Q1 2024 Silicon Motion Technology Corporation Earnings Call
Okay.
Good day and thank you for standing by welcome to the Silicon Motion Technology Corporation first quarter 'twenty 'twenty four earnings conference call.
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It's like 27 acres of.
19th 33, and section 21 E of the Securities Exchange Act of 19th 34 as amended.
Such forward looking statements include without limitation statements regarding trends in the semiconductor industry and all future results of operations financial condition and business prospects. Although such statements are based on our own information and information from other sources, we believe to be reliable you should not place undue reliance.
And then let's see.
<unk> involve risks and uncertainties and actual market trends and our results may differ materially from those expressed or implied in this slightly for a variety of reasons Patel.
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 because he must be electronic.
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In our relationship with all major customers.
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It is not my pleasure to hand, you over to the interim Chief Financial Officer, Mr. Jason Tsai. Please go ahead.
Thank you and good morning, everyone and welcome to Silicon motions first quarter 2024 financial results conference call and webcast.
Joining me today as well as co our president and CEO will also will first provide a review of our key business developments and then I will discuss our first quarter results and outlook.
In our prepared remarks, we will conclude with a Q&A session.
Before we get started I'd 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.
Market yesterday.
A webcast will be available for replay in the Investor Relations section of our website for a limited time George.
To enhance investors' understanding of our ongoing economic performance, we will discuss 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 GAAP to non-GAAP financial data can be found in our earnings release issued yesterday, we ask that you review it in conjunction with this call with that I will turn the call over to us.
Thank you Jayson.
Hi, everyone and thank you for joining US today, we had a good start to 2024, we delivered sequential revenue growth ahead of expectations.
Achieved gross margin at the high end of our guidance range and exceeded our operating margin outlook.
Or is that even though the business was better than expected primarily.
Primarily driven by demand from two of our fashion make the customers.
We continue to improve our pricing in the quarter, which is driving the steady improvement in gross margin and profitability.
Our results reinforce our leadership position in consumer technology.
<unk> continues to be the high demand resolve customer.
Recognize how important our technology innovation and service.
To their business.
Acquired bonded microenvironment remain uncertain.
<unk> was quoted we are taking the right steps to efficiently navigate a market dynamic.
Steadfast in delivering the product and solution doesn't need and focus on continuing growth improving profitability across our platform.
Let me start now with an overview of NAND market dynamic we are seeing today.
I have seen NASDAQ prices continued to increase since late last year and more recently have seen flash maker gradually increased utilization in the past, but more meaningful capacity increase.
Our next generation NAND fab is that an expanded until next year.
Demand remains robust, especially with Chinese handset Oems as well as with enterprise and data center storage markets well.
PC demand has been steadily increasing.
All of this will continue to try and in fact prices hires throughout this year.
Seeing some near term pricing fluctuations in the China market data may cause some uncertainty with our customers.
Well the zone the retail aftermarket.
But demand for our controller for PC, OEM, USD remained robust, especially with a vast base of customers.
Our leadership and consolidate technology continue to drive stronger demand across the board we saw customers.
Is it becoming period each day that our experience and expertise with <unk> NAND is a defining event JJ that has resulted in significant ways with a SaaS makers and other customer across all of them.
Alright.
For the three D. NAND layers continue to increase managing TLC NAND become even more challenging and continue to require more sophisticated controller technology to ensure high retention and reduced me Ryan determine issues.
Alright, then L. DPC industry D. Ray technology is a best in class to protect data doing high speed data transfer between the controller and Dan and operate on the wide temperature range.
We can deliver controller is that enable a no compromise high performance and low cost solid state storage solution, incorporating the latest generation of TLC NAND <unk>.
Specialty with a rapid adoption of AI.
Was there anything as devices like PC and smartphone.
Data Sanjay antibodies salaries.
He also historic devices.
Becoming increasingly central to a vacation and growth going forward.
Oh, yeah, no longer need to choose between high performers are lower cost.
We can kill especially upcoming two tabby maledight TLC NAND youre able to have highest sequential reap a woman high density and low cost solution to meet their ever liquidity.
Creating AI compute and storage requirement.
Okay.
