Q1 2025 Silicon Motion Technology Corp Earnings Call
Okay.
Speaker Change: Good day and thank you for standing by welcome to the Silicon Motion Technology Corporation first quarter 'twenty 25 earnings Conference call.
At this time all participants are in a listen only mode.
Speaker Change: After the Speakers' presentation there'll be a question and answer session at which time. If you wish you asked the question you will need to press star one on your telephone keypad.
Speaker Change: This conference call contains forward looking statements within the meaning of section 27, a of the Securities Act of 1933 and section 21 <unk> of the Securities Exchange Act of 1934 as amended.
Speaker Change: Such forward looking statements include without limitation statements regarding trends in the semiconductor industry and all future results of operations financial condition emphasis prospects well do so.
Speaker Change: The 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.
Speaker Change: These statements involve risks and uncertainties and actual market trends and our results may differ materially from those expressed or implied in this forward 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.
Speaker Change: Prices.
Speaker Change: Unpredictable changes in technology, and consumer demand for multimedia consumer electronics the ste.
Speaker Change: And any change in our relationship with all major customers and changes in political economic legal and social conditions in Taiwan.
Speaker Change: For additional discussion of those risks and uncertainties and other factors. Please see the documents we file from time to time with the Securities and Exchange Commission.
Speaker Change: Assume no obligation to update any forward looking statements, which apply only as of the date of this conference call.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: All my pleasure to hand, you over to Mr. Tom Spencers Senior director of IR and strategy. Please go ahead Sir.
Speaker Change: Good morning, everyone and welcome to Silicon motions first quarter 2025 financial results conference call and webcast joining me today as well as co president and CEO and Jason <unk> our CFO.
Speaker Change: I will first provide a review of our key business developments and then Jason will discuss our first quarter results and outlook.
Speaker Change: 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 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.
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 market yesterday.
Speaker Change: This webcast will be available for replay in the Investor Relations section of our website for a limited time.
Speaker Change: 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 consistent with how we.
Speaker Change: Analyze our own operating results.
Speaker Change: Reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued yesterday, we obviously review it in conjunction with this call with that I will turn the call over to Wallace.
Wallace: Thank you Tom.
Wallace: Hello, everyone and thank you for joining us today I'm pleased that we delivered revenue at the high end of our range, although the first quarter, but the marquee a P C and smartphones begin to rebound.
Speaker Change: Ali we deliver another quarter of gross margin expansion through the successful introduction of a new product and a mixed shift towards higher end Pcie and you have as products. We continue to invest in the next generation technologies that we expect will drive long term sustainable top and bottom line.
Wallace: Growth for our company.
Wallace: We are also benefiting from the increased control there.
Wallace: Sourcing by our NAND flash maker customer.
Wallace: Trended data to continue as a control their capacities increase and the design costs continue to rise flash makers remain focus on profitability.
Wallace: Managing their investment to serve our increasingly diverse end market memory requirements.
Finally, the macro uncertainties.
Wallace: We're excited by the progress we are making securing strong design win momentum and share gains across all our end markets as we launched several new products, including exciting new win with Nvidia Boot Fifth Street TPU platform that I will discuss in greater detail in a moment.
Wallace: As well as a new solution for the P C smartphone enterprise and automotive market.
Wallace: I would like to spend a moment discussing the current business environment.
Wallace: The current global economy picture, it's incredibly difficult to navigate and they change day to day due to ongoing tariffs and geopolitical challenges.
Wallace: Regarding current climate, we believe the impact to our business should be limited given that the U S. Only account for 10% of the global smartphone market and about 25% for the PC market for smartphones. The U S market dominated by Apple and Samsung accounting for nearly 80.
Wallace: 5% of market, where we haven't historically had little to no share.
Wallace: Overall exposure to U S consumer electronic sales.
Wallace: So you are significantly lower than many other semiconductor companies in the PC and smartphone.
Wallace: Well the escalating tariff environment create uncertainty in demand in the near term we are going to remain focus on well, we can control delivering market leading products.
Wallace: She'll period performance.
Wallace: Pending our market share with their flash makers that are increasingly resource constrained supporting multiple memory technology and diversifying our business should the expansion into new and growing market, including enterprise and AI storage automotive industrial.
Wallace: And more.
Wallace: I would now like to discuss a broader NAND flash environment.
Wallace: So ne industry experience improvements throughout the first quarter of inventory level in consumer market, including smartphone and PC appear to have bottomed out and enterprise storage demand remains shrunk.
Wallace: Flash makers have begun to raise prices recently.
Wallace: <unk> scaled back slag production and reduced inventory levels.
Wallace: We will continue to focus our resources.
Speaker Change: So I should make it partners Jose will it be the customer with a greatest asset to NAND in 2025, if prices continue to rise.
Wallace: Business with module makers remain steady as they are starting to build inventory ahead of increasing NAND prices and the restocking low channel inventory for after market. It's a D.
One area, where we are benefiting from both a crazy NAND cost and potentially negative pricing impact of tariffs is a rapidly growing inkjet in Q O see NAND.
