Operator: Hello everyone. Welcome to Silicon Motion Technology Corporation's Q4 2025 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question, you will need to press *11 and wait for your name to be announced. I must advise you that today's call is being recorded.
Speaker #1: To ask a question, you will need to press *11 and wait for a name to be announced. I must advise you that today's call is being recorded.
Speaker #1: This conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended.
Operator: This conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitations, statements regarding trends in the semiconductor industry and our future results of operations, financial conditions, and business prospects.
Speaker #1: Such forward-looking statements include, without limitation, statements regarding trends in the industry and our future results in the semiconductor operations, financial condition, and business prospects. Although such statements are based on our other sources, we believe them to be reliable.
Operator: Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends and our results may differ materially from those expressed or implied in these 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 pressures on prices, unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of and any change in our relationship with our major customers, and changes in political, economic, legal, and social conditions in Taiwan. For additional discussions on these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission.
Operator: Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends and our results may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons.
Speaker #1: You should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends, and our results may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons.
Operator: Potential risks and uncertainties include, but are not limited to, continued competitive pressure in the semiconductor industry and the effect of such pressures on prices, unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of and any change in our relationship with our major customers, and changes in political, economic, legal, and social conditions in Taiwan. For additional discussions on these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission.
Speaker #1: Potential risks and uncertainties include, but are not limited to, continued competitive pressure in the semiconductor industry and the effect of such pressures on prices, unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of and any change in our relationship with our major customers, and changes in political, economic, legal, and social conditions. For these risks and uncertainties and other factors, please see the Taiwan.
Speaker #1: For additional discussions on documents we filed from time to time with the Securities and Exchange Commission. We assume no obligations to update any forward-looking statements, which apply only as of the date of this conference call.
Operator: We assume no obligations to update any forward-looking statements, which apply only as of the date of this conference call. With that, I would now like to turn the call over to your first speaker today, Mr. Thomas Sepenzis, Senior Director of IR and Strategy. Thank you. Please go ahead. Good morning everyone, and welcome to Silicon Motion's Q4 2025 Financial Results Conference Call and Webcast. Joining me today is Wallace Kou, our President and CEO, and Jason Tsai, our CFO. Wallace will first provide a review of our key business developments, and then Jason will discuss our Q4 results and outlook. Following our prepared remarks, we will conclude with a Q&A session. Before we begin, I would like to remind you of our safe harbor policy, which was read at the start of this call.
Operator: We assume no obligations to update any forward-looking statements, which apply only as of the date of this conference call. With that, I would now like to turn the call over to your first speaker today, Mr. Thomas Sepenzis, Senior Director of IR and Strategy. Thank you. Please go ahead.
Speaker #1: With that, I'll now like to attend the call over to your first speaker today, Mr. Thomas Sepenzis, Senior Director of IR and Strategy. Thank you.
Speaker #1: Please go ahead.
Thomas Sepenzis: Good morning everyone, and welcome to Silicon Motion's Q4 2025 Financial Results Conference Call and Webcast. Joining me today is Wallace Kou, our President and CEO, and Jason Tsai, our CFO. Wallace will first provide a review of our key business developments, and then Jason will discuss our Q4 results and outlook. Following our prepared remarks, we will conclude with a Q&A session. Before we begin, I would like to remind you of our safe harbor policy, which was read at the start of this call.
Speaker #2: Good morning, everyone, and welcome to Silicon Motion's fourth quarter 2025 financial results. webcast. Joining me today as well as Conference call and co are President and CEO and Jason Tsai, our CFO.
Speaker #2: Wallace will first provide a review of our key business developments, and then Jason will discuss our fourth quarter results and outlook. Following our prepared remarks, we will conclude with a Q&A session.
Speaker #2: Before we begin, I would like to remind you of our safe harbor policy, which was read 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.
Operator: For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the U.S. Securities and Exchange Commission. For more details on our financial results, please refer to our press release, which was filed on Form 6-K after the close of market yesterday. This webcast will be available for replay in the investor relations section of our website for a limited time. To enhance investors' understanding of our ongoing economic performance, we will 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 analyze our own operating results. The reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued yesterday.
Thomas Sepenzis: For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the U.S. Securities and Exchange Commission. For more details on our financial results, please refer to our press release, which was filed on Form 6-K after the close of market yesterday. This webcast will be available for replay in the investor relations section of our website for a limited time. To enhance investors' understanding of our ongoing economic performance, we will discuss non-GAAP information during this call.
Speaker #2: Securities and Exchange Commission. For more details on our financial results, please refer to our press release which was filed on Form 6K after the close of market yesterday.
Speaker #2: This webcast will be available for replay, and the investor relations section of our website for a limited time. To enhance investors' understanding of our ongoing economic performance, we will discuss non-GAAP information during this call.
Speaker #2: 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 consistent with how we analyze our comparisons of our operating results in a manner own operating results.
Thomas Sepenzis: 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 analyze our own operating results. The reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued yesterday. We ask that you review it in conjunction with this call. With that, I will turn the call over to Wallace.
Speaker #2: The reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued yesterday. We ask that you review it and, in in conjunction with this call.
Operator: We ask that you review it in conjunction with this call. With that, I will turn the call over to Wallace. Thank you, Tom. Hello everyone, and thank you for joining the call today. I'm pleased to report that we delivered another excellent performance in Q4, exceeding our revenue and near the high end of our gross margin guidance and positioning us for a record-breaking year in 2026. We benefited from strong demand across our markets and through the introduction of compelling new controller and solutions. We increased market share in existing and new markets and expect momentum to continue throughout 2026. We remain focused on delivering long-term growth while investing heavily in next-generation products, increasing our engineering resources to support new products in markets, and further positioning Silicon Motion for long-term market share expansion.
Speaker #2: With that, I will turn the call over to Wallace.
Speaker #3: Thank you, Tom. Hello, everyone, and thank you for joining the call today. I'm pleased to report that we delivered another excellent performance in the fourth quarter.
Wallace Kou: Thank you, Tom. Hello everyone, and thank you for joining the call today. I'm pleased to report that we delivered another excellent performance in Q4, exceeding our revenue and near the high end of our gross margin guidance and positioning us for a record-breaking year in 2026.
Speaker #3: Exceeding our revenue and near the high end of operating margin guidance, and positioning us for a record-breaking year in 2026. We benefit from strong demand across our market and through the introduction of compelling new controllers and solutions.
Wallace Kou: We benefited from strong demand across our markets and through the introduction of compelling new controller and solutions. We increased market share in existing and new markets and expect momentum to continue throughout 2026. We remain focused on delivering long-term growth while investing heavily in next-generation products, increasing our engineering resources to support new products in markets, and further positioning Silicon Motion for long-term market share expansion.
Speaker #3: We increased market share in existing and new market and expect momentum to continue throughout 2026. We remain focused on delivering long-term growth while investing heavily in next-generation products.
Speaker #3: Increasing our engineering resources to support new products and markets, and further positioning Silicon Motion for long-term market share expansion. While 2026 memory and storage industry dynamics are challenging, given the supply tightness of NAND and DRAM and rapidly increasing prices of these components, we believe our resilient operation strategy and our unmatched NAND and maker relationships will allow us to deliver strong growth across our business.
Operator: While 2026 memory and storage industry dynamics are challenging given the supply tightness of NAND and DRAM and rapidly increasing prices of these components, we believe our resilient operation strategy and our matched NAND maker relationship will allow us to deliver strong growth across our business. Given our current backlog and sale plan, we believe that Q1 2026 revenue will be the lowest of 2026 and expect sequential growth throughout the remainder of the year. As we continue to introduce these compelling new eMMC and UFS controllers, PCIe client SSD controller, MonTitan enterprise SSD controllers, enterprise boot drive solution, and our expanding Ferri automotive portfolio, we expect to deliver broad-based growth and to deliver the highest annual revenue in the history of the company in 2026, as we capitalize on multiple new products and execute on our continuing diversification strategy.
Wallace Kou: While 2026 memory and storage industry dynamics are challenging given the supply tightness of NAND and DRAM and rapidly increasing prices of these components, we believe our resilient operation strategy and our matched NAND maker relationship will allow us to deliver strong growth across our business. Given our current backlog and sale plan, we believe that Q1 2026 revenue will be the lowest of 2026 and expect sequential growth throughout the remainder of the year.
Speaker #3: Given our current backlog and sales plan, we believe that first quarter 2026 revenue will be the lowest of 2026, and expect sequential growth throughout the remainder of the year.
Wallace Kou: As we continue to introduce these compelling new eMMC and UFS controllers, PCIe client SSD controller, MonTitan enterprise SSD controllers, enterprise boot drive solution, and our expanding Ferri automotive portfolio, we expect to deliver broad-based growth and to deliver the highest annual revenue in the history of the company in 2026, as we capitalize on multiple new products and execute on our continuing diversification strategy.
Speaker #3: As we continue to introduce the scales compelling new EMC and UFA controllers, PCIe Class D controllers, controllers, Enterprise Bullseye Mount Titan Enterprise D solutions, and our expansion Ferox Multiportfolio, we expect to deliver broad-based growth and to deliver the highest annual revenue in the history of the company.
Speaker #3: In 2026, as we capitalize on multiple new products and execute on our continuing diversification strategy. I would like to start by addressing the current market environment.
Operator: I would like to start by addressing the current market environment. The rapid adoption and growth of AI has introduced significant demand across all memory and storage technology, including HBM, DRAM, NAND flash, and even hard drives. The new and growing demand has led more recently to supply constraints, tight market conditions, and increasing pricing pressure across multiple markets, including AI and enterprise storage, boot drives, PCs, smartphones, and most other markets that use NAND flash. AI CSPs have attempted to lock up all the DRAM and NAND supply through 2026, which has made it increasingly difficult for other market players to get a product, and they are driving significant interquarter price increases. Given the growing supply constraint in DRAM and NAND, industry analysts are beginning to take a more cautious approach regarding smartphone, automotive, and PC unit growth in 2026.
Wallace Kou: I would like to start by addressing the current market environment. The rapid adoption and growth of AI has introduced significant demand across all memory and storage technology, including HBM, DRAM, NAND flash, and even hard drives. The new and growing demand has led more recently to supply constraints, tight market conditions, and increasing pricing pressure across multiple markets, including AI and enterprise storage, boot drives, PCs, smartphones, and most other markets that use NAND flash.
Speaker #3: To rapid adoption and growth of AI has introduced significant demand across all memory and story technology including HBM, DRAM, NAND flash, and even hard drives.
Speaker #3: The new and growing demand has led more recently to supply constraints, tight market conditions, and increasing pricing pressure across multiple markets including AI and enterprise storage.
Speaker #3: Bullseyes, PCs, smartphones, and most other markets that use NAND flash. AI CSPs have attempted to lock up all the DRAM and NAND supply through 2026, which has made it market players to get a product.
Wallace Kou: AI CSPs have attempted to lock up all the DRAM and NAND supply through 2026, which has made it increasingly difficult for other market players to get a product, and they are driving significant interquarter price increases. Given the growing supply constraint in DRAM and NAND, industry analysts are beginning to take a more cautious approach regarding smartphone, automotive, and PC unit growth in 2026.
Speaker #3: And driving increasingly difficult for other significant intra-quarter price increases. Given the growing supply constraints in DRAM and NAND, industry analysts are beginning to take a more cautious approach regarding smartphone, automotive, and PC unit growth in 2026.
Speaker #3: Silicon Motion, however, remains extremely well-positioned in the consumer market despite the tight conditions given our long-standing partnership with all the major flash vendors. Our spending market share within our existing market and the introduction of a new higher ASP product we are leveraging our strong relationship with flash makers OEMs and module makers to help secure NAND supply for our smartphone and PC OEM customers.
Operator: Silicon Motion, however, remains extremely well-positioned in the consumer market despite the tight conditions given our longstanding partnership with all the major flash vendors, our expanding market share within our existing market, and the introduction of a new higher ASP product. We are leveraging our strong relationship with flash makers, OEMs, and module makers to help secure NAND supply for our smartphone and PC OEM customers and ensure steady access to NAND even in the tight times. We are delivering greater value add to both our NAND maker partners and OEM customers, driving stronger partnerships that will lead to sustainable long-term growth. As a result, despite the expected market havoc, based on our existing backlog, we expect growth in all our major product lines in 2026, including automotive, mobile, PC, enterprise SSD, and boot drive storage solutions, giving us strong and growing market positions and leading product portfolios.
Wallace Kou: Silicon Motion, however, remains extremely well-positioned in the consumer market despite the tight conditions given our longstanding partnership with all the major flash vendors, our expanding market share within our existing market, and the introduction of a new higher ASP product. We are leveraging our strong relationship with flash makers, OEMs, and module makers to help secure NAND supply for our smartphone and PC OEM customers and ensure steady access to NAND even in the tight times.
