Q2 2026 Silicon Motion Technology Corp Earnings Call

July 30, 2026

Operator: Good day, and thank you for standing by. Welcome to the Silicon Motion Technology Corp Q2 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. At which time, if you wish to ask a question, you will need to press star one one on your telephone keypad. Please be advised that today's conference is being recorded. 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 limitation, statements regarding trends in the semiconductor industry and our future results of operations, financial condition, and business prospects.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. At which time, if you wish to ask a question, you will need to press star 11 on your telephone keypad.

Speaker #1: Please be advised that today's conference is being recorded. 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.

Speaker #1: Such forward-looking statements include without limitation statements regarding trends in the semiconductor industry and our future results of operations, financial condition, and business prospects. Although such statements are based on our own information and information from other sources, we believe to be reliable.

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. 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 pressure on prices, unpredictable changes in technology and consumer demands on 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.

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.

Speaker #1: Potential risks and uncertainties include, but are not limited to, continued competitive pressure and the semiconductor industry and the effect of such pressure on prices.

Speaker #1: Unpredictable changes in technology, 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.

Speaker #1: For additional discussion of this risk and uncertainties and other factors, and Exchange Commission. We assume no obligation to update any forward-looking statements which apply only as update of this conference call.

Operator: For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements, which apply only as of the date of this conference call. With that, I'll now hand you over to Mr. Thomas Sepenzis, Vice President of Investor Relations and Strategy. Please go ahead.

Speaker #1: And with that, I'll now hand you over to Mr. Tom Sepenzis, Vice President of Investor Relations and Strategy. Please go ahead.

Speaker #2: Good morning, everyone, and welcome to Silicon Motion's second quarter 2026 financial results conference call and webcast. Joining me today is Wallace Ko, our President and CEO, and Jason Tsai, our CFO.

Tom Sepenzis: Good morning, everyone, and welcome to Silicon Motion's Q2 2026 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. Jason will discuss our Q2 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. For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the US 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.

Speaker #2: Wallace will first provide a review of our key business developments, and then Jason will discuss the 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.

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.

Tom Sepenzis: 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. We ask that you review it in conjunction with this call. With that, I will turn the call over to Wallace.

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 comparisons of our operating results in a manner consistent with how we analyze our own operating results.

Speaker #2: The reconciliation of the GAAP to 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 #3: Thank you, Tom. Hello, and thank you for joining the call today. We delivered another outstanding quarter, achieving record revenue of $451 million and a gross margin above 50%.

Wallace Kou: Thank you, Tom. Hello. Thank you for joining the call today. We delivered another outstanding quarter, achieving record revenue of $451 million and gross margin above 50%, driven by continued growth across all our core markets. Stronger operation performance translating to record earning per ADS, reflecting our ongoing solution from the leading NAND flash controller makers into a diversified supplier of controller and solution, spanning AI infrastructure to the edge. During the June quarter, we grew our embedded eMMC, UFS portfolio, delivered both sequential and year-over-year gain in SSD controllers, began the initial commercial ramp of our MonTitan enterprise SSD products, and posted strong growth in our Ferri for automotive and enterprise boot drive solution business. With expanding consumer market share and rapidly broadening suite of enterprise and AI controller and solution, our competitive position keeps strengthening.

Speaker #3: Driven by continued growth across all our core markets, stronger operational performance translated to record earnings per ADS, reflecting our ongoing solution from the leading NAND flash controller makers into a diversified supplier of controllers and solutions spanning AI infrastructure to the edge.

Speaker #3: During the June quarter, we grew our embedded eMMC and UFS portfolio, delivering both sequential and year-over-year growth. We gained in edge SD controllers, began the initial commercial ramp of our Mount Titan Enterprise 3 products, and posted strong growth in our ferrite for automotive and enterprise boot drive solution business.

Speaker #3: We are expanding consumer market share and rapidly broadening our suite of enterprise and AI controllers and solutions. Our competitive position keeps strengthening. We expect to deliver record revenue in 2026 of more than 100% year over year, setting the foundation for sustained growth in the years ahead.