Wallace: Do you all see allows server and device makers ability to single billing for knee increasing memory density in a cost effective manner, given the Oems the opportunity to deliver higher density storage solution at a more reasonable price.
Wallace: We have discussed during the past few investor calls, we believe we are the best position to benefit from the increased adoption of QR team given that we have more experience managing kill season any other controller maker.
Wallace: We are experiencing significant inbound interest for all its developing two O C product across it.
Wallace: Market.
Wallace: In the consumer market for both ACD and smartphones and we expect to deliver multiple new products in the coming months that will capitalize on just interest and help us deliver long term sustainable revenue and earnings growth for many years to come.
Wallace: Now, let me share some update for each of our business segments, beginning with clients a day controllers.
Wallace: Well there has been much discussion around the 20 to 25 outlook for P. C.
Wallace: In the current geopolitical uncertainties.
Wallace: As of today, we believe the market is still expanding P. C to grow in the low to mid single digit range.
Wallace: We have seen some motivation by customers to purchase our hasnt been named price increases and any potential economic effect of carriers and potential supply disruption.
Wallace: We believe inventory levels remain healthy.
Wallace: Some of our current customer forecasts and continued share gains in the mid range and high end PC market.
Wallace: We are increasingly confident in our clients' need business for this year and our pipelines of new programs for next year to deliver long term growth.
Wallace: We are seeing stronger than expected demand for our new Pcie Fi eight channel control there.
Wallace: As we have mentioned previously.
Wallace: This controller in the first six nanometer Pcie Fi chip in the World and then we have design win and the four of six NAND flash makers and nearly all module makers, given its superior performance and lower power requirement.
Wallace: Introducing December quarter. This controller already account for over 5% of our clients' need business and then we expect they will continue to grow rapidly over the next several quarters as the PC OEM NAND flash makers and module maker customers ramp up their high end pcie five projects too.
Wallace: Full scale.
Wallace: In addition to the success, we are experiencing with our E channel control. There we have already secured for flash maker win with our upcoming P show you five four channel during this controller.
Wallace: Targeting the mainstream market.
Wallace: Airport Channel controller. It was Paypal in Q3 last year and expected to begin shipping later this year.
Wallace: We are also accuracy cage with virtually every market maker for this new control there and then we anticipate that that will help us help us continue to drive share growth in the clients would be in 2026 and beyond.
Wallace: In the first quarter, we began to see demand for our new P. J, if I E channel control the ink.
Wallace: The increase is all flash maker upon your secure additional PC OEM wins, and our module maker customer saw significant demand Thunder consumer aftermarket.
Wallace: Additionally, there was a new market developing for the control of the White box server market.
Wallace: The lower cost hardware platform for AI inference that it can leverage more mainstream components.
Wallace: Given the early trends in our E channel piece that you find controllers.
Wallace: And to the multiple when we saw our upcoming four channel during this control there.
Wallace: Our strong competitive position in the mirror and PC market. We believe we are increasingly well positioned for unit and revenue growth in clients a D over the next several years.
Wallace: Barring significant having found the broader economic environment.
Wallace: Now I would like to move on to our E. M C in Europe as a business.
Wallace: Like the PC market smartphone market show signs of a bottoming in the recovery in the March quarter.
Wallace: This was driven impart by increased smartphone subsidy die in China post the Chinese new year holiday and from the increased inventory restocking ahead of any disruption some geopolitical actions.
Wallace: While it is difficult to know how terrorists well in past smartphone itself. In 2025, we have had a promising start of the year. During the March quarter, we experienced strong booking momentum from both flash makers and module maker customer or you have as you know one.
And you have to the street to Dol to control there as well as our quote our E M C controllers.
Wallace: So as we mentioned during our last conference call the market shifting away from E. M. C P and U M C. P solution in the smartphone market.
Wallace: Where did you have historically been dominated by flash makers with the introduction of less expensive mobile DRAM solution.
Wallace: To make her gaining share using our control area.
Wallace: In Europe it seems.
Wallace: <unk> solution to smartphone Oems.
Wallace: It is also leading to the adoption of 30 party control their third party controller solution by the flash maker to compete in value line market to reduce development cost.
Wallace: With our new high end E. M C. Five one controller and a broad base E. M. C product portfolio, we are well positioned with both flash makers and module maker to serve the automotive Iot Smart TV set top box and other market data.
Wallace: For more than 800 million unit a year.
Wallace: Overall, we are delighted by the long term opportunity we are seeing in the EMC and your fish to further grow our share in the embedded <unk>.
Wallace: For the memory market as well as <unk>.
Wallace: Significant inroad.
Wallace: Into automotive Iot and other high volume markets.
Wallace: I will now provide an update to our non Titan business.
Wallace: Got it and one of the most exciting opportunity for silicon motion given the large addressable multibillion dollar market for antibody class controllers.
Wallace: As we have discussed this is a new opportunity for our company and then we continue to expand our product portfolio customer engagement and technology as we entered the market with it.
Wallace: Data center enterprise storage and AI solutions.