Speaker #3: And ensure steady assets to NAND even in the tight times. We are delivering greater value add to both our NAND maker partners and OEM customers, driving stronger partnerships that will lead to sustainable long-term growth.
Wallace Kou: We are delivering greater value add to both our NAND maker partners and OEM customers, driving stronger partnerships that will lead to sustainable long-term growth. As a result, despite the expected market havoc, based on our existing backlog, we expect growth in all our major product lines in 2026, including automotive, mobile, PC, enterprise SSD, and boot drive storage solutions, giving us strong and growing market positions and leading product portfolios.
Speaker #3: As a result, despite the expected market headwind, based on our existing backlog, we expect growth in all our major product lines in 2026, including automotive, mobile, Bullseye Story Solutions, PC, and Enterprise D, given our strong and growing market position and leading product portfolios.
Speaker #3: I will now like to discuss our highlights in EMC and UFS. Growing AI demand in focusing a more disciplined KPI approach by memory and story market to prioritize resources across multiple technology products and markets.
Operator: I would now like to discuss our highlight in eMMC and UFS. Growing AI demand in focusing a more disciplined capex approach by memory and storage market to prioritize resources across multiple technology, product, and markets. Increasingly, we are seeing additional opportunity for Silicon Motion to supply controllers as NAND makers shift their internal resources to focus on DRAM, HBM, and customize memory technology for high-performance AI requirements. The mobile market is a prime example of this trend, as NAND makers are actively exiting mobile in favor of DRAM and HBM, which has led our mobile business to outperform in 2025, as our eMMC/UFS business grew 25% for the full year, far outperforming the smartphone embedded market.
Wallace Kou: I would now like to discuss our highlight in eMMC and UFS. Growing AI demand in focusing a more disciplined capex approach by memory and storage market to prioritize resources across multiple technology, product, and markets. Increasingly, we are seeing additional opportunity for Silicon Motion to supply controllers as NAND makers shift their internal resources to focus on DRAM, HBM, and customize memory technology for high-performance AI requirements.
Speaker #3: Additional opportunities for Silicon Motion: increasingly, we are seeing Silicon Motion supply controllers as NAND makers shift their internal resources to focus on DRAM, HBM, and customized memory technology for high-performance AI requirements.
Wallace Kou: The mobile market is a prime example of this trend, as NAND makers are actively exiting mobile in favor of DRAM and HBM, which has led our mobile business to outperform in 2025, as our eMMC/UFS business grew 25% for the full year, far outperforming the smartphone embedded market.
Speaker #3: The mobile market is supplying examples of this trend as NAND makers are actively exiting mobile in favor of DRAM, HBM. Which has led our mobile business to outperform in 2025 as our EMC UFS business grew 25% for the full year.
Speaker #3: Far outperforming the smartphone embedded market. Module makers are seeing great asset success by using local NAND supply. Coupled with our controllers, just as many of other NAND flash makers have looked into exiting the mobile market.
Operator: Module makers are seeing great success by using local NAND supply, coupled with our controllers, just as many other NAND flash makers have looked into exiting the mobile market in favor of the enterprise. We will continue to benefit given that we are the only meaningful emerging controller maker for the eMMC and UFS. While the overall smartphone market is expected to decline this year due to higher DRAM and NAND component costs, we expect the continuing shift from NAND flash maker to module maker to continue in 2026 and further benefit our eMMC/UFS controller business. Leveraging our strong relationship with local NAND makers and helping to align supply with handset OEMs and module makers will lead to continuing outperformance for our business. In addition, the market for eMMC is vast and growing, with over 900 million units shipped annually.
Wallace Kou: Module makers are seeing great success by using local NAND supply, coupled with our controllers, just as many other NAND flash makers have looked into exiting the mobile market in favor of the enterprise. We will continue to benefit given that we are the only meaningful emerging controller maker for the eMMC and UFS.
Speaker #3: In favor of the enterprise, we will continue to benefit given that we are the only meaningful emerging controller maker for the eMMC and UFS.
Speaker #3: While the overall smartphone market is expected to decline this year, due to higher DRAM and NAND component costs, we expect the continuing shift from NAND flash makers to module makers to continue in 2026.
Wallace Kou: While the overall smartphone market is expected to decline this year due to higher DRAM and NAND component costs, we expect the continuing shift from NAND flash maker to module maker to continue in 2026 and further benefit our eMMC/UFS controller business. Leveraging our strong relationship with local NAND makers and helping to align supply with handset OEMs and module makers will lead to continuing outperformance for our business. In addition, the market for eMMC is vast and growing, with over 900 million units shipped annually.
Speaker #3: And further benefit our EMC UFS controller business. Leveraging our strong relationship with local NAND makers and helping to align supply with handset OEMs and module makers will lead to continuing outperformance for our business.
Speaker #3: In addition, the market for EMC are vast and growing, with over 900 million units shipped annually. We are shipping EMC into automotive, industrial, commercial, IoT, smart device, streaming device, and many other markets.
Operator: We are shipping eMMC into automotive, industrial, commercial, IoT, smart device, streaming device, and many other markets. As flash makers have all but exited for the eMMC market, the competition has diminished significantly, and we are experiencing strong revenue contributions from this segment. Given our current backlog and customer outlook for 2026, we expect to see significantly outpace the market and deliver another strong year of growth of our eMMC and UFS business despite the difficult market environment. I would now discuss our Client SSD business. 2025 market turning point of our Client SSD business, given the success of our new PCIe 5 controllers. We introduced our 8-channel PCIe 5 controller at the end of 2024 with 4 flash maker partners and nearly all module maker makers, setting us a clear path to grow our client's PC market share from 30% today to 40% over the next few years.
Wallace Kou: We are shipping eMMC into automotive, industrial, commercial, IoT, smart device, streaming device, and many other markets. As flash makers have all but exited for the eMMC market, the competition has diminished significantly, and we are experiencing strong revenue contributions from this segment. Given our current backlog and customer outlook for 2026, we expect to see significantly outpace the market and deliver another strong year of growth of our eMMC and UFS business despite the difficult market environment.
Speaker #3: As flash makers have all but exited the EMC market, the competition has diminished significantly, and we are experiencing strong revenue contribution from this segment.
Speaker #3: Given our current backlog and customer outlook for 2026, we expect to significantly outpace the market and deliver another strong year of growth for our EMC and UFS business.
Speaker #3: Despite the difficult market environment, I will now discuss our client's deep business. 2025 will be a market turning point for our client's deep business. Given the success of our new PCIe 5 controllers, we introduced our 8-channel PCIe 5 controller at the end of 2024, with four flash maker partners and nearly all module makers.
Wallace Kou: I would now discuss our Client SSD business. 2025 market turning point of our Client SSD business, given the success of our new PCIe 5 controllers. We introduced our 8-channel PCIe 5 controller at the end of 2024 with 4 flash maker partners and nearly all module maker makers, setting us a clear path to grow our client's PC market share from 30% today to 40% over the next few years.
Speaker #3: Setting us a clear path to grow our client's PC market share from 30% today to 40% over the next few years. We expect our new DRAM-less 4-channel PCIe 5 controller that was introduced last quarter to ramp significantly through all of 2026.
Operator: We expect our new DRAMless four-channel PCIe 5 controller that we introduced last quarter to ramp significantly throughout 2026, targeting the mainstream market and driving higher adoption of PCIe 5 given that it is DRAMless, making it easier for our customers to create SSDs despite DRAM shortage. We have secured design win with four NAND flash makers, including the two from South Korea for TLC and QLC SSD, and nearly all the module makers for this controller, and we expect to benefit from higher ASP and profitability as this new controller enters the mix. Until the memory and storage makers increase their bit production capacity to alleviate the current shortage, the PC market will likely experience some difficulty driven by both shortage and demand destruction from higher prices.
Wallace Kou: We expect our new DRAMless four-channel PCIe 5 controller that we introduced last quarter to ramp significantly throughout 2026, targeting the mainstream market and driving higher adoption of PCIe 5 given that it is DRAMless, making it easier for our customers to create SSDs despite DRAM shortage. We have secured design win with four NAND flash makers, including the two from South Korea for TLC and QLC SSD, and nearly all the module makers for this controller, and we expect to benefit from higher ASP and profitability as this new controller enters the mix.
Speaker #3: Targeting the mainstream market and driving higher adoption of PCIe 5, given that it is DRAM-less. Making it easier for our customers to create SSDs despite the DRAM shortage.
Speaker #3: We have secured design wins with four NAND flash makers, including the two from South Korea, for TMC and QLC SSD. And nearly all the module makers for this controller.
Speaker #3: And we expect to benefit from higher ASP and profitability as this new controller enters the mix. Until the memory and storage makers increase their big production capacity to alleviate the current shortage, the PC market will likely experience some difficulty driven by both shortage and demand disruption from higher prices.
Wallace Kou: Until the memory and storage makers increase their bit production capacity to alleviate the current shortage, the PC market will likely experience some difficulty driven by both shortage and demand destruction from higher prices. Silicon Motion, however, remains in excellent position to grow its PC business in the near to long term given market share gains, ASP increases, and growing decisions by the NAND flash maker to walk away from the consumer business in favor of AI, and we expect continued growth from our Client SSD business in 2026.
Speaker #3: Silicon Motion, however, remains in excellent position to grow its PC business in the near to long term, given market share gains. ASP increases and growing decision by the NAND flash maker to walk away from the consumer business in favor of AI, and we expect continued growth from our client's deep business in 2026.
Operator: Silicon Motion, however, remains in excellent position to grow its PC business in the near to long term given market share gains, ASP increases, and growing decisions by the NAND flash maker to walk away from the consumer business in favor of AI, and we expect continued growth from our Client SSD business in 2026. I will now provide an update on our enterprise business. The opportunity of Silicon Motion in data centers and AI infrastructure is expanding daily. Current expectations are for data center and AI infrastructure investments to exceed $1 trillion by 2030 and the miniaturization of NAND technology expanding rapidly to help store and process large volumes of data quickly.
Wallace Kou: I will now provide an update on our enterprise business. The opportunity of Silicon Motion in data centers and AI infrastructure is expanding daily. Current expectations are for data center and AI infrastructure investments to exceed $1 trillion by 2030 and the miniaturization of NAND technology expanding rapidly to help store and process large volumes of data quickly.
Speaker #3: I will now provide an update on our enterprise business. The opportunity for Silicon Motion in data centers and AI infrastructure is expanding daily. Current expectations are for data center and AI infrastructure investment to exceed $1 trillion by 2030, and the number of applications of NAND technology is expanding rapidly to help store and process large volumes of data quickly.
Speaker #3: The need for increased speed and lower latency is driven by greater adoption of SSD in the data center. And the industry is increasingly looking to adopt NAND solutions in one storage, compute storage, and eventually near-GPU storage as well.
Operator: The need for increased speed and lower latency is driven by greater adoption of SSDs in the data center, and the industry is increasingly looking to adopt NAND solutions in wall storage, compute storage, and eventually near GPU storage as well. Interest in our growing portfolio of MonTitan controllers is increasing as they are ideally suited to address the evolving requirements of AI workload for both compute and storage. In the December quarter, we began end-user qualification of TLC-based high-performance compute SSDs using MonTitan with multiple customers. This qualification will progress throughout the first half of calendar 2026 and will begin to ramp commercially in the second half of the year. High-capacity QLC-based storage SSDs represent the largest addressable market for MonTitan, and we remain on track with multiple customers to begin qualification this year.
Wallace Kou: The need for increased speed and lower latency is driven by greater adoption of SSDs in the data center, and the industry is increasingly looking to adopt NAND solutions in wall storage, compute storage, and eventually near GPU storage as well. Interest in our growing portfolio of MonTitan controllers is increasing as they are ideally suited to address the evolving requirements of AI workload for both compute and storage.
Speaker #3: Interest in our growing portfolio among titan controllers is increasing as they are ideally suited to address the evolving requirements of AI workloads for both compute and storage.
Wallace Kou: In the December quarter, we began end-user qualification of TLC-based high-performance compute SSDs using MonTitan with multiple customers. This qualification will progress throughout the first half of calendar 2026 and will begin to ramp commercially in the second half of the year. High-capacity QLC-based storage SSDs represent the largest addressable market for MonTitan, and we remain on track with multiple customers to begin qualification this year.
Speaker #3: In the December quarter, we began end-user qualification of TLC-based high-performance compute SSD using MONTITAN with multiple customers. These qualifications will progress throughout the first half of calendar year 2026 and will begin to ramp commercially in the second half of the year.
Speaker #3: High-capacity QLC-based storage SSD represents the largest addressable market for MONTITAN. And we remain on track with multiple customers to begin qualification this year. Our MONTITAN QLC one-story solution offers significant advantage over HDD for AI inferences including speed and power.