Well, let me start with our HDD controllers.
We're seeing strong traction we saw new Pcie Gen. Five eight channel controller, it we tape out last year.
This is the first six nanometer eight channel Pcie Gen. Five controller available in the market and we are winning in virtually every top module maker. In addition to our stream fast maker customers.
So resolved early testing has been very good.
This is a premium product that it will be ideally suited for high end notebook and desktop PC as.
As well as for gaming and workstation PC that offer unparalleled performance with ultra low power consumption.
In addition, we have a strong pipeline of design activity with several fast maker for pcie and poised to be using your next generation TLC and killed in that.
<unk> high performance high density low cost it would be ideal for effectively growing AI PC market.
Beyond the PC market. We also have automotive grade Pcie Gen. Four controller Wayne with two of our flash maker customer that will ramp with a leading electrical car iPhone next year.
We also expect to table, our dual port Pcie Gen five controller for the <unk>.
Automotive market next year for several of our SaaS metric customer to further our leadership in the market.
We are confident that our broad base of decontrol. This solution will continue to scale. This business meaningfully this year into 2025 as many of these new product and platform begin to ramp.
Moving to our AMC per USAID controllers.
So separately Paypal are first.
Four zero controller in the first quarter and are on track to start qualification with this new controller in the second half this year.
We also continue to see stronger than average demand.
For our <unk>, one and $2 two controllers, especially to support new generation of low cost debt.
In addition to several top module makers serving this.
Smartphone market, we started ramping our new fast make the customer or user street, our one and $2 two this quarter.
And this customer and expect it to ramp with a good bid for the new consoles next year.
What are the smartphone market has it predominantly use TLC NAND.
<unk> seen increasing inches of kill Athena, an especially mainstream handset OEM can operate higher density results.
Increase in cost.
We are collaborating with one of the leading handset Oems directly or Trc USA solution.
Package to come to market later this year.
Mainstream smartphone.
We expect the demand for kiosk <unk> partner, especially in mainstream and entry level smartphone well continue to increase as these higher density low Cal USA solution will be required to chime adoption of AI beyond the pre.
<unk> segment of the smartphone market over the next few years.
In addition, we.
We are seeing significant traction with our MSC and yoga control of it in the automotive market as well as the commercial industrial and other connected and smart devices.
These non smartphone vacation accounted for more than 40% of the overall MSC usa's market to date.
With the market as both a motive application growing faster than smartphone market.
We are working with several SaaS Baker and building your AUC and user control, although these customer, especially for the automotive market.
And the expenses to scale meaningfully.
In the next years to come.
Now, let me turn to monetize them and platform.
Although we have talked about before the enterprise data center started market.
Tremendous opportunity that we believe we now have a truly differentiated solution with mountain Titan to scale with the flash makers.
Our solution enabled area as well as directly with data center and enterprise customers.
Based on market data from Gartner and IDC as well as our own analysis, we anticipate the market will antibody as a D for both enterprise storage and data center.
ROE by more than 50% to <unk> 75 million units by 2027.
But then more importantly, the market for Pcie Gen. Five is indeed expected to increase more than five time to more than 60 million units in 2027.
<unk> are expected to account for nearly 30% of the total pay that by in 2020 seven.
Up from less than 10% in 2023.
Representing a huge growth opportunity.
We are uniquely positioned to lead.
Our first one Titan piece IGF I control, the well managed TLC <unk> NAND on a single platform <unk>.
Enabling the seamless transition and adoption of <unk> NAND with the enterprise and data center storage application.
I'm excited to announce that we have the one two tier one customers in the first quarter for the month heightened Pcie Gen. Five on July one of United States and why is in China.
To begin ramping later next year.
We continue to somehow with more than a dozen additional customers excited to secure more wane throughout this year.
We are on track to begin mass production later this year and bring more meaningfully next year.
Our early success here as being our ability to debenture with our high performance and power efficient control data that support more NAND, including TLC and Kelsey for highest capacities.
Than any other platform in the market today.
Using our patent did pro forma and power shipping technology.
We enable our customers to dynamically adjust for peak performance and low power consumption, depending on the various workload requirement to achieve the best result.