Wallace: Ancient in Montana, and it's driven in part by emerging demand for Kols see NAND solutions.
Wallace: In the in the English AI, given its ability to deliver at a high density and lower cost we have more experience with any others and support more trc NAND than anyone else in the industry.
Wallace: Third and also offer greater flexibility than competing solutions.
Wallace: Our wide range of thunberg capability.
Wallace: Which we can meet so you'll need to defer.
Wallace: Different customers application and use cases.
Wallace: Flexibility is opening opportunity across multiple crown in the enterprise and AI storage solution business.
Wallace: Many of our early customers.
Wallace: Our focus on delivering solution for storage system architectures, but we are now expanding.
Wallace: Our addressable market for main tightened we have been working with the Nvidia team well over a year to qualify our new mountain Titan semi tool storage solution for use with our booth here three data processing unit O.
Wallace: Oh GPU architecture.
Wallace: And then we have been designing to the platform.
Wallace: <unk> three is a network.
Wallace: <unk> solution that a help deliberate peak AI workload exactly.
Wallace: And we are in security and hyper format and cloud networking use nvme over fibers.
Wallace: Our booth stories solution will be used to power boost few street D. P. You.
Wallace: Beginning later this year, adding a significant new revenue and unit growth opportunity for silicon motion.
Wallace: Additionally, each Bluefield Street GPU will be paired with multiple high density enterprise class Ql's. He has deep shoe pcie switches currently <unk> is the only company shipping our high density 122, terabyte QR see enterprise D in the market.
Wallace: And we expect to be the second providing a 128 terabyte QR C mountain tied to any of the turnkey solution to our customers later this year.
Wallace: We are thrilled to be growing part of N V D star ecosystem, providing enterprise boost storage and high density one tiny a terabyte mountain tightened enterprise data storage solution for AI. These solution deliver a C that are significantly above our current cooperate.
Wallace: Average with a critic gross margins Oh, sorry.
Wallace: We're a month tied to the product portfolio evolves, we look forward to engaging with a new customer to expand our addressable market in other area. We are currently doing with Abu field.
Wallace: To that end, we are currently focused on delivering a more complete family of Montana, Prada, including control there for SATA and Pcie separate who will drive higher density and perform in a channel and signaling channel controller for AI salary application with mountain tightened supporting.
Wallace: The upcoming two terabyte monolithic die QR C noun, where you won't be able to deliver high density high performance 128 terabytes of D. B, the passing class Brendan Reidy of $3 5 million eye ops, putting us in a great position to rapidly expand.
Wallace: Our market share in the large and growing market for AI storage solution.
Wallace: And finally, we are also engaged with multiple partners with next generation Pcie sitcom children targeting the N V. Dr. Rubin GPU platform that expected to begin ramping in 2020 seven.
Wallace: We are confident that Monte then we'll begin to ramp in the second half this year and more meaningfully in 2020 six multiple.
Wallace: Multiple customer enter production.
Wallace: Finally, I would like to provide highlights on our automotive and other business.
Wallace: Our automotive market position continue to improve.
Wallace: As we add a new product to our growing portfolio, we continue to support automotive across all our product category, including South out P. J S. A D E. M. M. C. U S is in our favor I embody solution across a wide variety of it.
Wallace: Use cases.
Wallace: We are the first company to receive a spice level three certification in P show you for control there and we are on track to deliver our P show you fly control their automotive later this year.
Wallace: FICO capacity continue to increase along with a need for faster more data storage solution, given increasing processing capability.
Wallace: Hey, does sensors cameras and other advanced systems, we continue to expand our presence in the automotive market and are increasing our market share with existing and new customers alike, including Samsung.
Wallace: We have added recently.
Wallace: We are currently shipping to many of the.
Wallace: Biggest names in the business, including Mercedes Tesla G M B y D Xiaomi.
Wallace: Honda and many others and are well on our way to achieving our target of 10% revenue contribution from automotive by 26 to 27.
Wallace: Additionally, we recently introduced our 20 708 Microsd Express controller and have already secured a major design win with a leading south Korea fashion manufacturer supporting one of the most anticipated nexium duration handset gaming platform.
Wallace: Now this year, the Nintendo streets to parity Vytorin Pcie SSD like level performance in micro Steve Some factor there.
Wallace: S. M 27, the way it designed to meet high density high speed needed for modern portable gaming and other demanding application.
Wallace: In conclusion, the style for 2020 five had been challenging given the geopolitical headwinds driven by the terrorists crisis.
Wallace: <unk> is well positioned to expand its position across the market in 2025, we continue to gain share with our flash makers.
Wallace: These partnership and pioneer and increasingly look to all sorts of controller given their need for operation and expense discipline.
Wallace: Managing significant investment in other technology, including tier in an H b in memory.
Wallace: Our position is is also improving so the introduction of new products, including a piece out of your Fi clients of Decontrol, there, which is superior to seeing strong demand.
Wallace: Addition to our new U S. S E M C product as we progress through the year. We will also benefit from the introduction of a your fifth quartile one controller in the smartphone market as well as ramp off of Mont Titan for salary system solution and boost salaries in pool fifth Street.