Operator: Our MonTitan QLC wall storage solution offers significant advantage over HDD for AI inferences, including speed and power. Additionally, demand for QLC storage solutions has accelerated in recent months given the current supply shortage of HDD. Over the next few years, we expect the QLC SSDs will become a compelling alternative to HDD as they offer a matched economy of scale, which will lead to lower prices over time in addition to the inherent speed and power advantage. During 2026, we plan to tape out our first 4-nanometer chip, our PCIe Gen 6 version of MonTitan that is targeting hyperscalers, NAND flash makers, storage system providers, CSPs, and other tier-one customers. We have been developing the chip in association with multiple partner customers and expect this new controller to drive additional success for MonTitan beginning in the 2027-2028 time frame.
Wallace Kou: Our MonTitan QLC wall storage solution offers significant advantage over HDD for AI inferences, including speed and power. Additionally, demand for QLC storage solutions has accelerated in recent months given the current supply shortage of HDD. Over the next few years, we expect the QLC SSDs will become a compelling alternative to HDD as they offer a matched economy of scale, which will lead to lower prices over time in addition to the inherent speed and power advantage.
Speaker #3: Additionally, demand for QLC storage solutions has accelerated in recent months given the current supply storage of HDD. Over the next few years, we expect the QLC SSD will become a compelling alternative to HDD.
Speaker #3: As they offer a matched economy of scale which will lead to lower prices over time. In addition, to the inherent speed and power advantage.
Speaker #3: During 2026, we plan to tape out our first 4-nanometer chip, a PCIe 6 version of MONTITAN, that is targeting hyperscalers, NAND flash makers, storage system providers, CSPs, and other tier-one customers.
Wallace Kou: During 2026, we plan to tape out our first 4-nanometer chip, our PCIe Gen 6 version of MonTitan that is targeting hyperscalers, NAND flash makers, storage system providers, CSPs, and other tier-one customers. We have been developing the chip in association with multiple partner customers and expect this new controller to drive additional success for MonTitan beginning in the 2027-2028 time frame.
Speaker #3: We have been developing the chip in association with multiple partner customers and expect this new controller to drive additional success for MONTITAN beginning in the 2027-28 timeframe.
Speaker #3: I'm pleased to announce that we have already secured design wins with multiple tier-one customers for this new controller, which is expected to ramp significantly in 2028.
Operator: I'm pleased to announce that we have already secured design win with multiple tier-one customers for this new controller, which is expected to ramp significantly in 2028. We remain confident that MonTitan will ramp to represent at least 5% to 10% of revenue exiting 2026 and show even further success in 2027 and beyond as our entry into enterprise market scales is meaningful in the near to mid term. And finally, I would like to discuss our enterprise-grade boot drive storage business, which is rapidly evolving into a significant new era of growth for our company. We are collaborating with multiple customers to develop an enterprise boot drive solution that can work across multiple platforms. In Q4, we started volume shipment to the leading AI GPU maker for their current DPU product.
Wallace Kou: I'm pleased to announce that we have already secured design win with multiple tier-one customers for this new controller, which is expected to ramp significantly in 2028. We remain confident that MonTitan will ramp to represent at least 5% to 10% of revenue exiting 2026 and show even further success in 2027 and beyond as our entry into enterprise market scales is meaningful in the near to mid term.
Speaker #3: We remain confident that MONTITAN will ramp to represent at least 5 to 10% of revenue exiting 2026 and should experience further success in 2027 and beyond.
Speaker #3: As our entry into enterprise market scale meaningfully in the near to meter. And finally, I would like to discuss our enterprise-grade boot drive storage business which is rapidly evolving into a significant new era of growth for our company.
Wallace Kou: And finally, I would like to discuss our enterprise-grade boot drive storage business, which is rapidly evolving into a significant new era of growth for our company. We are collaborating with multiple customers to develop an enterprise boot drive solution that can work across multiple platforms. In Q4, we started volume shipment to the leading AI GPU maker for their current DPU product.
Speaker #3: We are allocating—we are collaborating with multiple customers to develop an enterprise boot drive solution that can work across multiple platforms. In the fourth quarter, we started volume shipment to the leading AI GPU maker for their current DPU product.
Speaker #3: We are currently working with this customer to qualify the next-generation version of their DPU, as well as their several NVLink and Ethernet switches for their new GPU CPU platform.
Operator: We are currently working with this customer to qualify the next generation version of their DPU as well as for several NVLink and Ethernet switches of their new GPU/CPU platform that are expected to launch in the second half of 2026. These next generation DPU and switch products require higher capacities with much higher ASP and unit volume, creating a significant new growth opportunity for Silicon Motion. We are also working with other potential customers, including a leading search engine company, to develop enterprise-grade boot storage drives based on our leading controllers. As the enterprise boot drives are a complete SSD product, this business will face greater exposure to our NAND scarcity and the high-pricing environment, placing greater emphasis on sourcing NAND to supply our customers.
Wallace Kou: We are currently working with this customer to qualify the next generation version of their DPU as well as for several NVLink and Ethernet switches of their new GPU/CPU platform that are expected to launch in the second half of 2026. These next generation DPU and switch products require higher capacities with much higher ASP and unit volume, creating a significant new growth opportunity for Silicon Motion.
Speaker #3: That is expected to launch in the second half of 2026. This next generation DPU and switch product require higher capacities with much higher ASP and unit volume.
Speaker #3: Creating a for Silicon Motion. We are also working with other potential customers including a leader significant new growth opportunity leading search engine company to develop an enterprise-grade boot storage drive based on our leading controllers.
Wallace Kou: We are also working with other potential customers, including a leading search engine company, to develop enterprise-grade boot storage drives based on our leading controllers. As the enterprise boot drives are a complete SSD product, this business will face greater exposure to our NAND scarcity and the high-pricing environment, placing greater emphasis on sourcing NAND to supply our customers.
Speaker #3: As the enterprise boot drives are complete SSD products, this business will face greater exposure to our NAND scarcity and the high pricing environment, placing greater emphasis on sourcing NAND to supply our customers.
Speaker #3: While this has become more difficult given the supply constraints and recent price increases, we remain confident that our relationship with the NAND flash maker, developed over the past 20 years, will help us succeed with these significant new opportunities.
Operator: While this has become more difficult given the supply constraints and recent price increases, we remain confident that our relationship with the NAND flash maker developed over the past 20 years will help us succeed with these significant new opportunities. For our Ferri storage solution, we are seeing strong demand from our automotive and industrial customers, especially in the tight NAND environment. Our customers are relying more on us for steady and consistent supply to ensure smooth supply chain dynamics. We will continue to play a more strategic role and partner to our Ferri customers, but we will also look to balance revenue growth with margin stability to drive profitability growth. In conclusion, Q4 2025 delivered significant growth for our business and accelerated our Boot Drive storage business.
Wallace Kou: While this has become more difficult given the supply constraints and recent price increases, we remain confident that our relationship with the NAND flash maker developed over the past 20 years will help us succeed with these significant new opportunities. For our Ferri storage solution, we are seeing strong demand from our automotive and industrial customers, especially in the tight NAND environment.
Speaker #3: For our favorite storage solution, we are seeing strong demand from our automotive and the industrial customers. Especially in the Thailand environment, our customers are relying more on us for steady and consistent supply to ensure smooth supply chain dynamics.
Wallace Kou: Our customers are relying more on us for steady and consistent supply to ensure smooth supply chain dynamics. We will continue to play a more strategic role and partner to our Ferri customers, but we will also look to balance revenue growth with margin stability to drive profitability growth. In conclusion, Q4 2025 delivered significant growth for our business and accelerated our Boot Drive storage business.
Speaker #3: We will continue to play a more strategic role and partner to our favorite customers who will also look to balance revenue growth with margin stability to drive profitability growth.
Speaker #3: In conclusion, the fourth quarter of 2025 delivers significant growth for our business and accelerated our boot drive storage business. In 2026, beginning in the first quarter, we expect to continue to reap the reward of our investment in MONTITAN.
Operator: In 2026, beginning in Q1, we expect to continue to reap the reward of our investment in MonTitan, our 6-nanometer Client SSD controller, and our new portfolio of eMMC and UFS products that are experiencing rapid growth and the ramp of our automotive business to about 10% of total business by the end of this year. We have never been better positioned as a company given our expanding product portfolio and scaling in a large new market, including the AI and enterprise storage market. I'm increasingly confident that we will deliver strong, broad-based, sustainable sequential growth throughout 2026 and beyond as we scale multiple existing and new opportunities. Now, let me turn the call to Jason to go over our financial performance and outlook. Thank you, Wallace, and good morning to everyone joining us today.
Wallace Kou: In 2026, beginning in Q1, we expect to continue to reap the reward of our investment in MonTitan, our 6-nanometer Client SSD controller, and our new portfolio of eMMC and UFS products that are experiencing rapid growth and the ramp of our automotive business to about 10% of total business by the end of this year. We have never been better positioned as a company given our expanding product portfolio and scaling in a large new market, including the AI and enterprise storage market.
Speaker #3: Our 6-nanometer client state controller and our new portfolio of eMMC and UFS products are experiencing rapid growth. And the ramp of automotive business to about 10% of total business by the end of this year.
Speaker #3: We have never been better positioned as a company given our expanding product portfolio and scaling in a large new market including the AI and enterprise storage market.
Speaker #3: I'm increasingly confident that we will deliver strong, broad-based, sustainable, sequential growth throughout 2026 and beyond, as we scale multiple existing and new opportunities. Now, let me turn the call to Jason to go over our financial performance and
Wallace Kou: I'm increasingly confident that we will deliver strong, broad-based, sustainable sequential growth throughout 2026 and beyond as we scale multiple existing and new opportunities. Now, let me turn the call to Jason to go over our financial performance and outlook.
Speaker #3: outlook. Thank you, Wallace.
Jason Tsai: Thank you, Wallace, and good morning to everyone joining us today. I will discuss additional details of our fourth 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 and non-GAAP data is included in the earnings release issued yesterday.
Speaker #2: And good morning to everyone joining us today. I will discuss additional details of our fourth 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.
Operator: I will discuss additional details of our fourth 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 and non-GAAP data is included in the earnings release issued yesterday. In the December quarter, sales increased 15% sequentially and over 45% year-over-year to $278.5 million, coming in well above the high end of our guided range and surpassing our $1 billion target run rate set at the start of the year as we experience continued strength in mobile demand and strong growth in our PCIe 5 client SSD business. Gross margins were at the higher end of our guidance range and increased again in the quarter to 49.2% as we capitalized on new product introductions and benefited from a mix shift towards client PC products.
Speaker #2: A reconciliation of our GAAP to non-GAAP data is included in the earnings release issued yesterday. In the December quarter, sales increased 15% sequentially and over 45% year-on-year to 278.5 million.
Jason Tsai: In the December quarter, sales increased 15% sequentially and over 45% year-over-year to $278.5 million, coming in well above the high end of our guided range and surpassing our $1 billion target run rate set at the start of the year as we experience continued strength in mobile demand and strong growth in our PCIe 5 client SSD business. Gross margins were at the higher end of our guidance range and increased again in the quarter to 49.2% as we capitalized on new product introductions and benefited from a mix shift towards client PC products.
Speaker #2: Coming in well above the high end of our guided range and surpassing our 1 billion target run rate set at the start of the year as we experienced continued strength in mobile demand and strong growth in our PCIe 5 client SSD business.
Speaker #2: Gross margins was at the higher end of our guidance range and increased again in the quarter to 49.2% as we capitalized on new product introductions and benefited from makeshift towards client PC products.
Operator: Operating expenses increased sequentially to $83.2 million given increased investments in our emerging AI and enterprise SSD and boot drive storage businesses. Operating margin increased sequentially to 19.3% within our guided range driven by the higher-than-expected revenue and gross margin during the December quarter. Our earnings per ADS were $1.26. Total stock compensation, which we exclude from non-gap results, was $15.8 million in the fourth quarter. We had $277.1 million cash, cash equivalents, and restricted cash at the end of the fourth quarter compared to $272.4 million at the end of the third quarter of 2025. Cash increased in the fourth quarter from improved operational performance offset by a combination of dividend payments of $16.7 million and an increase in inventory to support expected strong business ramp. Our team is executing well despite the difficult NAND and DRAM pricing environment.
Jason Tsai: Operating expenses increased sequentially to $83.2 million given increased investments in our emerging AI and enterprise SSD and boot drive storage businesses. Operating margin increased sequentially to 19.3% within our guided range driven by the higher-than-expected revenue and gross margin during the December quarter.
Speaker #2: 83.2 million given Operating expenses increased sequentially to increased investments in our emerging AI and enterprise SSD and boot drive storage businesses. Operating margin increased sequentially to 19.3% within our guided range driven by the higher than expected revenue and gross margin during the December quarter.
Jason Tsai: Our earnings per ADS were $1.26. Total stock compensation, which we exclude from non-gap results, was $15.8 million in the fourth quarter. We had $277.1 million cash, cash equivalents, and restricted cash at the end of the fourth quarter compared to $272.4 million at the end of the third quarter of 2025. Cash increased in the fourth quarter from improved operational performance offset by a combination of dividend payments of $16.7 million and an increase in inventory to support expected strong business ramp. Our team is executing well despite the difficult NAND and DRAM pricing environment.