We are seeing inbound interest from the world's leading data center provider because of our ability to deliver high density high performance low cost TLC and TLC SSD for the increasingly data hungry AI compute and storage needed.
Given our proven track record of managing more TLC NAND than anyone other vendor in the market over the past decade, we can leverage.
Parallel experience expertise with Kelsey to the Mount Isa contributor platform to build as a niche solution.
<unk> can effectively is paid portion of our near line HDD with high capacity near line HDD.
These solutions offer.
Lower tcl compared to legacy HDD due to their smaller comes back here.
Salary densities.
Lower power consumption and high reliability and certainty.
We see an incredible market opportunity here to defend Shea with Amman tightened platform and delivery solution.
Close to the further build out and adoption of AI in the enterprise.
In data center.
Driving our multi year growth cycle for the company.
Okay.
Overall I am excited by our strong start to the <unk> Corp.
And achievable opportunity or horizon for the rest of the year.
The young our strong result.
Our underlying business momentum continue.
Saturday as we add more product and more ways to drive sustainable long term growth overall business.
We continue to see very strong traction across the board with our controller.
Beginning bringing to the market and have equated accommodating that our strategy to diversify beyond PC and smartphone aims to new opportunity in the enterprise and automotive market well soon scale meaningfully without tier one customers.
We are very proud of this and they gave us good confidence in our pipeline our ability to serve our current and new customer to Jive built in growth.
Now, let me turn the call over to Jason to go over our financial result and outlook.
Thank you Ross and good morning, everyone I will discuss additional details of our first quarter results and then 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 GAAP to non-GAAP data is included with the earnings release issued yesterday.
In the first quarter sales increase assuming sales decreased 6% sequentially to $189 million.
Our <unk> controller sales increased slightly by zero to 5% sequentially MMC and Uff's controllers declined 10% to 15% sequentially SSD solutions sales decreased 5% to 10% sequentially.
Gross margin in the first quarter increased to 45%, reflecting both better mix and higher Asp's operating expenses in the first quarter were $62 5 million $1 million higher than the prior quarter, primarily due to higher R&D expenses to support our technology leadership.
Operating margins in the first quarter was 12% down from 13, 8% in the fourth quarter, our effective tax rate in the first quarter was 16% an increase from the two 3% tax rate in the fourth quarter, primarily due to a tax reversal benefit we had in the fourth quarter.
Earnings per Avs were 64.
Down from 93, we reported in the fourth quarter total stock based compensation, which we exclude from our non-GAAP results was $3 2 million in the first quarter.
$349 3 million of cash cash equivalents restricted cash and short term investments at the end of the first quarter compared to 369 million at the end of the fourth quarter.
Inventory increased sequentially in the first quarter to $253 million from $217 million in the fourth quarter to support revenue growth.
Second quarter and the rest of the year.
Let me now turn to our outlook as Wallace mentioned, the continuing success, we're seeing with flash makers and providing more clarity around the improving fundamentals of our business.
Strong demand in smartphones, coupled with improving demand in Pcs are design wins for this year are well positioned to drive better growth than we had anticipated just three months ago.
While the strength, we are seeing with our current products as well as the increasing interest in monetizing products. We are prudently increasing investments in R&D, primarily through higher head count to support increasing programs. We are engaged with.
Engaging in with our customers.
Now, let me turn to our second quarter outlook revenue is expected to increase 5% to 10% sequentially to approximately $199 million to $208 million, we expect to give MCA USS sales to increase in SSD controller sales will be stable sequentially.
Second quarter gross margins is expected to continue to improve and be in the range of 45% to 46% second quarter operating margins is expected to improve and to be in the range of 16, 5% to 17, 5%.
Second quarter effective tax rate to be approximately 19% and second quarter stock based compensation dispute related expenses in the range of two $5 million to $3 million.
For the full year of 2024, we are increasing our outlook given the strong momentum we are seeing from our customers' revenue is now expected to increase 25% to 30% sequentially to approximately $800 million to $830 million gross margin is expected to be in the range of 45% to 47% operating margins is expected to be in the range of $14.
7% to 16, 7% as we further invest in our technology leadership 2024 tax rate to be approximately 19% of 2020 for stock based compensation and dispute related expenses in the range of $30 million to $32 million.