Wallace Kou: We expect to deliver record revenue in 2026, up more than 100% year-over-year, setting the foundation for sustained growth in the years ahead. With the right product in the right market at the right time, we have never been better positioned to capitalize on the accelerating demand for intelligent storage from the data center to the edge. I would like to take a moment to address the current market environment. The AI super cycle has fueled significant demand for HBM, DRAM, NAND, and HDDs, driving substantial price increases over the past year and creating mounting substrate and supply pressure across memory and storage technology. As component prices, NAND and DRAM in particular, continue to climb, OEMs are finding it increasingly difficult to build affordable consumer products, such as smartphone and PC, especially at the low end.

Speaker #3: With the right product in the right markets at the right time, we have never been better positioned to capitalize on the accelerating demand for intelligent storage from the data center to the edge.

Speaker #3: I would like to take a moment to address the current market environment. The AI supercycle has fueled significant demands for HBM, DRAM, NAND, and HDDs, driving substantial price increases over the past year, and creating mounting sub-trade and supply pressure across memory and storage technology.

Speaker #3: As component prices—NAND and DRAM in particular—continue to climb, OEMs are finding it increasingly difficult to build affordable consumer products such as smartphones and PCs, especially at the low end.

Speaker #3: We expect this scarcity to persist likely until 2028, when new fabs come online and help bring NAND supply back to reduce supply demand gap.

Wallace Kou: We expect this scarcity to persist likely until 2028, when new fabs come online and help bring NAND supply back to reduce supply-demand gap. While the NAND environment will stay challenging through 2028, we have a clear path to deliver significant top and bottom line growth. Silicon Motion is in the early innings of a complete transformation to a diversified supplier of NAND flash controller and solution, from AI infrastructure to the edge, where there is accelerating demand for next-generation storage. I will now discuss our embedded eMMC and UFS business, which include controller for smartphone and other IoT and connected devices. This business continued to strive and grow significantly, outpace industry despite the supply having as NAND makers increasingly rely on third-party controller while focusing their own resources on DRAM HBM solutions.

Speaker #3: While the NAND environment will stay challenging through 2028, we have a clear path to deliver significant top- and bottom-line growth. Silicon Motion is in the early innings of a complete transformation to a diversified supplier of NAND flash controllers and solutions, from AI infrastructure to the edge, where there is accelerating demand for next-generation storage.

Speaker #3: I will now discuss our embedded EMC and UFS business, which include controller for smartphone and other IoT and connected devices. This business continues to thrive, and grow significantly outpaces industry despite the supply halving as NAND makers increasingly rely on third-party controllers, while focusing their own resources on DRAM, HBM solutions.

Speaker #3: Our outperformance was driven primarily by market share gains, as NAND makers de-emphasize these solutions to the benefit of our multi-maker customers. Across the many markets where we sell our embedded eMMC and UFS products, OEMs are trimming specifications to offset some of the rising costs of memory and storage.

Wallace Kou: Our outperformance were driven primarily by market share gains as NAND makers de-emphasize these solutions to the benefit to our module maker customers. Across the many markets where we sell our embedded eMMC UFS products, OEMs are trimming specification to offset some of the rising costs of memory and storage. While we still expect smartphone unit to be down 10% to 15% in 2026, we anticipate strong growth in our mobile business in 2026, driven by continued market share gains and ASP improvement from a mix shift to our newer UFS controllers. Our eMMC business delivering strong result as we win new business across a range of markets, including automotive, smart glasses, watches, drones, robots, next-generation cable set-top box, smart TV, and more. With the NAND maker is interested in these markets, we were operating in an environment of stronger pricing power and profitability.

Speaker #3: While we still expect smartphone units to be down 10% to 25% in 2026, we anticipate strong growth in our mobile business in 2026. Driven by continued market share gains, an S&P improvement from a mixed shift toward newer UFS controllers.

Speaker #3: Our EMC business delivering strong results as we win new business across a range of markets, including automotive, smart glasses, watches, drones, robots, next-generation cable set-top box, smart TV, and more.