Speaker #2: Our earnings per ADS was $1.26. Total stock compensation, which we exclude from non-GAAP results, was $15.8 million. In the fourth quarter, we had $277.1 million cash, cash equivalents, and restricted cash at the end of the fourth quarter compared to $272.4 million at the end of the third quarter of 2025.
Speaker #2: Cash increased in the fourth quarter from improved operational performance offset by a combination of dividend payments of 16.7 million and an increase expected strong business in inventory to support ramp.
Speaker #2: Our team has executed well despite the difficult NAND and DRAM pricing environment. During the fourth quarter of '25, we continued to invest in new advanced geometry products for our existing markets and for our emerging enterprise markets, including MONTITAN SSD and enterprise boot drive solutions.
Operator: During the fourth quarter of 2025, we continue to invest in new advanced geometry products for our existing markets and for our emerging enterprise markets, including MonTitan SSD and enterprise boot drive solutions. These investments will be ongoing in 2026 as we support new growing interests for our new enterprise portfolio. For Q1 2026, we now expect revenue to grow 5% to 10% to $292 to 306 million, up sequentially and counter to typical seasonality. We expect continued strength across nearly all our product segments, with a particular emphasis on mobile where we expect significant outperformance due to continued market share gains.
Jason Tsai: During the fourth quarter of 2025, we continue to invest in new advanced geometry products for our existing markets and for our emerging enterprise markets, including MonTitan SSD and enterprise boot drive solutions. These investments will be ongoing in 2026 as we support new growing interests for our new enterprise portfolio.
Speaker #2: These investments will be ongoing in 2026 as we support new, growing interests for our new enterprise portfolio. For the first quarter of 2026, we now expect revenue to grow 5 to 10%, to $292 to $306 million, up sequentially and counter to typical seasonality.
Jason Tsai: For Q1 2026, we now expect revenue to grow 5% to 10% to $292 to 306 million, up sequentially and counter to typical seasonality. We expect continued strength across nearly all our product segments, with a particular emphasis on mobile where we expect significant outperformance due to continued market share gains.
Speaker #2: We expect continued strength across nearly all our product segments, with a particular emphasis on mobile, where we expect significant outperformance due to continued market share gains.
Speaker #2: Gross margins are expected to be slightly lower sequentially at 46 to 47% in the March quarter given the product mix. But we expect overall margins to recover back to our target range of 48 to 50% throughout the year as a mix of newer products increases, including our PCIe 5 controllers and our enterprise SSD solutions.
Operator: Gross margins are expected to be slightly lower sequentially to 46% to 47% in the March quarter given the product mix, but we expect overall margins to recover back to our target range of 48% to 50% throughout the year as a mix of newer products increases, including our PCIe 5 controllers and our enterprise SSD solutions. Operating margin is expected to be in the range of 16% to 18%. Our effective tax rate is expected to be 19%. Stock-based compensation and dispute-related expenses are expected to be in the range of $10.8 to 11.8 million. We're well positioned for growth this year and expect 2026 to be a record revenue year for Silicon Motion with sequential revenue growth each quarter.
Jason Tsai: Gross margins are expected to be slightly lower sequentially to 46% to 47% in the March quarter given the product mix, but we expect overall margins to recover back to our target range of 48% to 50% throughout the year as a mix of newer products increases, including our PCIe 5 controllers and our enterprise SSD solutions.
Speaker #2: Operating margin is expected to be in the range of 16% to 18%. Our effective tax rate is expected to be 19%. Stock-based compensation and dispute-related expenses are expected to be in the range of $10.8 million to $11.8 million.
Jason Tsai: Operating margin is expected to be in the range of 16% to 18%. Our effective tax rate is expected to be 19%. Stock-based compensation and dispute-related expenses are expected to be in the range of $10.8 to 11.8 million. We're well positioned for growth this year and expect 2026 to be a record revenue year for Silicon Motion with sequential revenue growth each quarter.
Speaker #2: We're well positioned for growth this year, and expect 2026 to be a record revenue year for Silicon Motion, with sequential revenue growth each quarter.
Speaker #2: We anticipate additional tape-out and development costs, especially from our upcoming 4-nanometer tape-out in the second quarter, will drive higher operating expenses in the second and third quarters of the year.
Operator: We anticipate additional tape-out and development costs, especially from our upcoming 4-nanometer tape-out in the second quarter, will drive higher operating expenses in the second and third quarters of the year. Our focus has always been growing profitably, and 2026 is no exception. We anticipate full-year 2026 operating margins to improve as compared to 2025 despite our higher investments this year. While current supply shortages and resulting component increases are creating headwinds, our pipeline for growth in 2026 and beyond remains stronger than it has ever been in the history of our company. We remain focused on our market and product diversification strategy, which has already begun to deliver results. We have successfully entered the enterprise market with our boot drive storage solutions and are currently in the end customer qualifications with our MonTitan enterprise SSD products, which are expected to scale in the second half of 2026.
Jason Tsai: We anticipate additional tape-out and development costs, especially from our upcoming 4-nanometer tape-out in the second quarter, will drive higher operating expenses in the second and third quarters of the year. Our focus has always been growing profitably, and 2026 is no exception. We anticipate full-year 2026 operating margins to improve as compared to 2025 despite our higher investments this year. While current supply shortages and resulting component increases are creating headwinds, our pipeline for growth in 2026 and beyond remains stronger than it has ever been in the history of our company.
Speaker #2: Our focus has always been growing profitably in 2026 is no exception. We anticipate full year 2026 operating margins to improve as compared to 2025 despite our higher investments this year.
Speaker #2: While the current supply shortages and resulting component increases are creating headwinds, our pipeline for growth in 2026 and beyond remains stronger than it has ever been in the history of our company.
Speaker #2: We remain focused on our market and product diversification strategy, which has already begun to deliver results. We have successfully entered the enterprise market with our boot drive storage solutions and are currently in end-customer qualifications with our MONTITAN enterprise SSD products, which are expected to scale in the second half of 2026.
Jason Tsai: We remain focused on our market and product diversification strategy, which has already begun to deliver results. We have successfully entered the enterprise market with our boot drive storage solutions and are currently in the end customer qualifications with our MonTitan enterprise SSD products, which are expected to scale in the second half of 2026.
Speaker #2: Our leading position in the merchant control market and unmatched NAND maker partnerships will drive higher share in EMMC and UFS, client SSDs, enterprise, automotive, boot drive storage, high-performance and high-capacity enterprise and data center storage markets, and I look forward to sharing our progress in greater detail when we report again in three months.
Operator: Our leading position in the merchant control market and unmatched NAND maker partnerships will drive higher share in eMMC and UFS, client SSDs, enterprise automotive boot drive storage, high performance and high capacity enterprise and data center storage markets. And I look forward to sharing our progress in greater detail when we report again in three months. This concludes our prepared remarks. I'd like to open it up to questions now. Operator. Thank you. As a reminder to ask questions, please press star 11 and wait for our name to be announced. The first question comes from the line of Mehdi Hosseini from SIG. Yes. Thanks for taking my question. Two, for me. How should I think about the mix of eMMC, UFS revenue, especially in the back half of the year exiting this year?
Jason Tsai: Our leading position in the merchant control market and unmatched NAND maker partnerships will drive higher share in eMMC and UFS, client SSDs, enterprise automotive boot drive storage, high performance and high capacity enterprise and data center storage markets. And I look forward to sharing our progress in greater detail when we report again in three months. This concludes our prepared remarks. I'd like to open it up to questions now. Operator.
Speaker #2: This concludes our prepared remarks. I'd like to open it up to questions now.
Speaker #2: Operator. Thank you.
Operator: Thank you. As a reminder to ask questions, please press star one one and wait for our name to be announced. The first question comes from the line of Mehdi Hosseini from SIG.
Speaker #3: As a reminder to ask questions, please press star 11 and wait for an interview announcement. Our first question comes from the line of Mandy Hosseini from SIG.
Mehdi Hosseini: Yes. Thanks for taking my question. Two, for me. How should I think about the mix of eMMC, UFS revenue, especially in the back half of the year exiting this year? I'm asking you that because I'm under the impression that there is a diversification by end market. It used to be smartphone-driven, and now there is another. I want to better understand how that diversification is going to play out towards the end of this year. I'll have a follow-up.
Speaker #4: Yes, thanks for taking my question. At 2 for me, how should I think about the mix of EMMC, UFS revenue, especially in the back half of the year exiting this year?
Speaker #4: And I'm asking you that because I'm under the impression that there is a diversification by end market. It used to be a smartphone-driven, and now there is auto.
Operator: I'm asking you that because I'm under the impression that there is a diversification by end market. It used to be smartphone-driven, and now there is another. I want to better understand how that diversification is going to play out towards the end of this year. I'll have a follow-up. Our UFS controller majority is smartphone. eMMC controller majority is in IoT devices, smart device, streaming device, and sell-a-box, and all automotive. So the combination, I think, is around probably 40% controller, probably roughly similar, 50% for smartphone, 50% for non-smartphone area. Okay. Then on the BlueField, how will revenue contribution play out? I think your commentary implied that there could be some revenue contribution later this year. How would it impact your gross margin? I'm under the impression that for BlueField, the COGS is going to change.
Speaker #4: And I want to better understand how that diversification is going to play out towards the end of this year. And I have a
Speaker #4: follow-up. Our UFS
Wallace Kou: Our UFS controller majority is smartphone. eMMC controller majority is in IoT devices, smart device, streaming device, and sell-a-box, and all automotive. So the combination, I think, is around probably 40% controller, probably roughly similar, 50% for smartphone, 50% for non-smartphone area.
Speaker #5: controller majority is smartphone. EMMC controller majority is in IoT devices. Smart device, streaming device, and seller box. And all automotive. So the combination, I think the around probably 40% controller, probably similar, 50% for smartphone, 50% for non-smartphone
Speaker #5: area. Okay.
Mehdi Hosseini: Okay. Then on the BlueField, how will revenue contribution play out? I think your commentary implied that there could be some revenue contribution later this year. How would it impact your gross margin? I'm under the impression that for BlueField, the COGS is going to change. You actually have to go procure NAND. And if you could just comment on it and let me know if it's a wrong assumption, if it's correct, and how procuring NAND would actually impact the overall gross margin.
Speaker #4: And then on Bluefield, how will revenue contribution play out? I think your commentary implied that there could be some revenue contribution later this year.
Speaker #4: And how would it impact your gross margin? I'm under the impression that for Bluefield, the COGS is going to change. You actually have to go procure NAND.
Operator: You actually have to go procure NAND. And if you could just comment on it and let me know if it's a wrong assumption, if it's correct, and how procuring NAND would actually impact the overall gross margin. Yes. BlueField, our boot drive is a solution for BlueField and also several other switch platforms. We need to procure the NAND, and NAND price is a market price. So we had to work out with the customer. We can pass through the cost increase to the end customer. So this is challenging, but there's an ongoing process quarter by quarter. It definitely will impact some of our gross margin, but we manage the margin pass-through. So I think because even the customers, they have at least 2 to 3 suppliers. So they're based on the price and based on the supply and depend on the percentage.
Speaker #4: And if you could just comment on it and let me know is it the wrong assumption or if it's the correct and how procuring NAND would actually impact the overall gross margin.
Jason Tsai: Yes. BlueField, our boot drive is a solution for BlueField and also several other switch platforms. We need to procure the NAND, and NAND price is a market price. So we had to work out with the customer. We can pass through the cost increase to the end customer. So this is challenging, but there's an ongoing process quarter by quarter. It definitely will impact some of our gross margin, but we manage the margin pass-through.
Speaker #5: Yes. Bluefield, our boot drive is a solution for Bluefield. And also several other switches platform. We need to procure the NAND, and NAND price is a market price.
Speaker #5: So, we had to work out with the customer if we can pass through the cost increase to the end customer. So, this is challenging, but it's an ongoing process, quarter by quarter.
Speaker #5: It definitely will impact some of our gross margin, but we manage the margin pass-through. So I think because even the customer, they have at least a two to three supplier so they're based on the price and based on the supply and depend the percentage.
Jason Tsai: So I think because even the customers, they have at least 2 to 3 suppliers. So they're based on the price and based on the supply and depend on the percentage. We believe BlueField-3 is primary for this year, but the boot drive and the NVLink and the Ethernet switches are for second half and really more volume in 2027.
Speaker #5: We believe Bluefield 3 is for primary for this year, but Bluefield 4 and the NVLink and the Ethernet switches is for second half and really more volume in 2027.
