Q3 2024 Silicon Motion Technology Corp Earnings Call
Speaker Change: Today and thank you for standing by welcome to the Silicon Motion Technology Corporation's Q32024 on East Comfort's Call.
Speaker Change: At the time, all participants are in a listen-only mode. There will be a presentation, followed by a question in our session at which time, if you wish to ask a question, you need to press start on one on your telephone, your then-here automatic message, advertising your hand is raised. Please be advised that today's conference is being recorded.
Speaker Change: This conference called contents for the case statements within the meaning of section 27A of the Scaryless Act of 1933 and Section 21E of the Scarydyfection Act of 1934 as amended.
Speaker Change: Such a locust datements include without limitations, datements regarding trends in the semiconductor industry and our future results of operations, financial conditions and business prospects.
Speaker Change: For those such statements are based on our own information, their information from other sources, we believe to be reliable, you should not face undue reliance on them. These statements involve recent uncertainties and actual market trends and our resource benefit from those expressed or implying this route in the case statements for variety of reasons.
Speaker Change: Potential risk and uncertainties include, but are not limited to continue competitive pressure in the semiconductor industry and the effect of such pressures on prices. I'm predictable to use in technology and consumer demand for multimedia consumer electronics.
Speaker Change: the state of an any change in our relationship with our major customers and changes in political economic legal and social conditions in Taiwan.
Speaker Change: for additional discussions of these risks and uncertainties and other factors, please see the documents we file from time to time with the secretaries and exchange commission. We assume no obligations to update any fall of containment, which apply only as a survey of these conference call.
Speaker Change: with that, I'll now like to thank all over to Tom Suganzis, Senior Director of Industrial Relations and Strategy. Thank you. Please go ahead.
Tom Suganzis: Thank you and good morning everyone and welcome to Silicon Motion's third quarter, 2024 financial results conference call on Webcast.
Speaker Change: Joining me today is Wallace Co, my president and CEO and Jason Tsai, our CEO. Wallace will first provide a review of our key business developments and then Jason will discuss our third-quarter results in outlook. Following our prepared remarks, we will conclude with a Q&A session.
Speaker Change: Before we get started I would like to remind you of our safe harbor policy which was ready to start of this call.
Speaker Change: for a comprehensive overview of the risks involved in investing in our securities. Please refer to our findings with the US Securities and Exchange Commission.
Speaker Change: For more details on our financial results, please refer to our press release, which was filed on Form 6K after the close of the market yesterday. This webcast will be available for replay in the investor-relation section of our website for a limited time.
Speaker Change: to enhance investors' understanding of our ongoing economic performance. We will discuss non-gap information during this call. We use non-gap financial measures internally to evaluate and manage our operations.
Speaker Change: We have therefore chosen to provide this information to enable you to perform comparisons of our operating results in a manner consistent with how we analyze our own operating results.
Speaker Change: The reconciliation of the gap to non-gap financial data can be found in our earnings release as you guessed today. We ask it, you review it and conjunction with the skull. With that, I will turn the call over to Wallace.
Wallace Co: Thank you, Tom. Hello everyone and thank you for joining us today. We deliver another quarter of sequential revenue growth and goes marching in the high end of our guided range. Our sixth caliphary quarter of course, marching expansion.
Wallace Co: Revenue's fans were driven from our name-fetchmaker customers, as they continue to source controllers, externally, rather than develop them in-house. As they focus on long-term profitability and reduce the operating expense.
Wallace Co: Our strategy of deepening our partnership with the leading flash makers and investing in new technology and driving success across our business.
Wallace Co: We are winning more program in mainstream PC, smartphones, automotive.
Wallace Co: Industrial and other markets.
Wallace Co: and we expect this effort to accelerate that we're moving to high MTC.
Wallace Co: Sudan, Tradition of first PCIU-5.000 controllers, flicking motion is the best position to capture increasing shear in the market we serve for the strengthening our position as a leading merchant control advantage in the world.
Wallace Co: In the third quarter, a man maker revenue grow more than 50% year over year. The way he continued to increase, share gain, show new product introduction and new factors strategy.
Wallace Co: Both as a D and EMC, U of S controller, Shenzh from our OEM programs, more than the upset of continuing weakness in the retail after market for a C D.
Wallace Co: that has been impacted by high-name prices and lower consumer spending driven by low-end prices.
Wallace Co: Dismissed these new turn, macro-challengings. I'm pleased with our team's accutions throughout the year. And the building momentan, as we continue, to gain shared cross-market research.
Wallace Co: We believe that our ability to capture increasing shares through our name fetchmaker partners and the OEM channel will continue to allow us to up our pace to market. Hard.