Speaker #3: With the NAND maker disinterested in these markets, we will operate in an environment of stronger pricing power and profitability. Overall, we expect strong revenue growth in our embedded EMC and UFS segment in 2026, and I'm pleased with the exceptional performance our team delivered in the first half of this year.

Wallace Kou: With the NAND maker is interested in these markets, we were operating in an environment of stronger pricing power and profitability. Overall, we expect strong revenue growth in our embedded eMMC and UFS segment in 2026, and I'm pleased with the exceptional performance our team delivered in H1 this year.

Wallace Kou: Overall, we expect strong revenue growth in our embedded eMMC and UFS segment in 2026, and I'm pleased with the exceptional performance our team delivered in H1 this year. We expect our growing portfolio of a new product transitioning to next-generation solution and expansion into additional markets to drive share gains to keep outpacing the macro pressure in the smartphone market. Moving on to our SSD business, which include edge and enterprise SSD controllers. Our edge SSD business improved significantly in Q2 following a seasonally soft Q1, delivering 40% to 45% year-over-year growth. We are beginning to see payoff from our PCIe 5.0 investment as an edge with our 4-channel controller ramping steadily since introduction in Q4 of last year. However, the transition from PCIe 4.0 to PCIe 5.0 is proceeding more slowly than we anticipate 6 months ago.

Speaker #3: We expect our growing portfolio of new products transitioning to next-generation solutions, and expansion into additional markets, to drive share gains to keep outpacing the micro pressure in the smartphone market.

Wallace Kou: We expect our growing portfolio of a new product transitioning to next-generation solution and expansion into additional markets to drive share gains to keep outpacing the macro pressure in the smartphone market. Moving on to our SSD business, which include edge and enterprise SSD controllers. Our edge SSD business improved significantly in Q2 following a seasonally soft Q1, delivering 40% to 45% year-over-year growth. We are beginning to see payoff from our PCIe 5.0 investment as an edge with our 4-channel controller ramping steadily since introduction in Q4 of last year. However, the transition from PCIe 4.0 to PCIe 5.0 is proceeding more slowly than we anticipate 6 months ago.

Speaker #3: Moving on to our S&P business, which includes edge and enterprise 3 controllers. Our edge S&P business improved significantly in the second quarter, following a seemingly soft first quarter.

Speaker #3: Delivering 40% to 45% year-over-year growth, we are beginning to see payoff from our PCIe 5 investment at the edge, with our four-channel controller ramping steadily since its introduction in the fourth quarter of last year.

Speaker #3: However, the transition from PCIe 4 to PCIe 5 is proceeding more slowly than we anticipated six months ago. OEMs are increasingly pairing the latest generation, more cost-effective NAND with PCIe 4 S&P in value and mainstream PCs, as this offers a way of reducing the overall bill of materials.

Wallace Kou: OEMs increasingly pairing the latest generation, more cost-effective NAND with PCIe 4.0 SSD in value and mainstream PC, as this offer a way of reducing the overall bill of material. We are securing a meaningful share of this business across both NAND makers and module manufacturer with our leading controllers. Despite the slower pace of PCIe 5.0 transition, our 4-channel DRAM-less PCIe 5.0 controller continued to gain adoption among customers seeking leading performance in the mid to high-end segment of the PC market. We therefore expect to further increase edge SSD average selling price as we progress through the remaining of the year. I would now like to provide you with an update on our new MonTitan enterprise SSD business.

Speaker #3: We are securing a meaningful share of this business across both NAND makers and modular manufacturers with our leading controllers. Despite the slower pace of PCIe 5 transition, our four-channel DRAMless PCIe 5 controller continues to gain adoption among customers seeking leading performance in the mid to high-end segment of the PC market.

Speaker #3: We therefore expect to further increase edge S&P average selling price, as we progress through the remaining of the year. I would now like to provide you with an update on our new Mount Titan enterprise 3 business entered commercial production in the second quarter with two Tier 1 customers, and we expect to ramp five additional Tier 1 customers in the second half of the year.