Operator: We believe BlueField-3 is primary for this year, but the boot drive and the NVLink and the Ethernet switches are for second half and really more volume in 2027. Okay. Thank you. One moment for the next question. Next question comes from the line of Neil Young of Needham & Company. Please go ahead. Hi. Thanks for taking my question. My first question is, I wanted to understand how you're segmenting revenue from the boot drive opportunity. And same question for MonTitan. Are they both in SSD solutions, or is just the boot drive? Are you placing that in SSD solutions? And then at what point I think you'd sort of just answer this, but just for clarification, at what point do you anticipate revenue from the next-gen boot drive and those other switch opportunities that you talk about at the leading GPU maker?
Mehdi Hosseini: Okay. Thank you.
Speaker #4: Okay. Thank
Speaker #4: you.
Wallace Kou: One moment for the next question.
Speaker #3: One
Speaker #3: moment for the next question. Next question comes from the line of Neil Young of Midham & Co. Please go
Operator: Next question comes from the line of Neil Young of Needham & Company. Please go ahead.
Speaker #3: ahead. Hi.
Neil Young: Hi. Thanks for taking my question. My first question is, I wanted to understand how you're segmenting revenue from the boot drive opportunity. And same question for MonTitan. Are they both in SSD solutions, or is just the boot drive? Are you placing that in SSD solutions? And then at what point I think you'd sort of just answer this, but just for clarification, at what point do you anticipate revenue from the next-gen boot drive and those other switch opportunities that you talk about at the leading GPU maker? When do you expect revenue for those to begin to ramp? Thanks.
Speaker #6: Thank you for taking my question. My first question is, I wanted to understand how you’re segmenting revenue from the boot drive opportunity, and same question for Montitan.
Speaker #6: Are they both in SSD solutions, or is just the boot drive? Are you placing that in SSD solutions? And then at what point I think you sort of just answered this, but just for clarification, at what point do you anticipate revenue from the next-gen boot drive and those other switch opportunities that you talk about at the leading GPU maker?
Speaker #6: When do you expect revenue for those to begin to ramp? Thanks.
Operator: When do you expect revenue for those to begin to ramp? Thanks. Yeah. So you're right. For the boot drives, that's going to be part of our SSD solutions that we talk about each quarter. Enterprise controllers, MonTitan is part of our controller business. We will give you guys more color as it's appropriate. I think that when we talk about 5% to 10% for our company revenue does not include the boot drive solution. So currently, that's only kind of MonTitan controller. But boot drive solution is part of our enterprise business. We cannot comment regarding what percent about the boot drive. I think this year is relatively still small, but I think next year will be much bigger. But number one is we try to secure the NAND supply. Currently, we have two NAND suppliers. One is secure, but the other is not.
Jason Tsai: Yeah. So you're right. For the boot drives, that's going to be part of our SSD solutions that we talk about each quarter. Enterprise controllers, MonTitan is part of our controller business. We will give you guys more color as it's appropriate. I think that when we talk about 5% to 10% for our company revenue does not include the boot drive solution. So currently, that's only kind of MonTitan controller.
Speaker #5: Yeah, so you're right. For the boot drive, that's going to be part of our SSD solutions that we talk about each quarter. Enterprise controllers—MONTITAN—is part of our controller business.
Speaker #5: We will give you guys more color as it's appropriate. I think that when we talk about 5% to 10% for our company revenue, it does not include the boot drive solution.
Speaker #5: So currently, that's the only kind of MONTITAN controller. But boot drive solution is part of our enterprise business. The we cannot comment regarding what percent about the boot drive.
Jason Tsai: But boot drive solution is part of our enterprise business. We cannot comment regarding what percent about the boot drive. I think this year is relatively still small, but I think next year will be much bigger. But number one is we try to secure the NAND supply. Currently, we have two NAND suppliers. One is secure, but the other is not. So we're working with our NAND partner continually to support the major project. We expect the next generation DPU revenue to begin for us sometime in the back half of the year.
Speaker #5: I think this year is a relatively still small, but I think next year will be much bigger. But number one is we're trying to secure the NAND supply.
Speaker #5: Currently, we have a two NAND supplier. One is secure, but the other is not. So we're working with our NAND partner continually major project.
Operator: So we're working with our NAND partner continually to support the major project. We expect the next generation DPU revenue to begin for us sometime in the back half of the year. Okay. Thanks. That's helpful. And then the second question I just wanted to ask about the smartphone strengths in Q1. Maybe if you could just provide a little more details sort of what's driving that. I think it's predominantly market share gains. But if there's anything, different customer behavior or anything that you guys are seeing, that would be great. Thanks. So first of all, as you know, probably two NAND makers walked away from the mobile storage. And we see, but they are also still selling the wafer to multi-sourcers. And I think we benefit from the majority multi-sourcers using Silicon Motion controller.
Speaker #5: next generation to support the DPU revenue to begin for us sometime in the back half of the
Speaker #5: year.
Neil Young: Okay. Thanks. That's helpful. And then the second question I just wanted to ask about the smartphone strengths in Q1. Maybe if you could just provide a little more details sort of what's driving that. I think it's predominantly market share gains. But if there's anything, different customer behavior or anything that you guys are seeing, that would be great. Thanks.
Speaker #6: Okay. Thanks. That's helpful. And then the second question I just wanted to ask about the smartphone strength in 1Q. Maybe if you could just provide a little more details sort of what's driving that.
Speaker #6: I think it's predominantly market share gains, but if there's anything different customer behavior or anything that you guys are seeing, that would be great.
Speaker #6: Thanks.
Jason Tsai: So first of all, as you know, probably two NAND makers walked away from the mobile storage. And we see, but they are also still selling the wafer to multi-sourcers. And I think we benefit from the majority multi-sourcers using Silicon Motion controller. They not only use NAND makers from the US and Japan, but also use local NAND makers from China. That's why we continue to gain market share. We see we gain market share from mainstream and value line. We expect to start to ramp the high end by end of 2026.
Speaker #5: So
Speaker #5: first of all, as you know, probably two NAND makers, walked away from the mobile storage. And we see, but they also still selling the wafer to module maker.
Speaker #5: And I think we benefit from majority module maker using silicon motion controller. So not only use the NAND maker from US and Japan, but also use local NAND maker China.
Operator: They not only use NAND makers from the US and Japan, but also use local NAND makers from China. That's why we continue to gain market share. We see we gain market share from mainstream and value line. We expect to start to ramp the high end by end of 2026. Anything else, Neil? Next question. Questions? The next question comes from Craig Ellis from B. Riley Securities. Please go ahead. Yeah. Thanks for taking the question, and congratulations on the great execution, guys. I wanted to start out by going back to the comments on sequential growth through the year and just better understand some of the product-level gives and takes as we go through the year. I think from what I've heard, it sounds like we'll see some real strength starting the year from eMMC and UFS and the color on.
Speaker #5: That's why we continue getting market share. And we see we gain market share from mainstream and value line and we expect to start to ramp the high end by end of 2026.
Wallace Kou: Anything else, Neil?
Speaker #5: else, Neil? Next Anything question.
Operator: Next question. Questions? The next question comes from Craig Ellis from B. Riley Securities. Please go ahead.
Speaker #3: The next question comes from Craig Ellis from BYD Securities. Please go Questions?
Speaker #3: ahead. Yeah.
Craig Ellis: Yeah. Thanks for taking the question, and congratulations on the great execution, guys. I wanted to start out by going back to the comments on sequential growth through the year and just better understand some of the product-level gives and takes as we go through the year. I think from what I've heard, it sounds like we'll see some real strength starting the year from eMMC and UFS and the color on.
Speaker #6: Thanks for taking the question and congratulations on the great execution, guys. I wanted to start out by going back to the comments on sequential growth through the year.
Speaker #6: And just better understand some of
Speaker #1: product Of the level takes gives and through think from what it sounds like we'll see some real strength the year there , I Emk and UFS color and the Mon as we go transition .
Speaker #1: on I've heard , Real eMMC and year and starting on color the Titan starting the from . sampling to Transition revenue up would suggest a back half of the year .
Operator: MonTitan transition from sampling to revenue ramp-up would suggest more of a back half of the year orientation towards SSD solutions. I think that would lead SSD controllers plugging along. Along with that, if we have sequential growth in the 3% to 5% range, we exit the year annualizing at a $1.3 to 1.4 billion run rate. Is that the right level of growth we should be thinking about, or are you thinking about growth higher than that? Thanks for all the color there, guys. Yeah. I think you're right on some of these things. I think certainly strength in the first half of the year is coming primarily from eMMC and UFS. We'll see client SSD controllers ramp throughout the year, but Q1 should be seasonally weaker. Then we'll see the MonTitan products begin to scale in the back half of the year.
Craig Ellis: MonTitan transition from sampling to revenue ramp-up would suggest more of a back half of the year orientation towards SSD solutions. I think that would lead SSD controllers plugging along. Along with that, if we have sequential growth in the 3% to 5% range, we exit the year annualizing at a $1.3 to 1.4 billion run rate. Is that the right level of growth we should be thinking about, or are you thinking about growth higher than that? Thanks for all the color there, guys.
Speaker #1: Orientation towards SSD ramp solutions , and I think lead that would more strength controllers plugging along with . Along , if we sequential growth in range , we that exit the 3 to 5% the year a Is that of 1.3 to 1.4 billion run rate .
Wallace Kou: Yeah. I think you're right on some of these things. I think certainly strength in the first half of the year is coming primarily from eMMC and UFS. We'll see client SSD controllers ramp throughout the year, but Q1 should be seasonally weaker. Then we'll see the MonTitan products begin to scale in the back half of the year. We do anticipate quarter-on-quarter sequential growth this year. We are not providing full-year guidance specifically beyond just sequential growth. We expect this year to be a record year.
Speaker #1: Right level of have are you about? Or growth about higher than that? Color guys there.
Speaker #2: Yeah , so I think right on some of
Speaker #2: Yeah , so I think right on some of you're you know , strength in the first half of the year is coming primarily from EMC .
Speaker #2: And UFS . We'll see primarily client SSD controllers throughout thinking ramp But
Operator: We do anticipate quarter-on-quarter sequential growth this year. We are not providing full-year guidance specifically beyond just sequential growth. We expect this year to be a record year. Let me add some comment. I think we have very strong backlog, and we have a very strong momentum from our product line. But because some of the products like automotive Ferri and the boot drive, we require to procure the NAND. So, case by case, some business we probably just bypass, some business because strategically we're going to take. Even potentially, we have a much higher growth rate, but we might skip some of the business if the margin didn't meet our company target. That's why we balance and the thing. But just from the backlog in the business, we decide to engage. We have a sequential growth quarter by quarter. That's helpful.
Speaker #2: see Titan products begin to scale in the back half of the We do year . anticipate
Speaker #2: see Titan products begin to scale in the back half of the We do year . anticipate quarter quarter growth year . this We providing full year , specifically
Speaker #2: sequential
Jason Tsai: Let me add some comment. I think we have very strong backlog, and we have a very strong momentum from our product line. But because some of the products like automotive Ferri and the boot drive, we require to procure the NAND. So, case by case, some business we probably just bypass, some business because strategically we're going to take.
Speaker #2: beyond just , you sequential . this year And we expect guidance record year .
Speaker #2: a
Speaker #3: So
Speaker #3: strong backlog have a strong and we momentum
Speaker #3: from our very line . comment . because some of the products like product
Speaker #3: procure to the so the we by case , some business , just probably we very bypass name , business , we because some will we're strategic take even have potentially we a .
Speaker #3: case balance and think . But from the backlog in the business , Thanks for we just decided to the We have a we have a engage .
Jason Tsai: Even potentially, we have a much higher growth rate, but we might skip some of the business if the margin didn't meet our company target. That's why we balance and the thing. But just from the backlog in the business, we decide to engage. We have a sequential growth quarter by quarter.
Speaker #3: much higher growth rate . So we
Speaker #3: the our
Craig Ellis: That's helpful. And then the follow-up question is really a longer-term question for you, Wallace. You and I have known each other a long time. I've seen you transition the business previously from a USB and memory card business to one that's more oriented to smartphones and PCs. And it seems like you're doing it again, transitioning the business to include a very significant enterprise quotient.
Operator: And then the follow-up question is really a longer-term question for you, Wallace. You and I have known each other a long time. I've seen you transition the business previously from a USB and memory card business to one that's more oriented to smartphones and PCs. And it seems like you're doing it again, transitioning the business to include a very significant enterprise quotient. The question, do you see a point in the 2027, 2028 time period for that enterprise quotient to actually be bigger than the consumer business? Would love to get your views on that and how you see the longer-term arc of the company playing out. I think enterprise segment, definitely is a target want to grow. But when the enterprise portion exceeds the consumer version, we cannot really relate to you. We try to accelerate the momentum.
Speaker #3: Growth sequential quarter by quarter are not.
Speaker #3: growth sequential quarter by quarter are not
Speaker #1: really a question for Wallace , you helpful . and I have other a known each long time . I've you , seen you the business previously from a USB and to be memory card business to oriented to transition Annualizing at and smartphones PCs .