Wallace: CPU in the second half of the year.
Wallace: Additionally, we are well positioned for continued share growth in each of our other market, including automotive.
Wallace: So I'm going to turn on Titan and the motive business continue to scale for the next several years and our broad portfolio of solutions for Iot industrial commercial and smart devices application continue to gain share.
Wallace: I'm confident that our strategy to diversify beyond the maturing PC and smartphone market will be successful and continue to believe that we could generate more than 20% of our business in 2020 seven thousands of these new opportunities.
Jason: I look forward to sharing more about our successes with these products and new marquee is throughout this year now let me turn the call over to Jason to go over our financial results and outlook.
Jason: Thank you Walter and good morning to everyone. Joining us today I will discuss additional details of our first quarter results and then provide our outlook. 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.
<unk> issued yesterday.
Jason: In the March quarter sales decreased 12, 9% sequentially to $1 $66 5 million coming in at the high end of our guidance range. Despite the weak end user demand for PC and smartphones with the start of the quarter.
Jason: Gross margins increased again in the quarter to 47, 1% as we continued to benefit from improved product mix as we shift customers to newer products operating expenses increased sequentially to $63 six as we continue to invest in new enterprise storage products and given the timing of new product tape outs.
Jason: Operating margin increased sequentially to actually operate margin decreased sequentially to eight 9% was within our guided range.
Jason: We had a one time tax benefit due to the reversal of a risk accrual tax accrual that we had in the previous year, which resulted in a tax benefit.
Jason: A $2 5 million in the quarter earnings per ads was <unk> 60.
Jason: Total stock compensation, which excluded which we excluded from non-GAAP results was $4 8 million or <unk> 25, we.
Jason: We had 331 million bearing at any 1.7 million cash cash equivalents and restricted cash at the end of the first quarter compared to $334 3 million at the end of the fourth quarter of 2024.
Jason: Cash declined slightly in the first quarter, primarily from a combination of dividend payment of $17 million and $24 3 million.
Jason: And stock repurchases.
Jason: In the first quarter, we repurchased $24 3 million of the $50 million six month repurchase program. The board authorized on February six with an average price of $56 96 per share.
Jason: First quarter is challenging given the geopolitical impact of the U S election, and its effect on global trade, while market uncertainty remains high our team executed well and delivered revenue at the high end and operating margin within the upper half of our guidance range, while investing heavily in advanced geometry products and our emerging <unk> tightening platform.
Jason: Arm for enterprise it AI markets, we continued to build upon our strong foundation for long term growth.
Jason: Now I will discuss our second quarter outlook revenue is expected to increase 5% to 10% to $175 million to $183 million driven by the success of our pcie Gen five as well as continuing strong demand for U S to read out one and $2 two controllers.
Jason: Margins is expected to expand to a range of 47% to 48% as we continue to transition customers to newer platforms operating margin is expected to be in the range of eight 9% to 10, 9% as we benefit from higher revenue and gross margin.
Jason: Our effective tax rate is expected to be approximately 16%, 17% stock based compensation and dispute related expenses are expected to be in the range of three 1% to $4 1 million for.
Jason: For the full year, PC and smartphone growth targets remain in the low to mid single digit range with an above average second half waiting.
Jason: We believe that our business will reflect the broader industry with significant growth expected in the second half barring an overly negative impact from tariffs impacting end user demand as such we're not changing we're not changing our annual outlook currently target revenue growth is in line with it.
Jason: Hearing a run rate of approximately $1 billion as we exit the year.
Jason: Additionally, we expect to continue to improve our gross margins as we transition customers new products and enter the enterprise market in the second half of the year.
Jason: I'm confident that we can drive gross margins towards the higher end of our historical range of 48% to 50% by the end of this year.
Jason: We'll continue to invest in advanced geometry products that will allow us to grow our market share across our businesses long term and help us diversify our product portfolio to new markets. Despite these higher investments. We are confident that we can return to our historical operating margin range of 25% plus in the midterm as investments we have made over the past.
Jason: 18 months begin to scale and deliver stronger revenue growth better gross profitability and improve our operating profitability.
Jason: Overall tax rate for.
Jason: For this year is expected to be approximately 15%.
Jason: Rock based compensation dispute related expenses for this year is expected to be in the range of $27 million to $29 million.
Jason: Okay.
Jason: Enter the second quarter, we are experiencing increased design win activity and improved outlook from our customers. We see strong demand for our new Pcie Gen five products, including a channel. That's currently shipping as well as for our three Uff's readout wanted and our near Uff's too dark too and EMC 5.1 controllers in the smartphone.
Jason: The automotive markets.
Jason: Coming for channel PCI, five controller, and our USS Ford out one controllers. Our teams have been actively securing new wins and growing our backlog meaningfully as these advanced platforms expand into mainstream PC and smartphone markets next year.
Jason: Lastly, the momentum behind our one time family of enterprise controllers continues to grow as enterprises and <unk> around the world continuing to invest in next generation data centers require a high profile.