Wallace Kou: Our new SSD business entered commercial production in Q2 with 2 tier 1 customers, and we expect to ramp 5 additional tier 1 customer in H2 of the year. There's exceptional strong start after several years of investment in our enterprise AI cloud controllers. NAND is an essential and growing technology across the enterprise storage ecosystem. Spanning warm storage and compute storage application, and MonTitan is well-positioned for rapid growth. Our first customers are targeting the compute market using TLC NAND, which is in growing demand for next-generation AI platform that leverage NAND to support compute storage solution that deliver high speed, low latency storage dedicate for near GPU and near CPU KV cache. Several customers are leveraging MonTitan to target this market and will be ramping production throughout the remainder of this year.

Speaker #3: There is an exceptionally strong start after several years of investment in our enterprise AI-class controllers. NAND is an essential and growing technology across enterprise storage ecosystems.

Speaker #3: Spanning warm storage and compute storage applications, and Mount Titan is well-positioned for rapid growth. Our first customers are targeting the compute market using TLC NAND, which is in growing demand for next-generation AI platforms that leverage NAND to support compute storage solutions that deliver high-speed, low-latency, storage dedicated for near GPU and near CPU KV cache.

Speaker #3: Several customers are leveraging Mount Titan to target this market, and will be ramping production throughout the remainder of this year. We continue to believe that TLC Mount Titan solutions will ramp faster than TLC-based solutions on Tier 2 terabit TLC NAND dies become more broadly available.

Wallace Kou: We continue to believe that TLC MonTitan solution will run faster than TLC-based solution until 2 terabyte TLC NAND dies become more broadly available. High-capacity 1-terabyte SSD leveraging QLC NAND remains a large addressable market for MonTitan for long-term growth, and we expect the QLC-based solution will begin their initial ramp in H2 of the year with multiple customers. We are seeing increasing inbound interest in our MonTitan for QLC solution to drive long-term growth. Finally, we are completing the tape-out of our next-generation 4-nanometer PCIe Gen 6 controller in August of the year, targeting hyperscaler and CSP. We developed this controller in close collaboration with several customers, and we have already secured multiple design wins with both NAND maker and CSPs. We expect this new controller to be a significant growth driver in 2028.

Speaker #3: High-capacity warm storage S&P leveraging TLC NAND remains a larger address for market for Mount Titan, for long-term growth, and we expect the TLC-based solution will begin their initial ramp in the second half of this year, with multiple customers we are seeing increasing inbound interest in our Mount Titan for TLC solutions to drive long-term growth.

Speaker #3: Finally, we are completing the takeout of our next-generation 4 nm PCIe Gen 6 controller in August of the year. Targeting hyperscaler and CSP. We developed this controller in close collaboration with several customers, and we have already secured multiple design wins with both flash maker and CSPs.

Speaker #3: We expect this new controller to be a significant growth driver in 2028. With TLC and TLC Mount Titan controller already in customer qualification and a clear rollout plan in place, I'm confident we will hit our revenue target this year, and I expect significant growth in 2027 and beyond as the business scales.

Wallace Kou: With QLC and QLC MonTitan controller already in customer qualification and clear rollout plan in place, I'm confident we will hit our revenue target this year, and I expect to see significant growth in 2027 and beyond as the business scales. Our customer base is strong and expanding, and MonTitan is well-positioned to drive meaningful revenue growth from here. I look forward to sharing further update. Finally, I would like to provide an update on our Ferri for automotive and the enterprise boot drive storage business. Our Ferri for automotive and enterprise boot drive storage business is growing rapidly across automotive and AI infrastructure markets. NAND makers are leaving the automotive market as the volume are now meaningful to their business, and the quality and technical support demand are significantly greater than in other markets.

Speaker #3: Our customer base is strong and expanding, and Mount Titan is well positioned to drive meaningful revenue growth from here. I look forward to sharing further updates.

Speaker #3: And finally, I would like to provide an update on our ferrite for automotive and enterprise boot drive storage business. Our ferrite for automotive and enterprise boot drive storage business is growing rapidly across automotive and AI infrastructure markets.