Speaker #1: it And seems like you're doing it again you're business to include a very significant enterprise The question do you see a point quotient .
Craig Ellis: The question, do you see a point in the 2027, 2028 time period for that enterprise quotient to actually be bigger than the consumer business? Would love to get your views on that and how you see the longer-term arc of the company playing out.
Speaker #1: , transitioning the the 2027 , 28 , period for that quotient is actually bigger than the consumer enterprise business ? Would love to get your views on that and how you see the longer term arc of company .
Jason Tsai: I think enterprise segment, definitely is a target want to grow. But when the enterprise portion exceeds the consumer version, we cannot really relate to you. We try to accelerate the momentum. But I think the boot drive is a really pretty strong business for us. We also have multiple customers, not just one of the GPU customers. And in addition, automotive storage is also very strategic. And we believe if we can procure NAND stably, we can grow even much faster.
Speaker #1: playing
Speaker #3: enterprise segment out I think doubling the target wants to
Speaker #3: can grow , enterprise the exceed the consumer version , we cannot really you , really to we we target try to accelerate the momentum .
Operator: But I think the boot drive is a really pretty strong business for us. We also have multiple customers, not just one of the GPU customers. And in addition, automotive storage is also very strategic. And we believe if we can procure NAND stably, we can grow even much faster. So we have a multiple weapon to grow by enterprise is a stronger portion. And we do have some new product coming in the next two years. So we're very excited about the opportunity to grow. But just be patient with us, and hopefully, we can grow much faster even in 2027. Will do. Thanks, guys. Just one moment for the next question. Our next question comes from Suji Desilva of Roth Capital. Please go ahead. Hi, Wallace. Hi, Jason. Congratulations on the progress here.
Speaker #3: But the I think it's really pretty strong business us . for We also have a customer , not just one of the GPU customer .
Speaker #3: And in addition, automotive storage is also very strategic. And we believe if we can procure NAND stably, we can grow so much faster.
Jason Tsai: So we have a multiple weapon to grow by enterprise is a stronger portion. And we do have some new product coming in the next two years. So we're very excited about the opportunity to grow. But just be patient with us, and hopefully, we can grow much faster even in 2027. Will do.
Speaker #3: Even much a multiple weapon to grow by. Enterprise is stronger, a portion. And we do have some new product in the coming next two years.
Speaker #3: we're excited . We're So very excited about the opportunity But grow . to just be patient us and hopefully we can grow much faster in 2027 .
Craig Ellis: Thanks, guys.
Operator: Just one moment for the next question. Our next question comes from Suji Desilva of Roth Capital. Please go ahead.
Speaker #1: Well dude , thanks guys .
Speaker #1: Well dude , thanks guys .
Suji Desilva: Hi, Wallace. Hi, Jason. Congratulations on the progress here. Maybe stepping back on calendar year 2026, you talked about it being a growth year. You talked about 5 segments: auto, mobile, PC, enterprise, boot drive. Maybe you could talk about which ones would have the highest percent or dollar contribution to the growth in 2026 given some of the moving parts around NAND supply and so forth. Thanks.
Speaker #4: . Our next question comes from Suji Silva Roth da go ahead Capital .
Operator: Maybe stepping back on calendar year 2026, you talked about it being a growth year. You talked about 5 segments: auto, mobile, PC, enterprise, boot drive. Maybe you could talk about which ones would have the highest percent or dollar contribution to the growth in 2026 given some of the moving parts around NAND supply and so forth. Thanks. Percentage, I think the enterprise controller definitely grow much faster. Boot drive also is new to us. It grows presenting much bigger. But from dollar-wise, I think the mobile controller, eMMC, UFS, is a bigger one. And it will exceed probably about 35 to 40% of our total company revenue. So I think these are all strong momentum to grow, but we also see more balanced growth continually and moving into 2027. Okay. All right. Thanks.
Speaker #5: Hi , Jason Wallace . . Congratulations on the progress here .
Speaker #5: Hi , Jason Wallace . . Congratulations on the progress here
Speaker #5: stepping back with You talked 26 . about it being a growth year You talked about . mobile , PC , boot enterprise , drive .
Jason Tsai: Percentage, I think the enterprise controller definitely grow much faster. Boot drive also is new to us. It grows presenting much bigger. But from dollar-wise, I think the mobile controller, eMMC, UFS, is a bigger one. And it will exceed probably about 35 to 40% of our total company revenue. So I think these are all strong momentum to grow, but we also see more balanced growth continually and moving into 2027.
Speaker #5: Maybe you can five segments auto , which ones would highest percent or have the growth in 26 , given some of the moving parts around Nand supply and .
Speaker #5: Thanks forth . .
Speaker #3: think the
Speaker #3: Enterprise doesn't grow controller much Please faster Hi , . I also is a new to Percentage I us , IT grows a much bigger .
Speaker #3: But I dollar found the , EMC , UFS think is controller And mobile it will exceed probably about 3,540% of our total company revenue .
Speaker #3: I So think these are all strong momentum the growth , but we also see growth balanced continually a more And to 2027 . moving
Suji Desilva: Okay. All right. Thanks. And then specifically on the notebook SSD controllers, can you just talk about the puts and takes of how the year-over-year would trend given there's obviously NAND tightness and PC demand impact because of the cost of the inputs going up versus your share or your mix shift to premium, how that would all net together into a year-over-year trend for notebook SSD controller?
Operator: And then specifically on the notebook SSD controllers, can you just talk about the puts and takes of how the year-over-year would trend given there's obviously NAND tightness and PC demand impact because of the cost of the inputs going up versus your share or your mix shift to premium, how that would all net together into a year-over-year trend for notebook SSD controller? So this is a very good question. I think, as you know very well, DRAM and the NAND supply is really very tied to PC OEM customers. So some are able to secure the supply, some don't. So it gives a tremendous opportunity to Silicon Motion because the NAND maker, they move all the resource allocation to CSP. So what's left is not enough for all the PC makers to meet their demand.
Speaker #5: All Thanks . And right . then Okay . specifically on the The SSD notebook controllers , can you talk about the puts takes how the of year over and year would trend given there's obviously tightness and Nand PC , you know impact , demand because of the the cost of inputs going up versus your share or your mix shift to premium .
Wallace Kou: So this is a very good question. I think, as you know very well, DRAM and the NAND supply is really very tied to PC OEM customers. So some are able to secure the supply, some don't. So it gives a tremendous opportunity to Silicon Motion because the NAND maker, they move all the resource allocation to CSP. So what's left is not enough for all the PC makers to meet their demand.
Speaker #5: How that would all net into together into a year over year notebooks , controller trend .
Speaker #3: So this is a very good question. As you know very well, I think DRAM and NAND supply is really very tight to PC OEM customers.
Speaker #3: So some is can are able to secure the supply , some don't . So it gives us opportunity to silicon motion because the tremendous Nand maker , they move all the resource allocation to .
Operator: So, because we have a 4-nanometer using PCIe 5 channel controller, 4-nanometer also uses 4-channel DRAM controller, that balances about their internal allocation to fulfill the demand for a NAND maker. In addition, because there's a shortage from NAND supply to PC OEM, multi-makers start to take the opportunity. So because we have majority multi-maker design wins, that's why we fill the other gap. So even the total unit shipment for 2026 PC OEM will decline, but I think for 5% to 10%. But we still have a pretty strong confidence to grow continually in 2026. And also, Suji, keep in mind it's a combination of higher share, higher ASP products as we transition to PCIe 5. Even with the 4-channel PCIe 5 controller, it's still a much higher ASP than a comparable PCIe 4.
Wallace Kou: So, because we have a 4-nanometer using PCIe 5 channel controller, 4-nanometer also uses 4-channel DRAM controller, that balances about their internal allocation to fulfill the demand for a NAND maker. In addition, because there's a shortage from NAND supply to PC OEM, multi-makers start to take the opportunity. So because we have majority multi-maker design wins, that's why we fill the other gap.
Speaker #3: So the not enough left is for PC all the maker to meet their demand . So the because we have a for name maker using PCIe five channel controller also , Fortnite maker uses four channel during the controller that balance about the internal allocation to fulfill the demand for maker .
Speaker #3: In addition , because there is a shortage from from from supply to PCI makers start to the take take opportunity . So because we have , margin majority margin maker design we win , feel the that's why other gap .
Wallace Kou: So even the total unit shipment for 2026 PC OEM will decline, but I think for 5% to 10%. But we still have a pretty strong confidence to grow continually in 2026.
Speaker #3: So even the total unit shipments for 2026 will decline . But I for 5 to 10% . But we still have a pretty strong confidence to grow continually think 2026 .
Wallace Kou: And also, Suji, keep in mind it's a combination of higher share, higher ASP products as we transition to PCIe 5. Even with the 4-channel PCIe 5 controller, it's still a much higher ASP than a comparable PCIe 4.
Speaker #2: And also keep in mind , it's a combination higher of share , higher ASP products as we transition to PCIe five , even in the four , even with the four channel PCIe five controller , it's still a much higher ASP than a comparable PCIe four .
Operator: So we're going to get the benefit of both higher share and higher ASPs this year in spite of any sort of macro issues around PC unit volumes. Okay. Thanks, Wallace. Thanks, Jason. Our next question comes from Gokul Hariharan from J.P. Morgan. Please ask your question. Yeah. Hi. Thanks for taking my question. So I just wanted to understand, again, on the client SSD controller, what is the conversations you're having from the PC OEMs given many of them are already sounding a little bit more skeptical about overall demand? Is there any indication that the spec migration is slowing down because of the cost inflation from PCIe Gen 4 to PCIe Gen 5, because the general commentary in the industry seems to be about some degree of de-speccing of certain specs?
Wallace Kou: So we're going to get the benefit of both higher share and higher ASPs this year in spite of any sort of macro issues around PC unit volumes. Okay. Thanks, Wallace. Thanks, Jason. Our next question comes from Gokul Hariharan from J.P. Morgan. Please ask your question. Yeah. Hi. Thanks for taking my question. So I just wanted to understand, again, on the client SSD controller, what is the conversations you're having from the PC OEMs given many of them are already sounding a little bit more skeptical about overall demand? Is there any indication that the spec migration is slowing down because of the cost inflation from PCIe Gen 4 to PCIe Gen 5, because the general commentary in the industry seems to be about some degree of de-speccing of certain specs?
Speaker #2: So we're going to get the benefit of both higher share and higher ASPs this year , in spite of any sort of macro issues around unit PC volumes .
Speaker #5: Okay, thanks. Thanks, Jason.
Speaker #4: Our next
Speaker #4: question comes from Goku Hariharan from . Morgan . Please ask JP question .
Speaker #6: Hi . Yeah . taking Thanks for question . So just wanted to understand again on client my SSD controller the . What is the conversations you're on the having from the poems given ?
Speaker #6: Many of them are already sounding a little bit more skeptical about overall demand. Is there any indication that spec migration is slowing because of the cost from PCI, or because of Gen Five? The general commentary in the industry is about some respecting of specs.
Operator: I just wanted to understand if you can give some indication of what is the baseline PC market expectations that you have, and then where are you building on top of that both for market share and ASP to kind of get to growth in the client SSD business? Yeah. That's my first question. Yeah. I think, Gokul, you got a very good question. We cannot comment for each individual PC OEM. But overall, I think in 2026, PC unit shipment will decline 5% to 10%, and each OEM perform differently. Now, regarding the sharp NAND price and DRAM price increase, so PC OEM all face a price increase quickly. So I think from value line, many would despec the storage product. So 256 GB, it will down to 120 GB. But for high end, they need to increase the price.
Wallace Kou: I just wanted to understand if you can give some indication of what is the baseline PC market expectations that you have, and then where are you building on top of that both for market share and ASP to kind of get to growth in the client SSD business? Yeah. That's my first question. Yeah. I think, Gokul, you got a very good question. We cannot comment for each individual PC OEM. But overall, I think in 2026, PC unit shipment will decline 5% to 10%, and each OEM perform differently. Now, regarding the sharp NAND price and DRAM price increase, so PC OEM all face a price increase quickly. So I think from value line, many would despec the storage product. So 256 GB, it will down to 120 GB. But for high end, they need to increase the price.
Speaker #6: degree of just wanted to understand if seems to be give some indication of what is the baseline , like PC market expectations that how are you have , you building and then that ?
Speaker #6: top of Both market share and units and AFP to kind of on to growth in the client get business ? Yeah , that's my first question .
Speaker #3: Yeah , I think Goku , you got question . good It's a very we cannot comment for each individual PC , but overall , I think the 2026 .
Speaker #3: PC shipments will unit And OEM performed differently now , regarding the the sharp name , price and different price increase . So pkon outrageous price increase quickly .
Speaker #3: I think So from value line and many were dispatched the storage product . So gigabyte gigabyte or down to one gigabyte . But for high need to end they increase the price .