The strong start to year and the building momentum in our backlog, we expect to see sequential revenue growth and profitability improvements throughout the balance of the year.
For operating expenses, we taped out our newest six nanometer uff's borne out of our control in the first quarter and expect to tape out our six nanometer Pcie Gen. Five four channel SSD controller in the third quarter, we expect our operating expenses to decline sequentially.
Great.
Increase again in the third quarter to support the technology leadership investments, we continue to make we have accelerated some R&D hiring, especially in our montage enterprise controller group to support the opportunities we are seeing with our sampling customers as well as the increasing amount of inbound interest. This concludes our prepared remarks, we'll now open the call to your questions.
Thank you we will now begin the question and answer session.
You ask a question. Please press star one one on your telephone keypad.
You will then hear in all the major message Yohan is raised.
To withdraw your question Please press star one.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Matt.
Hosseini from <unk>. Please ask your question Mehdi.
Yes. Thank you for taking my question two follow ups.
Yeah.
Wallace.
Can you give us an update or.
You used to work the key milestones.
Determining yours.
Nitration into the enterprise segment.
Gen five I think the past you've talked about.
Evaluation in the second half of 'twenty four.
Vision by 'twenty five.
Those milestones and then for Jason what are your thoughts on that longer term gross and operating margin targets.
Thank you Manny we see the very strong momentum put demand on Titan Q.
Q1, we had two tier one customers that we won United States. The other from China. We also have some ongoing margin meager design. That's why we're starting to see some revenue by end of 2020 floor. They can meaningfully in 2035, but the two tier one customers while rent by law.
<unk> 2024.
Yes.
<unk> announced our goal is to win minimum two tier one U S and two tier one in China is on track we might have a more than what we really can support but we believe.
$2025 820, <unk> stake will be much more meaningful revenue growth.
Titan business plenty of advice.
And Betty.
In terms of gross margin and profitability.
Certainly our goal is to continue to gradually improve our gross margins. We can we believe we can return back to our historical gross margins level by early next year and then in terms of operating profitability again, as we scale our revenue as we see our.
We see our gross margins further improve we believe we can continue to improve long term operating profitability and get back to our historical range of 25% plus as well.
We don't have a specific guidance around timing at this point, but certainly as we continue to execute and deliver we expect to get closer and closer to that target each quarter.
Thank you just a quick follow up given the.
Mix in your revenue could you hit that 25% operating margin at a lower revenue run rate.
Look I think if you take a look at our products today are revenue, our SSD controller business those SSD controllers tend to be above corporate average gross margins.
RMC in Uff's controllers are below corporate average gross margins. There is certainly a number of growth factors and both of these businesses, but typically what we've seen historically is that SSD controllers account for anywhere from half to two thirds of our business in any given period.
Yes, I am seeing Uff's account for about a quarter to a third in any given period. So we don't see that percentage changing much and certainly if we see automotive, Vermont tightened, becoming a bigger portion of revenues that could skew our gross margins to be better than longer than what historical average has been but it's too early to say what those long term.
Targets are yet given that we have to scale those products meaningfully.
Got it thank you.
Thank you maybe.
Our next question comes from the line of Quinn Bolton from Needham and company. Please go ahead.
Nathaniel Quinn Bolton: I didn't catch was that Quinn from Needham.
Yes. It is please go ahead okay.
Sorry, you cut out there when you announced the name.
Well, let's see Jason congratulations on the nice results and particularly on the one Titan and wins.
Wallace wondering if you might try to size the opportunity for us for Monotype.
For Silicon motion in 2025 is this something that you see contributing tens of millions of dollars is the two tier ones ramp next year.
Can you try to help level set us on on what's a reasonable expectation for revenue next year.
Yes, we mean, a two tier one customer with revenue late 'twenty, one and in fact, it was probably more many 206.
We believe monotype to antibody controlling revenue will it be around meaningful or playing $26 seven meaningful I mean, the liza 5% to 10% of total revenue.
Perfect.
And then.
Thank you commented in the script, but also in the press release about <unk>.