Wallace Co: On E-Crow, technical and financial trends to build next-generation controllers has an well-continued-to-end opposition.
Wallace Co: Susan Tradussian of multiple new products and show our continuing drives of provide Workout customer service.
Wallace Co: Combine with initial ramp of our new Monkaitan Enterprise Class Lotion and our first PCIU 5 controller in the current quarter And the expected introduction of our new U of S4 controller next year
Wallace Co: and the best position for long-term growth and share again in our history.
Wallace Co: our opportunities are growing significantly as a way to re-repartize solutions that are matched by our competitions.
Wallace Co: and we remain focused on driving additional revenue and profitability across our platform of leading-man-controller solutions.
Wallace Co: I would not like to provide you with an overview of the current NAND-Marchi dynamics.
Wallace Co: Overall consumer-gray-nam-price increases have slowed and in some cases are beginning to see milder's decline.
Wallace Co: despise a maldus improvement in nan prices, the PC and smartphone markets, as well as aftermarket for Kaiser D, all experiencing near-term weakness.
Wallace Co: reflecting the industry why the man's flow down for consumer electronic disability seasons, end by grey and man pricing is stable, as the demand for AI storage solution remains strong.
Wallace Co: So here in 2225
Wallace Co: We are encouraged by a growth driver in the PC market, including an expected PC replacement cycle and an increase in story-down to AI as a hatch. And well being able by an exploration processor from Intel, MD and Qualcomm for PC.
Wallace Co: In the smartphone market, the introduction of the more AI capable processors from Qualcomm, MieterTech and others who drive an upgrade cycle in 2025.
Wallace Co: Given this tailwind and I'm going strengths in the enterprise storage market, we continue to expect then supply to Titan by May 2025, given by storage demand and desk decros.
Wallace Co: God name recently published his father, Aldeque, on then
Wallace Co: highlighting the growing importance of QLC.
Wallace Co: The X-Wreck KLC production to increase to more than 25% of total nanopold by 2028.
Wallace Co: up from last 10% today as a result, ancient QLCNN is increasing a density demand growing rapidly with a rise of artificial intelligence.
Wallace Co: [inaudible]
Wallace Co: We are currently engaged in discussion with all the major flash makers and multi-maker for the development of QRC-NAN across multiple markets including enterprise-AI, PC, smartphone, IoT and others.
Wallace Co: Gunner is projecting significant adoption of KLC across all markets over the next five years.
Wallace Co: and P.O.C., you can see the increase from about 20% a day to over 55% in 2028.
Wallace Co: or smartphone, Kelsey will be specially important in mainstream and low-end device. An adoption will grow to about 15% from virtually zero today.
Wallace Co: and the Enterprise, KEL 6-2 account for nearly 35% for server storage market and nearly 65% of the enterprise storage is the D-market 5-2028.
Wallace Co: Kiosen and while providing low-cost storage density is significantly more challenging than its previous actors to manage and require more sophisticated technology, income and children in filmware.
Wallace Co: Our PLC-nanks appearance has become a key diventiator in the market, resulting in multiple wings with a flash makers and multi-makers across our product categories.
Wallace Co: All proprietary advanced LDPC, 3D-ray technology and leading firmware algorithms have replaced the commotion in the best position to benefit from the emerging push to deliver KLC-based storage solutions.
Wallace Co: and we expect to be one of the primary winners in the growth of the new technology.
Speaker Change: Now, when I do this, go to each of major private segments, beginning we saw as it until these.
Speaker Change: The man remained robust from our flash-maker customer in September quarter driven by PCOeems
Speaker Change: We have presented across me 75% of our clients have become truly self.
Speaker Change: Significantly higher than no more surquotes, ciznality, or the high-end prices in the weaker consumer demand continues to pressures the retail after marketplaces.
Speaker Change: Define the Newton Challenge.
Speaker Change: This is the exciting quarter of three commotion that we introduce our new P.S.I.E.G.J. and FI.A. Channel Controls.
Speaker Change: This is a premium product. Ideally, suited for high-end AI notebook, desktop, gaming and worst-station PC. That offer unparalleled performance in basing cloud pop-in-sumption.
Speaker Change: Our controller is the first 6-0 meter HNLP-SiHN5 controller in the market and has led to 4 flash-maker design wings and multiple engagement with nearly all the modemakers
Speaker Change: The controller delivered 20 to 30% lower-palk consumption than competing controllers, including internally developed controller from the major name makers.
Speaker Change: This is the new PCIe Chen Phi Prada, extremely important for Silicon Motion, as they mark our entry into the high-end PC market for the first time.
Speaker Change: High NPC account for spasmony 10 to 15% of the overall piece market, representing a significant opportunity for market share again and top and bottom line growth for our company.