Jason: You'll also see storage solutions.
Jason: That we are uniquely positioned to provide.
Jason: While we are seeing a small degree of pull ins ahead of NAND price increases we do not expect this to impact our ability to grow sequentially throughout the year. Our teams continue to execute well are growing our product portfolio, winning new projects and customers and expanding our addressable market positioning silicon motion for sustainable long term.
Jason: And profitability growth.
Jason: Concludes our prepared remarks, we'll now open the call to questions.
Speaker Change: Operator. Please go ahead with the first question. Thank.
Jason: Thank you.
Jason: To ask a question. Please press star one one on your telephone keypad and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: We will now take our first question from the line of Craig Ellis from B Riley Securities. Please go ahead Craig.
Craig Ellis: Yeah. Thanks for taking the question I wanted to start with.
Craig Ellis: An inquiry on the enterprise SSD demand tightened programs. So first of all wallets congratulations on breaking into Nvidia that seems like a very significant intermediate long term development.
Craig Ellis: The question is more longer term with that business line. It sounds like the business is strongly on track with the fixed customer when she talked about last quarter or two.
Craig Ellis: We began ramping up later this year. The question is as we look out to 2020 six if we've got six customers engaged now where would you expect the business to exit 26 in terms of customer engagement.
Craig Ellis: And how many of those might be in production not looking for specific guidance, but just color on that.
Craig Ellis: The degree to which the pipeline is building out, especially as you get blue chip customers into the mix.
Craig Ellis: Okay, great. Thank you for your question, let me answer your question first of all our previous six major cause of engagement.
Craig Ellis: They are not related to Karin.
Craig Ellis: Nvidia Bluefield GPU platform engagement. So this is six customer and we're on track they are going to rent from second half 'twenty unify gradually in 2026 well reach.
Craig Ellis: The more meaningful revenue growth as in 2007, you will see much more significant way we are on track to achieve 5% to 10% found when you say 27, our total revenue doesn't change.
Craig Ellis: In media <unk> TPU design wing gave us.
Craig Ellis: Better picture into to fulfill module for a boost storage. In addition, because it boothia module with our pcie switches, where did you come that too many up to certainly pcie.
Craig Ellis: And device a D.
Craig Ellis: Solution. So each of us see see storage is <unk> going to come.
Craig Ellis: Complying.
Craig Ellis: Two maximum 230 <unk>.
Craig Ellis: So this is.
Craig Ellis: Pushing will be majority portion would be 128 terabyte high density So gave a new opportunity. So we need to leverage the opportunity with our media ecosystem provider such a that's a vast CDN such as Dell net App and also their end customer right and so this.
Craig Ellis: It gave us more opportunity to winning and qualify boundaries ecosystem and not only grow our boost storage and media platform, but also grow with our media ecosystem for salaries. So this is that we work with many of our module maker and partner to deliver C. High density one <unk>.
Craig Ellis: The eight terabyte QR CSD bye.
Craig Ellis: By end of this year gave additional momentum to grow our revenue in Montana and family.
Craig Ellis: That's really helpful. Wallace Thank you.
Craig Ellis: For my follow up question I wanted to.
Speaker Change: Turned around to chase and so Jason it's clear the trailing 18 months as the company has invested in six nanometer tape out.
Speaker Change: On the other side of that the company has done extremely well on getting new design wins with NAND makers and module makers.
Speaker Change: Ross the full range of products that the company offers the question is where are we in the journey of of upgrading the portfolio to six nanometer from a mass.
Speaker Change: Ross standpoint, how much of that is now behind us looking through the current to Q. How much of that is ahead, then and beyond six nanometer.
Speaker Change: Can you talk about when we would see that next node transition for the company.
Speaker Change: As we think about operating expense intensity or for the next couple of years. Thank you.
Speaker Change: So in the near term, let me answer you in the near term, we're going to have a two more sick nanometer tape out in the next.
Speaker Change: Three quarter and one five millimeter tape out.
Speaker Change: Which would be a cost reduction for <unk>.
Speaker Change: <unk> controller.
Speaker Change: And next year in probably a wrong me, though next year, we're going to have a four nanometer table for pcie Gen. Six and you buy a steep because we have a customer waiting.
Speaker Change: Originally and we do not want to Miss the schedule and deliberate result, Frank speaking, we are really in the full design pipeline and we have many many customers and then we don't have enough R&D resources support many many new design and we are very confident in the grille.
Speaker Change: Those momentum in clients D mobile controller, as well as and diversity.
Craig Ellis: I'll also point out Craig that.
Craig Ellis: We do not anticipate moving beyond six nanometer for the foreseeable future for client applications client Pcs or clients smart or smartphone applications for 40 nanometer product losses, pointing towards is for PCI for the enterprise.
So I think and historically.
Craig Ellis: With the exception of very rare cases, we really don't re tape out an old controller into a new process geometry, we look at new design supporting whether new generation of flash or new generation of interfaces for.
Craig Ellis: New tape outs, and so to <unk> point, we've got to.