Operator: So from desktop portion, I think they will lose the demand and interest from value line customer. So that is a fact. So I think the impact for each PC OEM is not different. And we see this is a current challenging situation for all the PC OEM. And we work with our multi-maker and work with the NAND maker because we also depend on their internal allocation for the NAND quarter by quarter. So it's very challenging. But because we have a much better position, so we have a much stronger opportunity to grow continually in 2026. Got it. And any comments about the PCIe Gen 5 penetration? I think last year, I remember it was 5% to 8% or 5% to 6%. Are we expecting that this goes to high teens, 20% by end of year? Yeah. So PCIe Gen 5 is supposed to ramp much stronger in 2026.
Wallace Kou: So from desktop portion, I think they will lose the demand and interest from value line customer. So that is a fact. So I think the impact for each PC OEM is not different. And we see this is a current challenging situation for all the PC OEM. And we work with our multi-maker and work with the NAND maker because we also depend on their internal allocation for the NAND quarter by quarter. So it's very challenging. But because we have a much better position, so we have a much stronger opportunity to grow continually in 2026. Got it. And any comments about the PCIe Gen 5 penetration? I think last year, I remember it was 5% to 8% or 5% to 6%. Are we expecting that this goes to high teens, 20% by end of year? Yeah. So PCIe Gen 5 is supposed to ramp much stronger in 2026.
Speaker #3: So from dispatch portion I think they will lose the demand and interest from value line that is customer . the So fact . So I think the impact for each option are different .
Speaker #3: And we see this is a current challenging situation for all the poems . And we work , our the our with our margin makers and work with the maker because we also their depend internal allocation for the Nand .
Speaker #3: Quarter by quarter . So it's very challenging . But because we have a much better position . So we a much stronger have opportunity to grow continually in 2026 .
Speaker #6: Got any it . And any comments about like the Gen five penetration ? I think last remember it year I was like PCIe 5 to 8% or 5 to 6% .
Speaker #6: Are we expecting that this like high teens , 20% by end of this year ?
Speaker #6: Are we expecting that this like high teens , 20% by end of this year goes to Yeah .
Operator: But for high end, because of DRAM shortage, that's why 8-channel increase will slow down dramatically in 2026. However, the PCIe 5 4-channel DRAMless, because no DRAM, has much more to build the SSD to ship. So we see the much stronger demand for DRAMless PCIe 5 controller, especially from second half, to ramp more meaningfully. Okay. Understood. Second question on the boot drive storage. Could you help us understand how big this business could be because you got the biggest GPU customer and looks like for the next platform, this is going to be mandatory. And I think you just mentioned you're also getting the biggest ASIC program out there as well. So you're kind of locking up probably 80% or 90% of the market share of the market already from the global market. How sizable is boot drive storage business going to be?
Wallace Kou: But for high end, because of DRAM shortage, that's why 8-channel increase will slow down dramatically in 2026. However, the PCIe 5 4-channel DRAMless, because no DRAM, has much more to build the SSD to ship. So we see the much stronger demand for DRAMless PCIe 5 controller, especially from second half, to ramp more meaningfully. Okay. Understood. Second question on the boot drive storage. Could you help us understand how big this business could be because you got the biggest GPU customer and looks like for the next platform, this is going to be mandatory. And I think you just mentioned you're also getting the biggest ASIC program out there as well. So you're kind of locking up probably 80% or 90% of the market share of the market already from the global market. How sizable is boot drive storage business going to be?
Speaker #3: So PCIe Gen five is suppose to ramp much stronger in 2026 . But for eight channel high end , because the drain shortage , that's why eight channel increase will slow down in 2026 .
Speaker #3: dramatically However , the PCIe five for channel during this because no Dram is much more to build SSD to ship . So we see the much stronger demand for during this PCIe five controller , the second half to especially from more ramp meaningfully .
Speaker #6: Okay , understood . Second question on the boot drive storage , could you help us understand how big this business could be ? Because you got the biggest GPU customer and looks like next for the platform .
Speaker #6: This is going to be mandatory. And I think you just mentioned you're also getting the biggest ASIC program out there as well.
Speaker #6: So you’re kind of locking up probably 80% or 90% of the market share of the market already from addressable market. How sizable is the drive storage business going to be?
Operator: Are you still going to stick with the NAND bundle kind of model here, or is it going to be eventually NAND passed through at higher margin? Yeah. First of all, let me talk about the TAM. I think, first of all, the boot drive business, it depends on the several factors, right, including the success with DPU. But so far, we see the volume is very meaningful in 2026. And all the leading CPU and GPU maker, they use a multiple supplier, 2 or 3 suppliers. So we are not the sole supplier for the DPU program. We see this year revenue relatively around $50 million. But I think next year will be much higher. So it all depends on the NAND procurement from us. So it's a case by case because we have multiple programs, not just one GPU customer. We have multiple customers.
Wallace Kou: Are you still going to stick with the NAND bundle kind of model here, or is it going to be eventually NAND passed through at higher margin? Yeah. First of all, let me talk about the TAM. I think, first of all, the boot drive business, it depends on the several factors, right, including the success with DPU. But so far, we see the volume is very meaningful in 2026. And all the leading CPU and GPU maker, they use a multiple supplier, 2 or 3 suppliers. So we are not the sole supplier for the DPU program. We see this year revenue relatively around $50 million. But I think next year will be much higher. So it all depends on the NAND procurement from us. So it's a case by case because we have multiple programs, not just one GPU customer. We have multiple customers.
Speaker #6: is boot And are you still going to stick with the Nand bundle kind of model here , or is it going to be eventually like Nand pass through at higher margin ?
Speaker #3: Yeah . First of all , let me talk about the ten . I think , first of all , the GPU , the boot drive business , it depends several on the factors , including the success of DPU , but so far we see the volume is very meaningful in 2026 .
Speaker #3: And and the all the leading CPU and maker , they GPU use a multiple supplier 2 or 3 supplier . So we are not the solely supplier for for the the GPU program .
Speaker #3: We see this year revenue relatively around $50 million. But I think next year will be much higher. So we saw depend the NAND procurement from us.
Speaker #3: So it's a case by case because we have multiple programs , not just one one GPU customer . We have a multiple customer .
Operator: And also, some will ramp up from Q4, the new program. So it depends how successfully we secure the NAND, also whether we can pass through the incremental cost to the customer with a meaningful margin. So this is all the negotiation. So some is dynamic. And we just make a reasonable, meaningful forecast for this year. But it's a very strategic business for us for long term. So we work closely and build a partnership with our GPU partner. Hopefully, this will become a much larger business in 2027 and 2028. Got it. Thank you. A reminder to ask questions, please press star 11. Our next question comes from Matt Bryson from Wedbush. Please go ahead. Mr. Bryson, your line is open. You may unmute locally. And if you'd like to ask questions, please dial star 11. We have a follow-up question. Just a moment, please.
Wallace Kou: And also, some will ramp up from Q4, the new program. So it depends how successfully we secure the NAND, also whether we can pass through the incremental cost to the customer with a meaningful margin. So this is all the negotiation. So some is dynamic. And we just make a reasonable, meaningful forecast for this year. But it's a very strategic business for us for long term. So we work closely and build a partnership with our GPU partner. Hopefully, this will become a much larger business in 2027 and 2028. Got it. Thank you. A reminder to ask questions, please press star 11. Our next question comes from Matt Bryson from Wedbush. Please go ahead. Mr. Bryson, your line is open. You may unmute locally. And if you'd like to ask questions, please dial star 11. We have a follow-up question. Just a moment, please.
Speaker #3: And also, some will ramp up from Q4—the new program. So its success depends on how we secure the NAND, also whether we can pass through the incremental cost to the customer with a meaningful margin.
Speaker #3: So this is negotiations . So it's some is a all the dynamic . And we we just make a reasonable , meaningful forecast for this year and .
Speaker #3: but this is a very strategic And us for long business for term . So we we work closely and build a partnership with our GPU partners .
Speaker #3: Hopefully this will become a much larger business in 27 and 28 .
Speaker #6: Thank you .
Speaker #4: A reminder to ask a Please question . press star one one . Our next question comes from Matt Bryson from Wedbush . Please go ahead .
Speaker #4: Your line is open . unmute You may . And if you'd like to ask questions , please dial star one one . We have a follow up question .
Operator: Follow-up questions from Craig Ellis from B. Riley Securities. Please go ahead. Yep. Thanks for taking the follow-up question, team. Wallace, I wanted to just talk about something and ask about something that we've started to see much more broadly with NAND flash and DRAM OEM supply and see if it's got applicability to Silicon Motion. The topic is long-term supply agreements, LTAs or LTSAs. Is that something that would make sense for CMO? If so, where would that be? Would it not make sense for CMO? Just talk about the gives and takes with any move in that direction. Currently, we did not have the LTA agreement, but I think based on partnership and relationship. See, because in the past, we never want to build a much bigger revenue from storage solution. And for automotive because automotive sector, they are the lowest priority from NAND and DRAM maker.
Wallace Kou: Follow-up questions from Craig Ellis from B. Riley Securities. Please go ahead. Yep. Thanks for taking the follow-up question, team. Wallace, I wanted to just talk about something and ask about something that we've started to see much more broadly with NAND flash and DRAM OEM supply and see if it's got applicability to Silicon Motion. The topic is long-term supply agreements, LTAs or LTSAs. Is that something that would make sense for CMO? If so, where would that be? Would it not make sense for CMO? Just talk about the gives and takes with any move in that direction. Currently, we did not have the LTA agreement, but I think based on partnership and relationship. See, because in the past, we never want to build a much bigger revenue from storage solution. And for automotive because automotive sector, they are the lowest priority from NAND and DRAM maker.
Speaker #4: Just a moment please . Pull questions up from Craig Ellis from Bradley Securities . Please go ahead .
Speaker #1: Yeah , thanks for taking the follow up question , Tim . While I wanted to just talk about something . And ask about something that we've started to see much more broadly with Nand flash and Dram , of OEMs late and and see if it's got applicability to silicon motion and and the topic is long term supply agreements .
Speaker #1: ltas or is that something that make would sense for Simo that so , ? If where would be ? Would it not make sense for Simo ?
Speaker #1: Just talk the about the gives and takes with any move in that direction .
Speaker #3: currently We we did not have LTA the agreement , but I think based on and partnership relationship . See , because in the past we never want to build a much bigger revenue from storage solution .
Speaker #3: And for automotive , because because automotive sector , they are the lowest priority from Nan and the maker . That's why many , many major tier one suppliers come to silicon motion .
Operator: That's why many, many major tier-one suppliers come to Silicon Motion, ask for help. That's why we will, case by case, to make a decision whether we can support them. If we are able to pass through the incremental cost to the automotive supply chain, then we will do the business. On the other hand, for boot drive, it's more strategic business. So in certain cases, we might have to sacrifice the margin lower than our corporate average margin because it's more strategic. So balancing, I think, in the long term because we cannot use a multiple NAND selection, it takes time. And the customer does not want to change the NAND solution either. So we just have to work out with our NAND partner to get a stable supply.
Wallace Kou: That's why many, many major tier-one suppliers come to Silicon Motion, ask for help. That's why we will, case by case, to make a decision whether we can support them. If we are able to pass through the incremental cost to the automotive supply chain, then we will do the business. On the other hand, for boot drive, it's more strategic business. So in certain cases, we might have to sacrifice the margin lower than our corporate average margin because it's more strategic. So balancing, I think, in the long term because we cannot use a multiple NAND selection, it takes time. And the customer does not want to change the NAND solution either. So we just have to work out with our NAND partner to get a stable supply.
Speaker #3: As for help , that's why we we were case by case to make to decision whether we can support them . If the we are able to pass through the incremental cost to the automotive supply chain and we will will do the business , it's the other hand for for Boudry , it's more strategic business .
Speaker #3: So some in certain case we might have to sacrifice the margin lower than our corporate average margin because more strategic . So balancing I think the long term because we we cannot use a multiple name Nan selection is taking time .
Speaker #3: And the customer didn't want—does not want—to change the NAND solution, just have to work out with our name partner to get a stable supply.
Operator: The challenge is much more severe than anybody can imagine because CSP really demand much more than the current supply can support. That's why even leading smartphone makers have a tough time to procure their NAND and LPDDR5 and the supply. This is the fact. It's just not what NAND maker cannot supply us because they really have a tough time to do allocation. So many big tier-one customers ask for help and ask for supply. This is a challenging situation right now. That's really helpful. The follow-up somewhat relates to the way you concluded that. It's an inquiry on some of the inside baseball, not asking for customer names. If we go back to 5 or 6 January when NVIDIA said that, "Okay. Look, the bottleneck in inference is all around the DPU. It's all around the storage.