Speaker #3: NAND makers are leaving the automotive market as the volumes are now meaningful to their business, and the quality and technical support demands are significantly greater than in other markets.

Speaker #3: And the NAND makers exit automotive, the module makers seem likely successors but they do not have the infrastructure, the resources, the certification process of the expertise to deliver automotive-grade products.

Wallace Kou: As the NAND makers exit automotive, the module makers should seem likely successors, but they do not have the infrastructure, the resources, the certification process, or the expertise to deliver automotive-grade products. This has benefited Silicon Motion significantly as we know the automotive market, the customers, and supply chain extremely well. We have developed our automotive product and certification for over a decade and already support 3 of the NAND makers with our automotive controller and firmware. Our success in automotive has generated interest in our Ferri solution for additional large and growing markets, including robots, drones, advanced networkings, and other applications. In the emerging robotic market, we are now actively engaged with multiple companies that want to leverage our storage product. We believe there are multiple opportunities in the emerging physical AI market for storage in humanoid robotics, including vision system, LIDARs, computing storage, balance system, and many others.

Speaker #3: This has benefits Silicon Motion significantly as we know the automotive market, the customers, and supply chain extremely well. We have and certification for over a decade, and already support three of the NAND maker with our automotive controller and the firmware.

Speaker #3: Our success in automotive has generated interest in our ferrite solution for additional large and growing markets, including robust, drones, advanced networking, and other applications.

Speaker #3: In the emerging robotic market, we are now actively engaged with multiple companies that want to leverage our storage products, we believe there are multiple opportunities in the emerging physical AI market for storage in humanoid robotics, including vision systems, LiDAS, computing storage, balance systems, and many others.

Wallace Kou: In the emerging robotic market, we are now actively engaged with multiple companies that want to leverage our storage product. We believe there are multiple opportunities in the emerging physical AI market for storage in humanoid robotics, including vision system, LIDARs, computing storage, balance system, and many others. In fact, it appears that from our initial conversation, the opportunity in robotics may be larger in automotive, and our Ferri solution will be ideally suited to support this future opportunity.

Speaker #3: In fact, it appears that from our initial conversation, the opportunity in robotics may be larger in automotive, and our ferrite solution will be ideally suited to support this future opportunity.

Wallace Kou: In fact, it appears that from our initial conversation, the opportunity in robotics may be larger in automotive, and our Ferri solution will be ideally suited to support this future opportunity. Moving on to our growing enterprise boot drive storage business. This is a new and growing market. Enterprise boot drive for server CPU have been around for over 30 years, and the NAND maker have supported this market with solutions that employ both DRAM and the NAND. As we move into next generation of AI and enterprise application, enterprise CPU customer will continue to use enterprise boot drive with DRAM to enhance random write performance and reduce latency. Most other customers, including DPU, TPU, and switch makers, are looking for enterprise boot drive solution with our unique DRAM-less technology that offer enhanced security and is our primary focus today.

Wallace Kou: Moving on to our growing enterprise boot drive storage business. This is a new and growing market. Enterprise boot drive for server CPU have been around for over 30 years, and the NAND maker have supported this market with solutions that employ both DRAM and the NAND. As we move into next generation of AI and enterprise application, enterprise CPU customer will continue to use enterprise boot drive with DRAM to enhance random write performance and reduce latency. Most other customers, including DPU, TPU, and switch makers, are looking for enterprise boot drive solution with our unique DRAM-less technology that offer enhanced security and is our primary focus today.

Speaker #3: Moving on to our growing enterprise boot drive storage business, this is a new and growing market. Enterprise boot drive for server CPU has been around for over 30 years.

Speaker #3: And the NAND makers have supported this market with solutions that employ both DRAM and the NAND, as we move into next-generation of AI and enterprise applications enterprise CPU customers will continue to use enterprise boot drive with DRAM to enhance render-write performance and reduce latency.

Speaker #3: Most other customers, including GPU, TPU, and switch makers, are looking for enterprise boot drive solutions with our unique DRAM-less technology. That offers enhanced security and is our primary focus today.