Craig Ellis: Six nanometer tape outs coming up here throughout this year, which is pretty flat compared to last year, but we're also looking at utilizing other foundry partners as well potentially to see if we could.
Craig Ellis: <unk>, certainly got better pricing longer term.
Speaker Change: That's really helpful color guys. Thank you.
Craig Ellis: Thank you.
Speaker Change: We will now take our next question from the line of Tsuji Silva from Roth Capital. Please ask your question.
Hi, Wallace I, Jason So maybe felt like my Greg's question, but the Nvidia product here appreciate the Mon tightened guidance of 5% to 10% of revenues how should we think about sizing the Nvidia partnership with the ecosystem in terms of addressable market any any framework or metrics there would be helpful.
Speaker Change: Okay.
Speaker Change: Yeah, So look I think obviously the.
Speaker Change: The opportunity.
Speaker Change: We're very excited about I think there are a number of factors regarding that kind of.
Speaker Change: The effect of time, we expect to Bluefield three products to begin ramping late this year.
Speaker Change: <unk>.
Speaker Change: Yeah, we see a meaningful ramp in 2006 and beyond with every successive win and monetize it makes for it gives us more confidence around achieving our goals for five.
Speaker Change: 5%, 10% of revenue in 'twenty six 'twenty seven.
Speaker Change: And then the Tam it really depends on several factors the growth in the enterprise storage market. The global demand tariff impacts et cetera, we do anticipate this to be a meaningful part of our Montana business longer term.
Speaker Change: I didn't comment is we're very happy to see our media start to focus on storage during the GTC 2025. They mentioned storage next so really put a new spec and perform a requirement to fill the stores, especially there isn't it says compute storage and data storage the blue field.
Speaker Change: Good.
Speaker Change: D P Street, the search generation and so really for data storage.
Speaker Change: Much bigger density as a storage system, we're very happy to see the momentum and as for the design win and I assume we cannot comment the total unit, but we're going to see start to ramp up second half this year and there's a minimum quality revenue and we do see the momentum moving to many many sources.
Speaker Change: Southern integrator and in addition, I've seen many many of hyper scaler.
Speaker Change: They are also looking for high density.
Speaker Change: Curious CSD in the past many many CSP provider and service provider they only need a 16 terabyte no they really change their mind and moving well and we.
Speaker Change: We I think as you can see a loss financial release several players the major design win in the CSP. So that's what gave you the indication that bother trends. So I think very exciting for our technology from Titan not just for N V. The Abu field three CPU design and also Theyre going to go.
Speaker Change: Many many for.
Speaker Change: And for AI cloud service and storage server storage.
Speaker Change: Requirement.
Speaker Change: Okay. That's very helpful color. Thank you and then maybe switching over to the notebook market understanding the mix here, whereas your traction in the premium notebooks and what's your outlook for those eight versus four channel product here.
Speaker Change: As the year progresses.
Speaker Change: Yeah.
Speaker Change: Okay. If you take a look for the PC Oems this year. They go into ramp up C. A channel Pcie five following July timeframe I think all of the PTO in top five well aligned the same time and we're going to see about.
Speaker Change: 5% of the second half of 5% with total busy shipment and the four channel. During this controller designed for 2020 seven.
Speaker Change: I mean 2026.
Speaker Change: So I think we have a design win funds 406 nanometer nearly all module maker for both a channel and the <unk> control. There. That's why we believe our channel will have a minimum 30% market share Sue with PC Oems and for <unk>, We're gonna have a.
Speaker Change: Minimum 30% market share when pcie five move to mainstream.
Speaker Change: Full scale production.
Speaker Change: That's why we believe we're going to continue gain market share in clients with deep and we're getting growth on our <unk> sales represent a day and moving towards 40% in the next few years.
Speaker Change: Okay very helpful. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Cocoa Howie Herrmann from J P. Morgan. Please go ahead go cold.
Speaker Change: Yeah, Hi, thank God it didn't become.
Speaker Change: So.
Speaker Change: Looking to the GPU.
Speaker Change: <unk> engagement.
Speaker Change: Can you talk a little bit about how the.
Speaker Change: Engagement and a product being bid work. So you are already quantified by Nvidia.
Speaker Change: And then a couple of months.
Speaker Change: D D M D.
Speaker Change: Data on that.
Speaker Change: But you can draw that into bad store execution does that is that typically how would that work and secondly.
Speaker Change: How many.
Speaker Change: When they're gonna be quantified I think you mentioned or at least on a dime has been qualified so far you can bend.
Speaker Change: Do you think you can kind of keep that.
Speaker Change: Kind of only two vendors.
Speaker Change: Yes.
Speaker Change: And maybe lastly, I think how do you buy it with the market come back to the.
Speaker Change: Kind of.
Speaker Change: Enterprise and data center.
Speaker Change: Market in India at the price that you'd be down.
Speaker Change: Kind of getting a deal.
Speaker Change: Our target market.
Speaker Change: So let me spend maybe basically babism Aldo certainly seem we cannot share with you.