Speaker Change: The High End of the Market Divers, the added benefit of high ASP and the Christian margin and we are entering the market with an incredible strong position.
Speaker Change: with our four-nan-fresh maker panorists and the growing number of multi-maker customers. We believe we can grow our share of high-end PC market rapidly.
Speaker Change: I would also like to share another significant achievement by our tinging-volving Delta-Motive market
Speaker Change: Our new PCI agent for automotive grey controller has recently received a spite level 2 certification
Speaker Change: This is the first PSI-EGN4 controller in the market to achieve this level of certification and we are engaged with money-boke customers and designed into several new automotive platforms Level 2 is the most critical step in a space certification
Speaker Change: As they validate the development is complete and fully managed and ready for release.
Speaker Change: We expect to achieve low-espoir level 3, certification with the controller with the same controller in 2025 And we remain on track to deliver a new PSA-HM5 automotive grade controller in the second half of calendar 2025
Speaker Change: Where the motive market has six experience
Speaker Change: for challenging year.
Speaker Change: We are continuing to experience growth.
Speaker Change: on the Monday, a radio account for approximately 5% are revenue today. And we spent a reach 10% of our total revenue by late, 2022, or nearly a early, 2020.
Speaker Change: Our pipeline with design activity for next generation P-Shage and 4 controller using both TRC and TRC and Remains from.
Speaker Change: These new SDs deliver high performance and high density at the lower cost than PCI-HM5 platforms And are increasingly ideal for multiple applications that require low cost solution
Speaker Change: We are growing our steam market share in the PC, game console, automotive, industrial, IoT and large markets. And well continue to diversify our customer base and market moving forward.
Speaker Change: I would like to discuss our EMC and your business.
Speaker Change: are you seeing your business continue to be strong grows, area for us as we continue to capture more share.
Speaker Change: We have a significant new product ramp in users, users, and EMC next year As we capture more opportunity in low-end to mainstream handset and shoot continuing expansion in automotive, IoT and other growing markets
Speaker Change: Our company, family of Europe's EMC controller, in conjunction with our strategy of customer diversification, through the working with NEN-Mark makers, Morg makers, and Hensel Yen directly.
Speaker Change: is enabling us to become the preferred hunter to make a cross-mudival market.
Speaker Change: This is an important mark in China where our multi-maker customers can deliver solutions that are compliant with increasing localization standards. Our ability to support.
Speaker Change: to broadest range of men, including KLC, give us Cust gave our customer the greatest of amount of flexibility to separate a wide range of performance feature and sourcing requirement.
Speaker Change: here with a 2002 and 3.1 remains a large portion of the smartphone market and we expect this will continue to shoot 2026.
Speaker Change: As Europe is forward, expand from the high end to more mainstream handset, our new signal meter Europe is forward, come true to it, it's well positioned to benefit from this growing adoption.
Speaker Change: We continue to receive positive feedback from our partners and the incorporation with multiple hands-on-sewinging pressure maker and multi-maker, a head of our expected product program in May 2025.
Speaker Change: [inaudible] States, the United States, the United States, the United States, the United
Speaker Change: offering higher performance and lower cost solution that will be increasingly high demand of the US-4 adoption move to mainstream smartphones.
Speaker Change: Let's compare to the current youth 4 for channel controller in the market today that only support 1.6 and 2 gigabit per second IOS VNAND
Speaker Change: Our solution has less convocation, substrate need, lower-pause usage, better performance, higher signal integrity and lower-over-bound cost.
Speaker Change: While the most important growth area for our EMC UFS business involved QLC, I would like to update you on our project with our first customer.
Speaker Change: We have this cut previously, we have been working directly with a handsack customer to develop a QLCNM memory solution for mobile smartphone.
Speaker Change: I'm pleased to report that our customer has already begun shipping and set with our Kelsey Yorker controller and will run more than fully next year as they expand Kiosk into additional models.
Speaker Change: We are in early discussion with additional Tier 1 hands-held yen for Kiosy solution or mainstream to lower and smartphone to effectively increase density without significantly increasing cost.
Speaker Change: First, make a continue to be resource-constrained. We are seeing them move their existing U.S. controller development to war next generation U.S. is 5.0 and opening new opportunity to outsourcing for mainstream solution.
Speaker Change: We are confident that we can continue to grow our share in this market as our Prada Roamab and strategy is aligned with our customer's own internal plan.
Speaker Change: As a adoption of EMC, you're the controller to grow. We believe our opportunity to gain shape, we're accelerated. And we are completely family of solution and growing customer base. We are well positioned for continued growth.
Speaker Change: Now I would like to turn to our montage in Python.