Speaker #3: While some NAND makers may choose to continue the support of conventional architectures, they do not have DRAM-less PCIe SD controllers, and they are not likely going to dedicate the R&D resources necessary to develop them for a comparatively low-volume market.

Wallace Kou: While some NAND makers may choose to continue the support of conventional architectures, they do not have DRAM-less PCIe SSD controller, and they are not likely going to dedicate the R&D resources necessary to develop them for a comparatively low-volume market. Silicon Motion has the right technical know-how, the leading controller, and firmware technology, and the right relationship to deliver turnkey enterprise boot drive solution, and this is why we are winning in the market. Ferri and boot drive storage solution segment is growing rapidly, and we expect new customer design wins in both automotive and AI infrastructure to drive strong growth for the future. One of the most important reasons of our success in the solution business has been our long-term relationship, which have allowed us to secure NAND from multiple suppliers despite recent supply shortage, a significant and enduring differentiator.

Speaker #3: Silicon Motion has the right technical know-how. The leading controller and firmware technology and the right relationship to deliver turnkey enterprise boot drive solutions and this is why we are winning in the market.

Speaker #3: So, Ferrite and Boot Drive storage solutions segment is growing rapidly, and we expect new customer design wins in both automotive and AI infrastructure to drive strong growth for the future.

Speaker #3: One of the most important reasons for our success in the solution business has been our long-term relationships, which have allowed us to secure NAND from multiple suppliers despite the recent supply shortage.

Speaker #3: A significant and enduring differentiator. In second quarter '26, ferrite and enterprise boot drive solutions more than double sequentially and represent near 30% of our total revenue.

Wallace Kou: In Q2 2026, Ferri and Enterprise Boot Drive solution more than doubled sequentially and represent near 30% of our total revenue, up from 4% a year ago. We are just getting started. In conclusion, we reported our second consecutive quarter of record revenue for Silicon Motion as we executed across our rapidly diversifying business. We are fundamentally a much stronger company today than we were just a year ago, with a broad suite of products to support the increasing demand from AI, from the data center to the edge. This gave us a strong balance across our markets and greater flexibility to capitalize on pockets of strength while overcoming end market challenge, like those we're seeing today in PC and smartphones.

Speaker #3: Up from 4% a year ago. And we are just getting started. In conclusion, we reported our second consecutive quarter of record revenue for Silicon Motion as we executed across our rapidly diversifying business.

Speaker #3: We are fundamentally a much stronger company today than we were just a year ago. With a broad suite of products to support the increasing demand from AI, from the data center to the edge.

Speaker #3: This gives us a strong balance across our markets and greater flexibility to capitalize on markets of strength while overcoming end-market challenges like those we are seeing today in PC and smartphones.

Wallace Kou: I'm extremely proud of our teams for building a durable, diversified business that benefit from best-in-class technology, expanding share, and entering to new end markets, all while monetizing the strong relationship we have built with OEMs, module makers, and NAND makers over the past two decades. I'm more confident than ever that we will deliver broad-based sustainable growth across our business in 2026 and beyond. Let me turn the call to Jason to go over our financial performance and outlook.

Speaker #3: I'm extremely proud of our teams for building a durable, diversified business that benefits from best-in-class technology expanding shared and entering into new end-markets all while monetizing the strong relationship we have built with OEMs.

Speaker #3: Module makers and NAND makers over the past two decades. And more confident than ever that we will deliver broad-based sustainable growth across our business in 2026 and beyond.

Speaker #3: Now, let me turn the call over to Jason to go over our financial performance and outlook.

Speaker #1: Thank you, Wallace. And good morning to everyone joining us today. I will discuss additional details of our second quarter results and then provide our outlook.