Speaker Change: I think we start to engage with our media about a year ago.
Speaker Change:
Speaker Change: So.
Speaker Change: In the beginning we don't fully understand it wasn't really the purpose for the application.
Speaker Change: After three months.
Speaker Change: Prairie and everything and I think and we understand that's it for me.
Speaker Change: In media <unk> III CPU.
Speaker Change: Platform.
Speaker Change: You can see in the past that <unk> used for really is a pass through transfer of data between Gpus, the GPU and CPU or GPU.
Speaker Change: <unk> seen this as a.
Speaker Change: Sorry for networking and they're really designed for the storage system.
Speaker Change: And as I've seen the design wins give us great opportunity to fully understand and media their plan for the storage application.
Speaker Change: Vacation and they gave opportunity to approach it be young through the ecosystem and go to that and certainly greater one by one and it's a I think a media did not own the assistant <unk> product, but it is selling C, who feel street mall, Joe to see there.
Speaker Change: So is there any way to ending and starting enabler.
Speaker Change: This is a business model and so we need to be qualified by our media I think theres only two supplier to support the boost storage. We are one of them and they seem to find those same qualification because theyre going to ramp in the second half. This year. So the gearing to find those stage and.
Speaker Change: See we are in the process to qualify our.
Speaker Change: High density QR CSD sue their ecosystem. So it doesn't even positive and we believe by end of the year the customer and we are moving to mass production.
So this is just in the beginning range above the storage system growing momentum for AI is storage and we see the more beyond this.
Speaker Change: This is a.
Speaker Change: Mature variable, we can share more data with.
Speaker Change: With all investors.
Speaker Change: And I would also point out that on the Blue feel when we talk about.
Speaker Change: The opportunity there.
Speaker Change: Solid time isn't in the Bluefield opportunity present, a good drive opportunity there blue solid diamonds on the high density 122 terabyte side that are high density <unk>.
Speaker Change: Data storage opportunities so it's different than the boot drive opportunity that we're talking here specifically within the video on the Brookfield three.
Speaker Change: Got it so for the boot drive opportunity. According to what you know you are currently there won't be one quantified is that.
Speaker Change: Sure.
Speaker Change: Thank you.
Speaker Change: Hi.
Speaker Change: There is only two supplier we are one of the two supplier.
Speaker Change: Yeah, that's very clear.
Speaker Change: Second question, maybe for you Dave.
Speaker Change: So part of our lives.
Speaker Change: How should we think about I think youre still maintaining the <unk>.
Speaker Change: The 1 billion.
Speaker Change: By Q4.
Speaker Change: They just pretty.
Speaker Change: A meaningful step up from what your Q2 guidance.
Speaker Change: What are you kind of step up.
Speaker Change: From the Q2 guidance and.
Speaker Change: Historically, we have another team that kind of seasonality at least in the last five.
Speaker Change: Yeah.
Speaker Change: B.
Speaker Change: In 2019, we by that I mean beyond that we've never seen that kind of thing.
Speaker Change: And our revenues into Q4, so just wanted to understand better.
Speaker Change: That's a big kind of project men.
Speaker Change: That's the Miranda that you are really kind of penciling in AR.
Speaker Change: Which gives you the confidence.
Speaker Change: Especially given the macro environment has changed.
Speaker Change: I think what you'll see Q4 momentum building the.
Speaker Change: $1 billion run rate, we did not count don't see enterprise business.
Speaker Change: Field design revenue, it's really based on last year, a major design win some mobile phone mobile controller as well as PC P. G HN side.
Speaker Change: Because these days.
Speaker Change: Design win pipeline will create.
Speaker Change: In a moment and for us to bring to $1 billion run rate in Q4.
Speaker Change: And I would also point out that we do have a number of new programs that are scaling.
Speaker Change: <unk> five we expect our PC OEM channel to scale more meaningfully in the back half of the year as PC Oems start ramping for the holiday season ramping for enterprise replacement cycle ramping for the Windows 10 replacement cycle all of those things are kicking in in the back half of the year.
Speaker Change: And that's still the current expectation obviously the.
Speaker Change: Geopolitical is uncertain, but the numbers that we've seen in the forecast that we've seen today are still indicating a very back half centric growth profile for Pcs and for smartphones for this year as well so we've got the new PC.
Speaker Change: Channel ramping we've got beginning late ramp of.
Speaker Change: First for Dot one we've got to Wallace's points under the one Titan boot drives as well as the high density 120 to 180 terabyte SSD controllers ramping so we do have a number of new programs that would be supplementing the expected market shrank that we're seeing.
Speaker Change: Got it yeah, that's medical.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: We will now take our next question from the line of Max <unk> from Wedbush. Please go ahead mats.
Max: Thanks for taking my question.
Speaker Change: I guess first off.
Max: I look good.
Max: What was happening with some of your customers.
Max: It appears in Q1, it seems like February and March picked up relatively significantly and that momentum is carrying into Q2.
Max: Obviously you came in ahead of your guidance range, but didn't quite see the same magnitude of momentum I mean, if I look at Q2.