Speaker Change: Montage and represent a significant opportunity for Silicon Motion.
Speaker Change: Give the large addressable market an expected growth in Kiel Sinan within the enterprise storage and AI server market in the coming years.
Speaker Change: While we are a new comer in the end of our market, our experience in QC and Chelsea NAND, couple with our dominant position of the leading merchant control maker.
Speaker Change: have a driven strong interest in Montaidan.
Speaker Change: We continue to see more inbound inches in our enterprise class solution given our unique differentiation.
Speaker Change: We believe we are well positioned to scale with a flashmaker and storage solution in able learn, as well as directly with a data center and anti-vide customer in the coming years.
Speaker Change: As we announced earlier this year we have a secure two initial tier one customers that will receive initial order this quarter and we expect to announce two additional design wings by end of this year.
Speaker Change: On Saturday has several advantages that we believe put us in excellent position to go see what's in the market.
Speaker Change: and allow us to achieve our target of generating 5 to 10% of our overall revenue on this business by KELONDU 2021-27.
Speaker Change: Some of these advantages include our amazings, parents, managing girls in and flexible, rent-bill approach.
Speaker Change: Are Unii Aktecher, High Capacity, Cababurity, and Leaving Performance.
Speaker Change: with Montyten, Cusheron can choose either our turn key firmware solution, how they can develop their own firmware using our SDK. Most of our competitor only offer one of the other options, but not both.
Speaker Change: We also offer unique capability including performance shape which allow only apply adjustment, targeting either battery, performance, rifle, performance, and lower power.
Speaker Change: Wired off the factory, acquired one time setup without ability to change dynamically.
Speaker Change: Montana also includes upcoming two TB mono die QLCNM, the ability to deliver 1-28 TB SD, that will be ideally suitable AI server and application.
Speaker Change: and finally Mountidell also did a very passing class Renden Reed of 3.5 million IOPS.
Speaker Change: Seekman has significantly better than most other options that are limited to 2.8 to 3.0 meaning Iops. This performance could be with faster training in A-havocation, save power and lower the total cost of ownership.
Speaker Change: We continue to achieve both our internal milestone.
Speaker Change: and our customer milestone regarding the introduction of Mount Aiden.
Speaker Change: and the way I'll track to begin.
Speaker Change: Early production in the current quarter and the Rember more meaningfully in the second half of calendar 2025.
Speaker Change: It is becoming increasingly clear from customer feedback that among titans' solution will be a key addition to next generation data century and storage build-out plan, especially for delivering faster and more accurate AI capability to the market.
Speaker Change: So that we have mentioned
Speaker Change: on previous call, given our record of meaning of managing more kill CNN than anyone over the past decade, we believe that this new product platform will try multiple year growth cycle for Silicon Motion.
Speaker Change: Overall, despite the near-ton having in the retail acidity after market and the expectation of a muted holiday sale this year. I'm pleased with our strong execution in 2024.
Speaker Change: and meaningful wing.
Speaker Change: and Pipeline, our team has delivered. Looking forward to 2025, we have much to be excited about the new product transition, including PCIe Gen 5, U of S4, and our new enterprise class
Speaker Change: Abenzio, or Groves for the 3rd emotion.
Speaker Change: Adicionaling.
Speaker Change: We continue to diversify our M-market beyond the PC and smartphone with many new exciting growth opportunity in the automotive industrial commercial IoT, GEN Council and other markets. I believe this new product and
Speaker Change: the Design Wing Pipeline, where I'll help sick emotion grow in 2025. And I look forward to sharing more about our progress in future updates. Now let me turn the call over to Jason to go over our financial result and all look.
Jason Tsai: Thank you all and good morning to everyone joining us today. I will discuss additional details about third quarter results and then provide our guidance for the fourth quarter.
Jason Tsai: Please note that my comments today will focus primarily on our non-gap results, unless otherwise specifically noted. A reconciliation of our gaps and non-gap data is included with the earnings release issued yesterday.
Jason Tsai: and September quarter sales increased 23% year over year to 212 million point, 212.4 million.
Jason Tsai: SSD controller sales were approximately flats, sequentially in 3Q24 as continued share games were offset by weakness in SSD after market sales and lower than expected holiday ramps from the PCO Williams.
Jason Tsai: The weakness was exacerbated by continued inflationary pressure, high-nan flash prices, and a modest slowdown ahead of next generation Intel AMD and Qualcomm platform to support PCI-85.
Jason Tsai: YMMC Controller Sales were up slightly in 3Q24 and up over 44% of your years are diversification strategy continues to work with NANDS, makers, model makers and handset OEMS directly driving strong growth.