Jason Tsai: Thank you, Wallace. Good morning to everyone joining us today. I will discuss additional details of our Q2 results and then provide our outlook. Please note that my comments today will focus primarily on our non-GAAP results, unless otherwise specifically noted. A reconciliation of our GAAP to non-GAAP data is included in the earnings release issued yesterday. Our Q2 performance was even stronger than expected. Sales increased 32% sequentially and 127% year-on-year to $451 million, coming in well above the high end of our guided range of $393 to 411 million, delivering our third consecutive quarter record revenue. We experienced strong growth across all our businesses in Q2, with standout growth in Ferri for automotive, enterprise boot drives, and embedded eMMC and UFS. Gross margin was 50.2%, exceeded our guided range of 48.5% to 49.5% as we capitalize on new product introductions.

Speaker #1: Please note that my comments today will focus primarily on our non-GAAP results, unless otherwise specifically noted. A reconciliation of our GAAP to non-GAAP data is included in the earnings release issued yesterday.

Speaker #1: Our second quarter performance was even stronger than expected. Sales increased 32% sequentially and 127% year-on-year to $451 million, coming in well above the high end of our guided range of $393 to $411 million.

Speaker #1: Delivering our third consecutive quarter record revenue. We experienced strong growth across all our businesses in the second quarter with standout growth in ferrite for automotive, enterprise boot drives, and embedded EMMC and UFS.

Jason Tsai: We experienced strong growth across all our businesses in Q2, with standout growth in Ferri for automotive, enterprise boot drives, and embedded eMMC and UFS. Gross margin was 50.2%, exceeded our guided range of 48.5% to 49.5% as we capitalize on new product introductions. Operating expenses increased sequentially to $122.1 million, given increased investments in new controller and solution development, new tape-out related expenses, and higher headcount. Operating margin was 23.1% and exceeded our guided range of 21% to 22%, driven by higher than expected revenue and gross margins during Q2. Our earnings per ADS was $2.43.

Speaker #1: Gross margin was 50.2%, exceeding our guided range of 48.5% to 49.5%, as we capitalized on new product introductions. Operating expenses increased sequentially to $122.1 million, given increased investments in new controller and solution development, new tape-out-related expenses, and higher headcount.

Jason Tsai: Operating expenses increased sequentially to $122.1 million, given increased investments in new controller and solution development, new tape-out related expenses, and higher headcount. Operating margin was 23.1% and exceeded our guided range of 21% to 22%, driven by higher than expected revenue and gross margins during Q2. Our earnings per ADS was $2.43. Total stock-based compensation, which we exclude from non-GAAP results, was $3.4 million in Q2. We had $181.8 million in cash equivalents, and restricted cash at the end of Q2, compared to $210.9 million at the end of Q1. Cash decreased in Q2 through a combination of dividend payments of $16.9 million and an increase in inventory to support our growing business. We continue to navigate the memory and storage supply challenges effectively.

Speaker #1: Operating margin was 23.1% and exceeded our guided range of 21% to 22%, driven by higher-than-expected revenue and gross margins during the second quarter. Our earnings per ADS were $2.43.

Speaker #1: Total stock-based compensation, which we exclude from non-GAAP results, was $3.4 million in the June quarter. We had 181.8 million in cash, cash equivalents, and restricted cash at the end of the second quarter compared to 210.9 million at the end of the first quarter.

Jason Tsai: Total stock-based compensation, which we exclude from non-GAAP results, was $3.4 million in Q2. We had $181.8 million in cash equivalents, and restricted cash at the end of Q2, compared to $210.9 million at the end of Q1. Cash decreased in Q2 through a combination of dividend payments of $16.9 million and an increase in inventory to support our growing business. We continue to navigate the memory and storage supply challenges effectively. Investments in new advanced geometry products for both our established markets and our emerging enterprise markets are ongoing. We are building a balanced and resilient portfolio of products that target everything from AI infrastructure to the edge.

Speaker #1: Cash decreased in the second quarter through a combination of dividend payments of $16.9 million and an increase in inventory to support our growing business.

Speaker #1: We continue to navigate the memory and storage supply challenges effectively. Investments in new advanced geometry products for both our established markets and our emerging enterprise markets are ongoing and we are building a balanced and resilient portfolio of products that target everything from AI infrastructure to the edge.

