony.
Now me to tape out.
And we believe to the streets signaling me to table, we won't have any signaling me table within a year, but we do have additional hotel Gnome due to an email me to table.
<unk> by quoting so Daphne operation expanded will go down but it was a skill is it depends upon how many part I was going to table.
So I think we will give you more color when we have a C.
So next quarter next year and guidance.
Okay. Thank you well thank you just.
Thank you.
Next question comes from the line of <unk> J P. Morgan. Please ask your glasses question cocoa.
Yeah, Hi, Thanks, Wallace and <unk> and congrats on the rebound number a number my first question is could you give us a little bit of kind of <unk>.
Backdrop in terms of how your market Chad situation is right now for a plan that would be controllers just to get an update after almost a yard I'm more than a year in terms of their market share. This and also you did a new to some of the design wins and enterprise and data Center could you give us a little.
<unk> what is the size of the opportunity there and what are the needs of engagement. You have is it still mostly the b b I E didn't find controllers for enterprise market on on that please.
Could you give me your try an open channel controllers, what symptoms like none of the market. So I just want to understand what are the approach to kind of tap into the enterprise, Montana and the date of the mortgage here.
Alright. Thank his may I talk to you again.
Regarding see our currency market share what are you continue to maintain a stable market share around 70%, maybe up and down a little bit, but I seen we're gaining market share community for 2024.
Regarding the data center seems a C major enterprise Paula was shipping meaningful orange juice setup, and Pcie really we focus on pizza agent five because she in full control, we not able to show a meaningful financial result in this nonhealth competitive but it <unk>.
June Simon Titan, we are in a very good position, we believe will show meaningful financial resolve.
Hi, Ah cute by end of 2024 and more meaningful 2025.
Oh, Thanks, So could you give us a sense of how big this enterprise and data the market five fifth I think <unk> you have back then you said that Buffy about this you indicated that similar in size to the plan, which is the market in terms of controllers Avenue site any updates on how big.
The market is even date isn't the amount of <unk>.
Hey, Gulf Coast, Jason here, we're seeing that attraction today, we're working with a number of data center in enterprise customers around the world.
But it's still early or.
To our sampling this quarter.
Surely to say, how big that opportunity is at this point as we get closer to launch as we have more concrete and better visibility.
We'll be able to provide more additional details at that point, but right now it's just a little bit early.
Okay got it and one one question on pricing could you talk a little bit about how piping has evolved in the last 12 months or so let me if I think he needs to come off from the upload the five dollar kind of average <unk> a fee that you had and do we need to.
Leapfrog Gen five to really come through.
On the plan that 50 controllers for you to start potentially being some <unk> coming through do you need to wait for the next generation for <unk> do you think that you're gonna disguised as we go along once the marketing stance getting unlimited data.
[noise] Oh, yes, you know very well does he is very challenging for <unk> as well as a control the makers.
Because before September 90 per cent of our customers are selling product below cost and sang to the price increase in the last two months and but <unk> excuse. Many named me could gross margin is too negative and we <unk> is the leading <unk> we have to share.
A pen, but we believe when the damn price.
Gradually recover to breakeven and become profitable or certain income children Seckman and we will also gradually increase the AFP, but I seem to <unk> inside the ancient <unk>. We stayed the a S. P. S. Two time then <unk> in this.
Would be a much more competitive and helping for both gross margin and also ASB and we also believe C. P. C. I C U F as point $5 zero four double zero also gaining help US Guinea mixed regarding both gross margin as well as ASB. So we.
Do have other new products coming and also create a more positive regarding the product mix, helping resp and goes margin.
Okay. Thank you very much.
Thank you.
Next question comes from the line <unk>, Matt <unk> Securities. Please ask you a question Matt.
Yeah. Good morning got thanks for taking my question first question is I I think in the prepared remarks, you mentioned that there are still some inventory getting work down.
Customers.
I guess in Q4.
Is the expectation with that guy the inventories fully work down or is there potential that there's still some some incremental revenue you'll see in foreign quarters.
Because in inventories are normalized in future periods.
Hey, Matt is Jason here, I think we're very close to to normalize inventory levels of not they're ready.
There may be I mean, it varies by product by product it varies customer by customer and market, but by and large we see inventory has.
Normalized for the vast majority of end markets and customers that we work with.
Thanks, I guess my second question is around new products. So it sounds like both in terms of returning pricing and margins are returning margins too.
More traditional historic levels.
Well, it's potentially seeing some some revenue growth type the I R. S. P's the the new products are very.
Very important I I guess is there any help you can give us in terms of thinking about how those parts rule out either in terms of time after tape out the revenue starting to become meaningful or if you could give us some color around when you think customers start shifting too.
Who are there Jen five pcie or you a passport auto solutions that'd be really helpful. Thanks.
Yeah. So our first a channel Jen five controller is getting taped out right now.
Sampling that here shortly and then we expect to start seeing the first shipments in late May 2024.
U F S $4, Oh is ticketing take down in the first quarter, we'll start seeing shipments of that late twenty's going forward into 2025 and then the.
The four channel Jen five SSD controllers, that's really more of a late 25, <unk> 25 into 2006 type event for us.
Thanks, That's all I got.
Thank you.
As a reminder to ask that question. Please press stop one one on your telephone next question comes from the lineup Craig Ellis fan be rally Securities. Please go ahead correct.
Hi, This is Ethan wide all calling in for Craig Gallus. Thanks for taking my questions to start you provide some good color on the near two intermediate term slowed the Bob access diet Cokes on strategic investments I was wondering to what extent the tiny of those assessments to.
The slope of recovery Denmark.
Thanks.
I'm sorry, what's the slope of the Opex and how is it tied to the end market recovery is that what you asked.
Right.
Yeah. So.
Seeing strengthened and markets the guidance, we provider for Q4 is stronger than seasonal and then certainly we expect royal.
Royal continue to grow into 2000, and 2024 as well.
The Opex should stay at these levels for Q4, Q1, and Q2, and then that will come down a little bit in the second half of next year, but that's you know depending on the number of additional tape outs that won't be doing can vary a little bit so will provide more color around that next earnings call.
Alright, Thank you and then.
Giving your past physician I was hoping that you could just broadly speak to your cast upon the plans.
Yeah. So for cash apply matters you know you may I saw earlier this week we.
Instigated are two dollar per year dividend there'll be paid quarterly the first quarterly payment will start here in November.
And with regards to share repurchase it's something that historically, we've been opportunistic about we don't have a program in place today, but the board is always looking at ways of returning cash to shareholders and it's something that I'll continue to evaluate.
Thank you that's all from me.
Thank you.
Once again to ask a question. Please press <unk> on your telephone.
[laughter].
Okay I think.
Her eyes are very happy to talk to you guys have been one half year, San Diego language joined the today and therefore, you're continuing says you can take emotion will be attending siblings <unk> over the next few months to schedule of this event will be posted on investor veins sheaves section of a corporate web site. Thank you everyone.
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That concludes today's conference call. Thank you for participating you may now disconnect.
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