Jason Tsai: Rose Margining increased for the 6 consecutive quarter to 46.8%. As we continue to benefit from improving product mix as we shift our customers to newer solutions.
Jason Tsai: Operating expenses were 65.1 million in the sector of Procorder, of from 62.1 million in the June quarter.
Jason Tsai: The increase as we discussed in our last call was attributable to the expected tape-out expense for our new 60-nm 4-channel client PCIe Gen5 SSD controller, which is targeting introduction in early 2026.
Jason Tsai: this ramp of this product of timing is
Jason Tsai: Time to coincide with PCI-5 entering the mainstream PC market. It can benefit from significant buck you can't follow you scaling.
Jason Tsai: Operating margin is 16.1% in 3Q24, down slightly from 16.5% in the June quarter given the PCIe 5 4 channel. Tape out, and earnings per ADS was 92 cents down 5% sequentially due to the tape out, but up over 46% you over here.
Jason Tsai: Total Stockbase Compensation, which we exclude from non-gap results, solicit 3.7 million in 3-224.
Jason Tsai: We had 368.6 million of cash, cash equivalents, restricted cash, and short-term investments at the end of the third quarter compared to 343.6 million at the end of the second quarter.
Jason Tsai: Inventories decreased from 240.8 million at the end of second quarter to 214.6 million at the end of third quarter a reduction of over 11%.
Speaker Change: Now let me turn to our outlook. As Walls described earlier in the conference called demand for retail aftermarket SSDs remains to think.
Speaker Change: Additionally, expected holiday PC and smart fun sales are muted, leading to lower than seasonal order patterns from OEMs and module makers in the current quarter.
Speaker Change: Despite near-term weakness, our increased OEM shared games will allow us to achieve a full year 2020 Ford guidance that we had raised earlier this year.
Speaker Change: We do expect current, we miss to be short lived as we are introducing a number of new products including our new client PCIU 5, HNL SSD controller and our Montyten Enterprise SSD controller. Both in the current quarter and our UFS 4.1 controller in the second half of next year.
Speaker Change: We have a race that curious to meet for you at Winds and Desymo Mentos with these new products that will drive additional share gains in our existing markets and open up new greenfield growth opportunities in enterprise storage market that will scale over the next few years.
Speaker Change: For the fourth quarter we expect revenue to be down 5 to 10% sequentially to be in the range of 191 to 202 million driven by weaker than seasonal smartphone and PC I say I'll continue in weakness in the SSD after work.
Speaker Change: Ross Martin is expected to be 46.5 to 47.5 driven by continuing the improvement in our mixed-tours newer products.
Speaker Change: Operating margin is expected to be in the range of 15.6 to 16.6 percent as operating expenses are expected to decline due to better expenses. Better expense control as well as no additional 6 nanometer to take about this quarter.
Speaker Change: Fourth Quarter Effective Taxoration should be approximately 18% Fourth Quarter Stock Race Compensation and...
Speaker Change: Dispure related expenses in the range of 13.4 to 14.4 million. Despite the near term weekness in the end markets, our increasing share of control or outsourcing is expected to drive significantly better than end market demand growth next year.
Speaker Change: As Wallace mentioned, we are in a better position for growth today than at any other time in our history. I am pleased with the progress our team has made this year, it's securing new opportunities that will be the foundation of strong growth for years to come.
Speaker Change: This concludes our prepared remarks. We will now open the call for your questions. Operator.
Speaker Change: Thank you. As a reminder to ask questions, please press star 11 and we're for a name to be announced. The can tell request you have made also press star 11 again.
Speaker Change: One moment for the first question.
Speaker Change: Our first question comes from the lion, Mandy Hossini from SIG. Please go ahead.
Mandy Hossini: Yes, thanks for taking my question. What it's looking to early 25 and
Mandy Hossini: What is the confidence that this kind of weakness that you're experiencing in Q4 is not going to sustain into early 25 especially since
Mandy Hossini: and I have a father-on.
Speaker Change: I think today's position are the 35-blown. We have to have me counting.
Speaker Change: Comed and to grow 2025.
Speaker Change: but regarding the latest.
Rachel Wittiman: Rachel Wittiman
Rachel Wittiman: Do 2-C
Rachel Wittiman: Inflation, due to high-name prices and multiple reasons, we cannot guarantee whether to one or recover. However, we do see more meaningful progress on the multi-customer, including industrial customer. We'll believe that on the link you want, are already due to.
Rachel Wittiman: and Cusman Angle must start to do more booking.
Rachel Wittiman: So I think it's more challenging. We also see the PC, Suzy.
Rachel Wittiman: Psycho-Reef Rash and the demand of smartphone customers start having multiple new program coming. So this is more exciting. We believe the worst addition in what we've gone and we should look for more exciting 2025.