Creasing backlog and visibility I guess I'm kind of wondering I guess I would think the NAND controller space would typically be pretty sure sure lead time business because it just.
It can change pretty quickly how far does your backlog extend you have pretty good visibility now into the second half or is your backlog shorter term in nature and really only covers say 90 or so days.
Yes so.
Backlog, we obviously have some long term customers, especially with our NAND makers, where we have much better clarity on what their demand profile looks like over the over a longer term. These are rolling forecast. So we do get updated on that pretty regularly.
So it does vary depending on the end markets are serving with our serving PC OEM customers are certainly a little bit better visibility there.
But I would also point out that from a inventory management standpoint, it does take us about three months to get products in and out of our manufacturing partner stores that we do need that.
Advanced notice in order to build inventory to support those upcoming products that was upcoming sales those upcoming ramps, especially going into the back half of the year, where demand is typically stronger we need to make sure that we've got adequate inventory to support that revenue growth.
Comment.
But to increase at all and you so guidance what do you mean with better visibility for second half this year.
Got it and then lastly, Chris Wallace had mentioned the price the NAND price.
Sort of fluctuations might cause.
Some perturbations in the retail SSD market I'm, just wondering if you could sort of expand.
On those comments.
Is it just the pricing is coming up pretty quickly and that could create sort of lower demand temporarily in the retail channel or.
What are you trying to imply some other behavior. Thank you.
Well I think the the current solution like this the NAND maker, you have pretty high confidence because demand from data center and enterprise is very very strong.
That's why they Daphne continue see the supplier shortly to go and increase the wafer price and we see go into inquiry gradually with a shoe that a whole year, however for certain channel market or.
Demand for AC D C. The demand now that strongly so wafer price increase that's why are some fluctuation, but overall, we see is stabilized and we see this demand for our <unk> strong and stable. So I think primarily because of lava module customers.
While many inventory last year, so they can balance for the year.
Third cost.
Got it thank you.
Thank you Quinn.
Our next question.
Great.
Thanks, Kevin.
Please ask your question Craig.
Yes, thanks for taking the questions and congratulations on the very strong start.
2024.
<unk> I wanted to start with a higher level question for you that helps put it into context of what youre seeing with NAND OEM controller outsourcing.
So if we take a look at where we are today and compare it to.
January and early February can you talk about the incremental <unk>.
<unk> wins that you've seen with NAND Oems that would ship in 2024 and it seems from your prepared commentary that you are also being actively engaged with.
With some 2025 projects.
The question is what have you seen in the last three months that impacts this year's revenues.
And what are you seeing that kind of starts to give you.
At least project visibility for 2020.
I think the three years and really have a major changes, but we really you start to see the NAND maker. They all focus on profitability, having every NAMIC abnormal strategy and how to really.
Invaginate K pack.
The agreement, but we domine working you may have seen last year for several 2025 OEM project.
Cover from clients D oar USS for the multiyear MSC on multi pcie or voice at the multiple project.
Individual NAND makers, so they're quite busy and are monetizing also looking we set.
Quite a we have a two major design wins for tier one customer we have several in the process in quad Beijing engagement. So we are quite busy this year and we are pretty confident.
Pipeline for 2025.
And on that mine tightening point to follow up Marianne Quinn's question. It seemed like you were saying if we book in 2027 at market projections with TLC, where you have just an amazing history with product development and performance.
That part of the market would be about a third of the market or maybe 25 million units.
The question is given given your history with the technology, Kevin the solution you develop what might be a reasonable share position that investors could look at even if its a fairly wide range for 2027.
Yes, we cannot comment on Huntington.
Our market share it looks like seven give can give you certain guidance regarding why moment monetize innately get chimento traction the inkjet fund the tier one customer.
The main reason is because of the AI cloud and server demand is very very strong and we see many tier one customers on U S and China, They really try to export <unk> baked into the plan to buy storage solution, because TLC base it will be cheaper than can view this.
Much bigger capacity, we see so many demand or sorry, two terabyte higher density or future sandeep, so that will be suitable for AI data process specialty sequential re and.
Low latency, so because we have a very very strong position and knowhow in <unk>. So that we get a tremendous interest from customer to engage with the full qualification and joined development. That's why we see that trigger the stronger demand than usual he passes and we.