Wallace Kou: The challenge is much more severe than anybody can imagine because CSP really demand much more than the current supply can support. That's why even leading smartphone makers have a tough time to procure their NAND and LPDDR5 and the supply. This is the fact. It's just not what NAND maker cannot supply us because they really have a tough time to do allocation. So many big tier-one customers ask for help and ask for supply. This is a challenging situation right now. That's really helpful. The follow-up somewhat relates to the way you concluded that. It's an inquiry on some of the inside baseball, not asking for customer names. If we go back to 5 or 6 January when NVIDIA said that, "Okay. Look, the bottleneck in inference is all around the DPU. It's all around the storage.
Speaker #3: The challenging is a much more severe than anybody can imagine because CSP really demand much more than the current supply can can support .
Speaker #3: And that's why even leading smartphone maker have a tough time to procure their Nan and LP . DDR side and supply . is So this the fact and it's just not what Nan cannot supply us because just they they they really have tough time to do .
Speaker #3: Allocation—and there are so many big tier one customers asking for help and asking for supply. So, this is a challenging situation right now.
Speaker #1: really That's helpful . The follow up somewhat relates to the way you concluded that . And it's an inquiry on some of the inside baseball , asking for customer names , but if we go back to January 5th or sixth , when Nvidia said that , okay , look , the the bottleneck and inference is all around the DPU , it's all around the storage .
Operator: We've got to find a way to drive a 5X increase in inference processing time. We're going to do it with much more NAND-intensive architectures." The question is, what have you seen from existing and new enterprise customers following that? Have you seen that catalyze new levels of engagement? And what does it mean for how you think about R&D and just how you're looking at opportunities going forward? Because AI inferencing is growing much faster than anybody can anticipate. So there's so many new technology, so many new storage technology around, right, for KVCache, how you can improve the latency, how you really and capacity also increase dramatically because so many new content, new data need a storage device to keep it. So this is a huge momentum and need the NAND maker to increase capacity.
Wallace Kou: We've got to find a way to drive a 5X increase in inference processing time. We're going to do it with much more NAND-intensive architectures." The question is, what have you seen from existing and new enterprise customers following that? Have you seen that catalyze new levels of engagement? And what does it mean for how you think about R&D and just how you're looking at opportunities going forward? Because AI inferencing is growing much faster than anybody can anticipate. So there's so many new technology, so many new storage technology around, right, for KVCache, how you can improve the latency, how you really and capacity also increase dramatically because so many new content, new data need a storage device to keep it. So this is a huge momentum and need the NAND maker to increase capacity.
Speaker #1: We've got to find a way to drive a five x inference processing time . We're going to do it with much more Nand intensive architectures .
Speaker #1: The question is what have seen you from existing and new enterprise customers following that ? Have you seen that catalyzed new levels of engagement ?
Speaker #1: And what does that mean for how you think about R&D and just how you're looking at opportunities going forward?
Speaker #3: Because AI inferencing is a growing much faster than anybody can anticipate . There's so many new technology , so many new story technology around , right ?
Speaker #3: For KB cache . how you can To improve the latency , how you really and and capacity also increased dramatically because so many new content , new data needed storage device to to keep it .
Operator: But because there's a limitation for LAN, for clean room, for equipment build, it all takes time. You need to increment the KPACs. So a lot of the several NAND-DRAM makers, their preference is definitely DDR and HBM, right? So the leftover KPAC for the NAND is limited. But we see the demand is very strong. And there's so many variable technology. And it's just much more. And they all need MonTitan to fill the role. And hopefully, I think our customer and ourselves can secure the NAND. And we can pay our duty to fill our obligation to be part of the AI game. Thanks for that color, Wallace. I would like to invite once again Mr. Matt Bryson from Wedbush to ask a question. Hey. Can you hear me now? Yes. We can. Awesome. Sorry about that. Great quarter. One question, one follow-up from me.
Wallace Kou: But because there's a limitation for LAN, for clean room, for equipment build, it all takes time. You need to increment the KPACs. So a lot of the several NAND-DRAM makers, their preference is definitely DDR and HBM, right? So the leftover KPAC for the NAND is limited. But we see the demand is very strong. And there's so many variable technology. And it's just much more. And they all need MonTitan to fill the role. And hopefully, I think our customer and ourselves can secure the NAND. And we can pay our duty to fill our obligation to be part of the AI game. Thanks for that color, Wallace. I would like to invite once again Mr. Matt Bryson from Wedbush to ask a question. Hey. Can you hear me now? Yes. We can. Awesome. Sorry about that. Great quarter. One question, one follow-up from me.
Speaker #3: So this is huge momentum and need the name maker to increase capacity . But because there's a limitation for for land , for clean room , for equipment , build it all , take time tremendous and you need a CapEx lot a .
Speaker #3: of So the several makers , non-dairy they preference is definitely DDR . And HBM , right . So the leftover , the CPAp for the Nand is limited , but we see the demand is very strong and so many variable technology and it just much more and all need a Titan to fill the role .
Speaker #3: And hopefully think I our customer and ourselves can secure the Nand . And we can our duty to fill pay our application to be part of the AI game .
Speaker #1: Thanks for that color , Wallace .
Speaker #4: I would like to invite once again , is the person from Wedbush to ask the question .
Speaker #7: Hey , can you hear now me ?
Speaker #2: Yes , we can .
Operator: So you have the large fabs seemingly shifting allocation away from handsets and PCs to support that cloud demand. And that, at least to me, seems like it creates significant room for share gains for SMI over a multi-year period, particularly in the Chinese handset market. But we also know that China tends to prefer Chinese production when it's a viable alternative. At the same time, it also seems like the Chinese controller vendors have really struggled to compete technically. So would you mind just talking a little bit about competitive dynamics, whether anything is changing in that market, and some of the structural dynamics that might make it hard for the domestic Chinese players to compete? I think the Chinese controller maker, they will have a tough time to secure TSMC advanced technology now.
Wallace Kou: So you have the large fabs seemingly shifting allocation away from handsets and PCs to support that cloud demand. And that, at least to me, seems like it creates significant room for share gains for SMI over a multi-year period, particularly in the Chinese handset market. But we also know that China tends to prefer Chinese production when it's a viable alternative. At the same time, it also seems like the Chinese controller vendors have really struggled to compete technically. So would you mind just talking a little bit about competitive dynamics, whether anything is changing in that market, and some of the structural dynamics that might make it hard for the domestic Chinese players to compete? I think the Chinese controller maker, they will have a tough time to secure TSMC advanced technology now.
Speaker #7: Sorry about Awesome . that . Great quarter . One question , one follow up for me . So you have the large fab , seemingly shifting allocation away from handsets and PCs to support that that cloud demand and that , at least to me , seems like it creates significant room for share gains for SMI over multiyear period , particularly in the Chinese handset .
Speaker #7: Market . But we also know that China tends to prefer Chinese production when it's a viable alternative . At the same time , it also seems like the Chinese controller vendors have really struggled to compete technically .
Speaker #7: So, would you mind just talking a little bit about competitive dynamics, whether anything is changing in that market, and some of the structural dynamics that might make it hard?
Speaker #7: For the domestic Chinese players to compete .
Speaker #3: think I the Chinese controller maker , they will have a tough time to secure TSMC advanced technology node . So I think the to beyond 12mm like 765 .
Operator: So I think to go beyond 12 nanometers, like a 7, 6, 5 nanometer, you have to be applied and to be approved by TSMC or Samsung in order to fabricate their advanced technology node product. For mature technology, for 22, 28 nanometers, China local fab can fabricate. But that is a really legacy product. So I think that is the toughest part. And we don't even need to mention the technology, how good they are or whatever. But that is a manufacturing point of view. We see, due to the NAND supply shortage, I think, create another dilemma. So that will probably give even tough time for China local supplier. But to say that, I think both YMTC and CXMT, they also try to increase capacity as much as they can, but just take time. Another thing, Matt, is that our controllers manage everybody's NAND, right?
Wallace Kou: So I think to go beyond 12 nanometers, like a 7, 6, 5 nanometer, you have to be applied and to be approved by TSMC or Samsung in order to fabricate their advanced technology node product. For mature technology, for 22, 28 nanometers, China local fab can fabricate. But that is a really legacy product. So I think that is the toughest part. And we don't even need to mention the technology, how good they are or whatever. But that is a manufacturing point of view. We see, due to the NAND supply shortage, I think, create another dilemma. So that will probably give even tough time for China local supplier. But to say that, I think both YMTC and CXMT, they also try to increase capacity as much as they can, but just take time. Another thing, Matt, is that our controllers manage everybody's NAND, right?
Speaker #3: Nanometer is they have to be applied and to be approved by TSMC or Samsung in order to to fabricate their advanced technology node product for for mature technology for 2228 nanometer Chinese China local fab can fabricate .
Speaker #3: But that is really a legacy product, so I think that is the tough part. And we don't even need to mention the technology, how good they are or whatever, but that is from a manufacturing point of view.
Speaker #3: We see the due to supply shortage , I think create another dilemma . So that will probably give even tough time for China .
Speaker #3: Local supplier . to But say that I think MTC and both the the CSMT , they also try to increase capacity as much as they can , but just take time .
Operator: And so working with a lot of the module makers, especially in China, that does qualify as a lot of local production there because we're using the module makers are building a lot of these solutions for the Chinese handset OEMs as well. Using our controller, not only can sell China locally, can sell internationally. Makes sense. And so just one more quick question. With regards to the lower gross margins in Q1 on mix, Jason, can you just talk to whether that's lower margins on controllers or whether it's you're shipping more modules and so the NAND weighs on the gross margins? Yeah. As we've talked about before, eMMC and UFS, our mobile controller, tends to be a little bit below corporate average.
Wallace Kou: And so working with a lot of the module makers, especially in China, that does qualify as a lot of local production there because we're using the module makers are building a lot of these solutions for the Chinese handset OEMs as well. Using our controller, not only can sell China locally, can sell internationally. Makes sense. And so just one more quick question. With regards to the lower gross margins in Q1 on mix, Jason, can you just talk to whether that's lower margins on controllers or whether it's you're shipping more modules and so the NAND weighs on the gross margins? Yeah. As we've talked about before, eMMC and UFS, our mobile controller, tends to be a little bit below corporate average.
Speaker #3: .
Speaker #2: Another thing , Matt , is that , you know , our controllers manage everybody's Nand , right . And so working with a lot of the module makers , especially in China , that does , you know , qualify as a lot of local production .
Speaker #2: There because we're using the module are building makers a lot of these solutions for the Chinese handset OEMs as well .
Speaker #3: Using our controller not only China can locally sell to internationally .
Speaker #7: Makes sense . And so just one more quick question with regards to the lower gross margins in Q1 on mix , Jason , can you just talk to whether that's lower margins on controllers or whether it's your shipping more modules so ?
Speaker #7: And the the Nand weighs on gross margins ?
Operator: So as that business is a little bit stronger here in Q1, that's going to have some pressure on our gross margins in the near term. But as we have MonTitan and more PC client SSD products ramping in the back half of the year, we do expect to see improvements in our gross margins as we go into the back half of the year. Awesome. Thank you. Thank you. At this time, there are no further questions on the line. I'd like to hand the call back to the management for closing. Thank you, everyone, for joining us today and for your continuing interest in Silicon Motion. We will be attending several investor conferences over the next few months. The schedule of this event will be posted in the Investor Relations section of our corporate website.
Wallace Kou: So as that business is a little bit stronger here in Q1, that's going to have some pressure on our gross margins in the near term. But as we have MonTitan and more PC client SSD products ramping in the back half of the year, we do expect to see improvements in our gross margins as we go into the back half of the year. Awesome. Thank you. Thank you. At this time, there are no further questions on the line. I'd like to hand the call back to the management for closing. Thank you, everyone, for joining us today and for your continuing interest in Silicon Motion. We will be attending several investor conferences over the next few months. The schedule of this event will be posted in the Investor Relations section of our corporate website.
Speaker #2: we've Yeah . As before talked about , eMMC and UFS are mobile controller tends to be a little bit below corporate average . So as that business is a little bit stronger here in the first quarter , that's going to have some pressure on our gross margins in the near term .
Speaker #2: But as we have , you know , on Titan and more PC client SSD products ramping in the back half of the year , we do expect to see improvements in our gross margins as we go into the back half of the year .
Speaker #7: Awesome . Thank you .
Speaker #2: Thank you Okay . .
Speaker #4: At this time , there are no further questions on the line . I'd like to hand the call back to the for management closing .
Speaker #3: Thank you everyone for joining us today and for your continued interest in second Motion . We will be attending investor several conferences next few over the months .
Operator: We look forward to speaking with you at this event. Thank you, everyone, for joining us today. That concludes today's conference call. Thank you for your participation here now. Thank you, Mr. Matt.
Wallace Kou: We look forward to speaking with you at this event. Thank you, everyone, for joining us today. That concludes today's conference call. Thank you for your participation here now. Thank you, Mr. Matt.
Speaker #3: The schedule of these events will be posted in Investor Relations section of our corporate website . And we look forward to you speaking with as this event .
Speaker #3: Thank you, everyone, for joining us today.