Max: Seasonality, our Q2 guidance it looks relatively seasonal.
Max: I guess my question is.
Max: First question why are we seeing a bit.
Max: More of a guy that's reflective of the pick up that seems to be happening across the industry.
Max: Okay.
Max: Because of the terrorist he has really created a mini uncertainty I assume we can only have based on where we are although I believe we have almost.
Max: No impact on tariff moment, we tried to be cultures, but our design win pipelines are rock solid and we are gaining market share. It continually and there is really as we said we have enough design win pipeline and ramping in second half this year that.
Max: We'll bring a 2 billion dollar run rate in Q4 timeframe and we have very confident to achieve it and we have many many new projects ramping including Toyota Global model for Adas and <unk>. So this is many new design win and really bring out.
Max: Very broad range of product mix, and I think the Nvidia and the $1 90, a terabyte enterprise demand tightened that will bring more momentum in 2026 and beyond but it's.
Max: 25, Q4, I assume the full year, our current pipeline and design win is sufficient to carry off.
Max: Our cell revenue growth.
Max: But we won't be we don't want to have a more aggressive guidance because.
Max: I think.
Max: So far we try to be cautious.
Max: Make sure we meet all of the Investor expectation.
Alright, so it sounds like Youre, just trying to embed some conservatism.
Max: Is your current I guess the second question is kind of following up on vocals last question in terms of how we should think about the ramp.
Max: In Q3 Q4, it sounds like it's very project based I tend to think about new PC designs.
Max: Then starting to get built in June July.
Max: New handset designs, particularly Chinese handset designs being more of a late Q3 Q4 timeframe.
Max: Type opportunity and it sounds like a lot of the enterprise designs come in in Q4.
Max: Kind of how we should think about those new programs layering into your revenue stream to get to that $250 million goal by Q4.
Max: Yes, that's right.
Speaker Change: Yes, that's right Matt.
Speaker Change: Just again, a little bit more commentary around Q1, Q2, just given the broader economic environment and the potential impacts of the changing tariff policies. We believe it's prudent to err on the side of caution right.
Speaker Change: While we're seeing as we said some mild customer Colin so the amount is not material enough to change our near term outlook and we're experiencing increased interest in all of the new products that we talked about right PCI five U S plus four et cetera.
Speaker Change: And our guide for the June quarter, it's pretty consistent with our peers and in line with really more importantly, with our customer forecasts.
Speaker Change: And so those are kind of the key foundry.
Speaker Change: Foundation.
Speaker Change: What we see in the market today and in the first half of this year and then certainly to your point. We have do we do have some program specific market specific things affecting growth in Q3, and Q4 that are going to be pretty meaningful.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone keypad.
Speaker Change: We'll now take our next question from the line of Nick Doyle from Needham. Please go ahead Nick.
Nick Doyle: Hi, Thanks for taking my questions.
Nick Doyle: Asking about the switch to opportunity can you help size that at all what your market share attach rate is there and maybe what kind of.
Nick Doyle: Asps are are there is looking like thanks.
Nick Doyle: There is a desire for D C.
Mike Christy: Mike Christy Express.
Mike Christy: <unk> seven <unk>, they're useful counting car for the intended.
Mike Christy: So.
Mike Christy: I can only say, we're about 80% of this year.
Speaker Change: Okay helpful.
Speaker Change: The importance of the boot storage application could you just talk more about that like what exactly are you, providing there and does that help you get closer to providing the data storage.
Speaker Change: Thanks.
Speaker Change: I think on what I can say so because.
Speaker Change: Through the collaboration with Nvidia team.
Speaker Change: We Daphne understand let's see who feel molecule and see ecosystem.
Speaker Change: And so the ecosystem, we look we see star ecosystem, together and Thats why we get the opportunity to get a product qualified in events.
Speaker Change: And as Sue that I've seen because we see because of many company announce one Tony a terabyte QR CSD.
Speaker Change: No one can deliver the real part I accept solid die.
Speaker Change: And we believe.
Speaker Change: We could be the second player provides a turnkey solution to the market two things.
Speaker Change: Demand for storage system, so theres, a great opportunity, but we have to ask you very well deliver as a result, so we're very excited about the new opportunity and engage with our media I've seen scope beyond just the Abu field.
Speaker Change: Fulfill a TPU believe me, although we cannot say too much but we do want to work because the storage system and much bigger for AI cloud and AI service and this is opportunity we show QR seeing demand when we do see as I said all of the cloud service provider and change their direction.
Speaker Change: Set higher density and device with dji. So this is a great opportunity for sick emotion to shine to grill.
Thank you.
Speaker Change: Thank you.
Speaker Change: I'm showing no further questions I will now turn the conference back to Mr. Wallace go for his closing comments.
Speaker Change: Thank you everyone for joining us today and for your continuing interest in sync emotion will be attending several investor conferences over the next few months. The schedule of this event will be posted on the Investor Relations section overall corporate web site and look forward to speaking with you.
Speaker Change: As this event. Thank you everyone for joining today.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].