C, especially to terra bit mono <unk>, they become the man men Prada to enable future new lines SSD to replay pushing of HDD. So we're very happy with can be part of it.
That's really helpful color and then Jason if I could follow up with one per year before harken back in the queue.
I appreciate the point in time revenues rising sequentially through the year and any color as we look at the year's progression on how mix between.
SSD controllers and EMC.
Some of the other segments might play out do you kind of high level. Thank you.
Yes, I mean look I think.
We anticipate growth this year from both of those segments, obviously MMC.
MMC I think we obviously have much was much more difficult year for MMC Uff's loscher, given where inventory levels were the smartphone markets. So I think youll see.
And on a stronger year on year growth given that it was a bit more depressed last year ssds were a bit more stable and so while it will still grow it's not going to grow at the same.
Growth rates as we saw with as we expect to see what the MSC first of this year, but overall again.
The percentage of our business for Ssds, and EMC Uff's kind of typically stay in those bands that we talked about earlier and we don't see that changing anytime in the near future I think I may add some comments with devaney, both clients and mobile MSC Europe is what came up.
Gain market share this year, however, our mobile controller EMC USS dossier to phases smaller so we had much bigger momentum to gain market share in mobile controller.
Really helpful color guys. Thank you.
Thank you Chris.
Our next question will come from the line of.
<unk> de Silva from Roth. Please ask your question Susan.
Yes. Good morning, good morning, Good morning, Walton, Jason Congrats on the progress here and the strong start to the year on the sticking on Mon tightened in the AI opportunity.
If it is supporting AI do you have a sense of whether it's supporting inference or whether it's supporting training our traditional cloud instances any.
Specific color on those programs and where you're seeing traction.
You asked a very good question, but naturally we really don't know, but I've seen that.
<unk> today is not helping any input compute.
But other supporting it for storage, but <unk> I think fundamentally real data I believe.
When you really see the upcoming the flash memory summit in August in Santa Clara you Couldnt see many NAND maker.
<unk> supplier you Couldnt tell you like that be they see regarding a supporting AI and.
Associate so Daphne is relate to in France also relate to training process also a really rich.
<unk> the swapping between the Elliot model and in doing this diversification around them. So I've seen the storage have the specifics.
But for me requirement and there are certain feature we can add especially for edge computing edge devices.
Devices because of the limited Devon adapting.
It's a D. All mobile USS they have many many technology, we can help in the application.
Okay. Thanks, Welles and then my other question is on the smartphone market I heard you guys talk about.
OEM that is trying to in source the controller effort versus using a merchant controller I know.
Some of the flagships have been doing that for years, but im curious if thats a trend you're seeing or if thats an exception.
And what that impact might be for Simon in terms of opportunity.
So it's a very very good that we see the momentum.
Some smartphone maker.
Considering the <unk> into the mobile solution.
Thank.
As you can see.
<unk>, what we said one of the leading smartphone maker in the last two years and bring the solution to the market. It seems that Q4 production last year and we're very happy to what we said one major leading smartphone maker for Chelsea project and we believe this will be new production by nature.
This year and this is going to bring us real momentum.
<unk> allows the player in the smartphone segment now looking for how to bring the flagship model into the AI smartphone because everybody looking for very high performance and how to maintain no power and to supporting deepen lie Alan model, but at ANZ.
The other area. Many many smartphone maker to also bring that mainstream smartphone into the AI arena.
This is why we see the leading smartphone makers tried to increase the density, but we saw increased cost and thats why <unk> become fee to best candidate and so many smartphone maker. We believe are going to try to explore the potential opportunity to bring.
The USS with <unk>.
Solution and to try the market and I think eventually they will become a key to engage both smartphone AI smartphone.
The flagship to mainstream and beyond.
Alright, great very helpful color.
Well it sounds like is well positioned.
Thank you Lisa.
Our next question comes from the line of Matt Robison from wet bearish.
Okay.
Zach.
<unk>.
Thanks for taking my question.
I have a few so on the enterprise SSD side, we've seen substantial demand for $32 54 terabyte Ssds.