Speaker Change: and one follow-up for you Wallace, you're very excited with the new products that you hired in the pre-pair remarks.
Speaker Change: but I did a list to capture the return. I feel like we're being here before. The stock is near two-time work more than a third of your work is.
Speaker Change: Liquid Cash, and understand you may not be a fan of fight back, but not why not the step up and increase cash dividend and to illustrate how confident you are with all of these new products that you highlighted.
Speaker Change: when we should do the shared by that and how we return cash to shielded fairly.
Speaker Change: So this is a very, very important. This strategy behind our dividend amount has always been to set it at a level that is a comfortably affordable and well-continued to evaluate it going forward. As you know, we might have to have a legal expense to pay and this year's certain time to go. That's why we try to maintain a position and focus on the business to grow.
Speaker Change: Thank you for the questions, one more moment for the next question.
Speaker Change: Our next question comes from the Lion Creek Alice from DP Riley's Curities.
Speaker Change: Yeah, thanks for taking the question and Wallace.
Speaker Change: Thank you very much for all the details in your prepared remarks around what you see next year. What I wanted to do is see if you could give us more of a high level summary view of what it all adds up to as we look at.
Speaker Change: PCIe Gen 5 coming in with a tire-ass piece and higher margins.
Speaker Change: UFS 4.0 coming in in the back half of the year.
Speaker Change: Montyton after initial shipments in the fourth quarter sounding like a tramping up in the back after the year. And then the strength you're seeing in the automotive market in EMMC. As you look at what's happening, one, do you feel like in the core?
Speaker Change: PCSSD and UFS markets, you're tracking to another year at 500 basis points of share gain as we target it for this year and secondly...
Speaker Change: is there a way you could quantify the level of growth we could get next year. Are we looking at a mid-singled digit year on your growth year, high-singled digits? Help us just understand what all this out to. Thank you.
Speaker Change: Well, thank you for having a pretty big question. So let me introduce the product 1 by 1. Especially for Piaichen by a channel controller.
Speaker Change: um
Speaker Change: We are in a very unique position today to launch the PJI Gen 5 Channel High in Controller with D-Ramp And we won 4 major NANDFreshmaker, we almost won
Speaker Change: Every Mall you make here today.
Speaker Change: So, for PCI-185
Speaker Change: Hi and next year going to RAM, Lying with Intel AMD
Speaker Change: Sir
Speaker Change: See you in chipset by Lay K1 and Erdicutu for notebook.
Speaker Change: and so this initially I think will be take about 5 to 10%.
Speaker Change: I've seen the high end of the overall 10 to 15% of the market.
Speaker Change: We believe when they reach
Speaker Change: the Pauli 10 to 15% will issue on minimum 50 to 60% of a high-end market share by 1926.
Speaker Change: So this is a very exciting, rare new growth for us and the Funtablan and Bunderland because we never have a high-end PC market before. So can go to your first four.
Speaker Change: It is also very unique product we launched and as we are going to launch with one man maker in middle of next year and this is the high end.
Speaker Change: and we're going to launch in the early 2026 with another name maker at the high end. So you can see in the 2026-27 the market is going to launch yourifice fly at the high end. You're the for-good transition to be mainstream.
Speaker Change: So, all the current men make their current US 4 is a poor channel like as a controller. Support the name of faith only go to 1.62 giga-p per second.
Speaker Change: Pardon. So that is a very limited, you can see, most mainstream, two-channel youth control that was a signal meter. We are much more compelling and positioning than...
Speaker Change: the Nian maker today's solution.
Speaker Change: So we believe majority would come back to us and mine, even we only have a two-comedy customer to rent in the next one year.
Speaker Change: So this is a very exciting product. We launched big, we support all the way to 300 plus stacks a new net for TLC and QLC. So we're ready to grab marketing to grow.
Speaker Change: In addition to go to Mount Tyson and because our current South Rabbony forecast on 2026-27 to become 10% of our total Rabbony, it's just based on 2 tier 1 customer.
Speaker Change: and we have that confidence to rent because the Tier 1 customer in China will have a multiple end customer to grow. So this very, very exciting program we see we're going to win two more Tier 1 and we have a multiple Tier 2 customer and using for ecosystem for mountain. Because our technology to provide high density QLC base with FTP firmware, that will be unique and ideas solution for AI server AI data center.
Speaker Change: So this is a so many customer approaches and we are really short of a resource. We're not able to handle to serve their need. But we believe through the Product majority and firmware and we are able to initial ramp this quarter.
Speaker Change: I think about second half would 25 will be meaningful revenue and we have come then to reach 10% by 2026 or 27 or total revenue.
Speaker Change: and Craig in terms of guidance for next year, it's a bit early. Obviously we normally put that out on an ex earnings call when we report our fourth quarter results. So stay tuned for that, but as well as pointed out there's a number of new products, new opportunities that we're scaling that we're really confident about the next year.
Speaker Change: I'm Rick Ellis, sorry, which I had a little automotive
Speaker Change: are known today.
Speaker Change: The total is about 5% with total revenue, but we have confidence to grow to 10% by the late 26th of 3027
Speaker Change: because this year's
Speaker Change: is a pricing very challenging where no a grassy to wing any design, bigger margins very very low.
Speaker Change: but we are continuing to develop new products and winning new name maker and also our fairer product line. And we believe next year we're going to launch with the Toyota Global Model that's going to bring meaningful revenue with company growth and we have multiple new products that we're going to announce in by sticking out next year.
Speaker Change: Wait and see.
Speaker Change: and that town's very encouraging while us so thank you very much for all that color and I get the point on this specific guidance, Jason
Speaker Change: I'm hoping that you could help us on a 2025 set of items related to gross margins without providing guidance. Can you just talk about some of the gifts and takes with gross margins? Clearly there's a lot happening with new products.
Speaker Change: that should be a tailwind or there are any pressures we need to be aware of than on optics.
Speaker Change: and Thomas level set with what we should expect with Mass Set Cross.
Speaker Change: Intensity versus 2024 and due expect to increase R&D intensity in areas like enterprise SSC just given the demand you're saying thank you.
Speaker Change: Yeah, so we said that we expect our gross margins to get back to historical levels of 48 to 50% by early next year. We're still on track for that, so we don't expect that to change.
Speaker Change: We have a good mix, PCI-5 on the client side, higher.
Speaker Change: Hiroes, peace hired gross margins. At Montyten on the enterprise, certainly getting much higher ASP and higher margin. So as those continue to become bigger and bigger portions of revenue, certainly longer term, we can see that being additive to our overall gross margin picture, longer term.
Speaker Change: in terms of the op-acts, you know...
Speaker Change: We are planning to do have
Speaker Change: Two more advanced controller tape bouts for next year and so that'll...
Speaker Change: We expect that to continue to become
Speaker Change: Steady State from World War II, this year we take out two six-manometer controllers this year, we expect to take out a equivalent number next year. So I think from an off-back standpoint, you know, we do anticipate obviously some inflationary growth in terms of wages and headcount, et cetera, but also maintaining the same level of tape out activity for next year as well.
Speaker Change: Thank you very much, guys. Good luck.
Speaker Change: Thank you for the questions. Our next question comes from Suji the Silver from Brock Capital, please go ahead.
Speaker Change: by Wallace, such as, and so on the client side, the PCIe 5 wins any of four flashmakers, are those ramps going to be staggered or they're all hitting at a time frame where the new PC-process are available to support PCIe 5.
Speaker Change: for PCOEN, they're tapping online with a PCOEN requirement.
Speaker Change: but for retail because two of them have a retail business so they're going to start to rim by.
Speaker Change: Ladies and gentlemen, I'm going to say that the next year. So, it depends on the retail demand. I think we'll probably 20, 26. We're going to reach a maximum around 15% level.
Speaker Change: but we do see we might opportunity to gain more one more neme career opportunity when the high end by late next year so hopefully we can really have the real home round with a signal meter, very, very great polypeotency and get-ipotency.
Speaker Change: and to position the mainstream notebook.
Speaker Change: Okay.
Speaker Change: and then on the Montaite and the side. I'm curious, you know, the use of QLC is that, well, it's by application workload or is it across the board opportunities and and the customers initially going for their own firmware or more using SIMO's turn key and peers which is the directions they're going initially.
Speaker Change: You have a very good question. I think one of the two one is to develop the firmware themselves.
Speaker Change: One of the other two are one is a joint development film work So, this is try to accelerate the time to market And we do see certain OEM, they prefer the other film work Certain prefer the time to market Because, for the...
Speaker Change: AI data space. As you know, well, is a four major stages, right? Like a ingest to collect all the data and second stage go to see...
Speaker Change: Go to Previdition with regards transformation is to recognize and changing will become AI, GPU, recognize the language and then the search day goes training and the search day go to inference.
Speaker Change: but I do in the past because I'm on Titan or...
Speaker Change: Data Shave, People Veren Shipping and Power Shipping Technology That's the idea for the customer to adjust When you're going to reach the highest performance When you can reduce the power, then reduce overall See
Speaker Change: Paul Epidiencing
Speaker Change: So this is ideal cave for...