Recently I guess.
It sounds like what Youre doing with your technology is enabling <unk> so allowing.
Allowing other vendors beyond say solodyn with our kiosk solution.
To address this market with those capacity of use and higher capacities hyster.
There hasnt been a ton of success for third party controller vendors in the enterprise market I mean do you see your.
Nathaniel Quinn Bolton: Advantage around <unk> is enabling that opportunity for you.
So you can get some success in this market is that is that correct and if you see more momentum.
Over the last.
Three or four months when it appears like these high capacity Ssds are all of a sudden started to see incremental demand.
I won't say silicon motion will be the first being mow kelcey for antibody. The deep adapting we are the leader for clients a depot with TLC, but.
Because lately, we got tremendous demand, but also because all NAND makers are going to have the <unk> available in the market.
And I believe all NAND maker, you're going to have a two terabyte TLC in Molla die by late 2025, that's why that trigger the strong in chip Hyperscale data Center and server leader at it tried to potentially adopt <unk> for that.
Coming strong demand for AI server AI.
<unk> services.
Because chelsea by Nacho, a beautiful new line is a D there'll be much more attractive or near line HDD from data asset point of view, so we silicon motion because our controller can work with all NAND maker TLC. So we are in a very unique position quality customer.
Directly work with Silicon motion and two we said that deepen NAND supplier. So.
I cannot say, so we have budgeted NAMIC it but we are seeing we are in a very unique position to.
Enable to trend adopt TLC to enterprise.
<unk>.
Got it and what's it sounds like you're working with all of the different customers out there in the sense, you've talked about Hyperscale Oems module makers.
And.
I guess my question is can you characterize what those first two customers.
Victor solution, which bucket they fit into in the Oes, we cannot comment.
Until they really announce the name, but one tier one U S. One tier one in China. We believe by end of the year, we have a few more to add on the list.
Awesome and then I guess my last question is I know this has kind of been asked but just in terms of the Tam.
Either on both.
Would that enterprise product.
But also in the automotive market can you characterize what you see those two tabs is being versus your more traditional.
Markets.
You have to ask the MMC and SSD controllers.
In terms of the enterprise.
Obviously from a unit volume perspective, it's not going to be narrow where near as big as the PC market or smartphone market rate, but however, asp's for our <unk> products are certainly.
Several multiples higher than our client SSD controllers margins certainly better than corporate average. So it is a big opportunity, even though the unit volumes.
Much smaller compared to Pcs and smartphones on the automotive side again total number of cars ship today is a lot smaller than either of those other markets, but what we're seeing now is multiple storage requirements multiple storage devices required per car to run things like.
Just the infotainment system, but the Adas sensors cameras all of those things require individual independent storage solutions that significantly balloon the size. The number of units I don't have that number handy, we can get back to you on that one Matt but it's.
These are certainly much higher.
More sticky engagements that we would be going into as opposed to the PC and smartphone I made a comment regarding automotive.
No it's semi habit to do you're going to approach expand our automotive visibility one is direct control there.
Figure out timeline book come children, we have engaged <unk> NAND makers and the core <unk>.
He also as well as the USS the MMC.
Development I've seen some are in production to date, we have to make here is going to production with pcie Gen.
Gen. Four and then we also have the.
<unk> MSC is a NAND maker.
On the floor.
We're already is based on our own solution and engaging with our automotive customers and we already win which we had said was that Toyota and Honda also including China BYD. So we have multiple design wins in the pipeline. We believe we will grow our automotive business.
Very very strongly from 'twenty to 'twenty five.
Thanks for all the color and congrats on a good quarter.
Thank you Matt.
Thank you.
Just a reminder to ask a question. Please press star one on your telephone keypad.
Okay.
Sir I'm showing no further questions I'll now turn the conference back to the <unk>.
<unk> CEO Mr. Wallace go for closing comments.
Thank you everyone for joining us today and for your continuing interest. They can motion we will be attending several investor conferences over the next few months as well as the <unk> conference in Taiwan June.
Our schedule of this event will be posted on the investor relationship section of our call.
Great website and look forward to speaking with you.
As you see events. Thank you everyone for joining us today Goodbye for now.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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