Speaker Change: for our customer to utilize the Montaitan technology in software to dynamic changing and help for the data center in the full server. So this is why this is very, very attracted to the end customer because it's very unique.
Speaker Change: and this week we believe with APTB and QLC that can make us a high density acidity drive become more interesting and more valuable.
Speaker Change: Okay, very interesting while it's thanks for the color.
Speaker Change: Thank you for the questions, one moment for the next questions.
Speaker Change: Next question comes from netbrizen from web bush securities please go ahead.
Speaker Change: Thanks for taking my question and Jason Congrats on formalizing the role as Sep.
Speaker Change: I guess my first question is, you're asking, looking at the QLC solution that you're checking to a hands-on vendor. It's a slightly different...
Speaker Change: after Market and we typically see where normal you are, you work with Fabs and Modelmakers. Is that something that you see becoming more common going forward where you're working with OEMs directly?
Speaker Change: I think you know Smartphone have predominantly been using TLCN for memory solution.
Speaker Change: but the AI's ash is driving high density demand.
Speaker Change: for low to high-end smartphone platform.
Speaker Change: I think because QRC is much more attractive because they can provide your higher dancing, but the cost can be managed in the community.
Speaker Change: So that's why I attract many, many sloth and maker who like to provide higher dance these stories, but with increasing the cost, significant.
Speaker Change: and Motivation for them.
Speaker Change: and the reason to work with the controller directly, not go to the NAMMaker. I didn't say no NAMMaker workforce, Markle Maker. But particularly this is a top five smothl maker shooting a solution because they want to collaborate with us and to all the field tasks and figure all the issue over come.
Speaker Change: to maintain the know-how remaining the company.
Speaker Change: So that's why they do not want to share the know-how with the man maker, they prefer initially, want to keep the know-how and they're able to decide what they want to expand next year.
Speaker Change: So this way we are very, very happy to have the opportunity in gay with this and Smapha Maker. And we believe we're going to have a second Smapha Maker to engage in 2025. So this is Calbers to really gain much more knowledge how to transition.
Speaker Change: from TOLC, moving to smartphone storage and primary storage, and increase the density and also add value to smartphone makers.
Speaker Change: Thanks for all the color walls. Just falling up on Maddie's question around Q1's personality. I mean, if you're not seeing the typical pick-up into the holiday season, then I mean, shouldn't we expect?
Speaker Change: The Dowdsick and Q1 would also be muted simply because you're coming off a higher cop and then just with
Speaker Change: [inaudible]
Speaker Change: I've seen what I can only say this today.
Speaker Change: See viewing a ballsy retail, consumer-training pot, potter, is really weak.
Speaker Change: and for the beauty is very, very low.
Speaker Change: because we're going to launch several new products, especially Pizzai, Jim Fai, and it could change certain color in both retail and the Pizzioe.
Speaker Change: So that's why I think it's too early to comment about Q1 All Look.
Speaker Change: but I think we're focusing on Q4 but we are more optimistic about Q1 whether it would be like the conventional, the city's analogy, we could Q1 we might have a more broader opportunity to sustain the growth.
Speaker Change: and just want more for me in terms of...
Speaker Change: for us margins, you're still running a little bit below.
Speaker Change: with had been no longer smartens.
Speaker Change: Should we still expect that you get back to...
Speaker Change: The roughly 50% are just below 50% range in 2025 and then I guess structurally it sounded like you have a lot of opportunities to move into higher gross margin areas. I mean, do you, or see in the future potentially being able to be above that kind of historic norm given those opportunities?
Speaker Change: Yeah Matt, I'm got a hard historic norm as 40 to 50 percent and so you know we do anticipate getting back there and and
Speaker Change: and early next year.
Speaker Change: in terms of going above and beyond that, it's...
Speaker Change: Obviously with more enterprise and more higher end product ramping, there's an opportunity for that longer term, but it's still really to say how that shapes up.
Speaker Change: I think our goal is to have a reach back to 50% by the end of the 25%, but I think because there's a possibility and also there's a business strategy consideration, become low-end in the high-end, but overall I think the direction and the goal.
Speaker Change: 1 change.
Speaker Change: Awesome, thank you so much.
Speaker Change: Thank you for the questions. As a reminder to ask question, please press star 1-1.
Speaker Change: and I'd like to have a quick look at the video. If you have any questions, I'd like to have a call back to Wallace for a closing response.
Wallace Co: Thank you everyone for joining us today and for your continuing interesting promotion We'll be attending several investor conferences over the next few months
Wallace Co: The schedule of this event will be posted on the University of Relationship's session of our corporate website and look forward to supposing with you as this event. Thank you everyone for joining today. Goodbye for now.