Jason Tsai: Investments in new advanced geometry products for both our established markets and our emerging enterprise markets are ongoing. We are building a balanced and resilient portfolio of products that target everything from AI infrastructure to the edge. These investments will continue throughout 2026 as we support the growing demand for our new enterprise portfolio and fuel our growing market share across our consumer portfolio. For Q3 2026, we now expect revenue to grow 15% to 20% sequentially to $519 to 541 million. We expect growth across nearly all our product segments led by Ferri for automotive, enterprise boot drive solutions, and our new MonTitan enterprise SSD controllers. Gross margins are expected to increase sequentially to 50% to 51% in Q3, given the product mix, assisted by greater contribution from MonTitan and our PCIe 5.0 controllers.

Speaker #1: These investments will continue throughout 2026 as we support the growing demand for our new enterprise portfolio and fuel our growing market share across our consumer portfolio.

Jason Tsai: These investments will continue throughout 2026 as we support the growing demand for our new enterprise portfolio and fuel our growing market share across our consumer portfolio. For Q3 2026, we now expect revenue to grow 15% to 20% sequentially to $519 to 541 million. We expect growth across nearly all our product segments led by Ferri for automotive, enterprise boot drive solutions, and our new MonTitan enterprise SSD controllers. Gross margins are expected to increase sequentially to 50% to 51% in Q3, given the product mix, assisted by greater contribution from MonTitan and our PCIe 5.0 controllers. Operating margin is expected to grow substantially to 27.5% to 28.5% as strong revenue growth drives leverage to the bottom line. Our effective tax rate is expected to be 22%.

Speaker #1: For the third quarter of 2026, we now expect revenue to grow 15 to 20 percent sequentially to 519 to 541 million. We expect growth across nearly all our product segments led by ferrite for automotive, enterprise boot drive solutions, and our new Montaigne Enterprise SSD controllers.

Speaker #1: Gross margins are expected to increase sequentially to 50 to 51 percent in the September quarter given the product mix, assisted by greater contribution from Montaigne and our PCI-5 controllers.

Speaker #1: Operating margins expected to grow substantially to 27.5 to 28.5 percent as strong revenue growth drives leverage to the bottom line. Our effective tax rate is expected to be 22 percent.

Jason Tsai: Operating margin is expected to grow substantially to 27.5% to 28.5% as strong revenue growth drives leverage to the bottom line. Our effective tax rate is expected to be 22%. Stock-based compensation and dispute-related expenses is expected to be in the range of $14.9 to 15.9 million. 2026 is on track to deliver record revenue for Silicon Motion, with top line expected to more than double this year. While we continue to invest heavily in R&D this year to expand our portfolio with leading-edge solutions, we're confident that along with much higher revenue and improved gross profitability, our operating margins can exceed 30% exiting this year. We're navigating today's memory and storage supply constraints and elevated pricing with remarkable success, a direct result of the relationships we spent more than two decades building with NAND flash makers.

Speaker #1: Stock-based compensation and dispute-related expenses is expected to be in the range of 14.9 to 15.9 million. 2026 is on track to deliver record revenue for Silicon Motion.

Jason Tsai: Stock-based compensation and dispute-related expenses is expected to be in the range of $14.9 to 15.9 million. 2026 is on track to deliver record revenue for Silicon Motion, with top line expected to more than double this year. While we continue to invest heavily in R&D this year to expand our portfolio with leading-edge solutions, we're confident that along with much higher revenue and improved gross profitability, our operating margins can exceed 30% exiting this year. We're navigating today's memory and storage supply constraints and elevated pricing with remarkable success, a direct result of the relationships we spent more than two decades building with NAND flash makers.

Speaker #1: With top-line expected to more than double this year. While we continue to invest heavily in R&D, this year to expand our portfolio with leading-edge solutions, we're confident that along with much higher revenue and improved gross profitability, our operating margins can exceed 30 percent exiting this year.

Speaker #1: We're navigating today's memory and storage supply constraints and elevated pricing with a relationships we spent more than two decades building with NAND flash makers.

Speaker #1: At the same time, our leadership in the merchant controller market and our multi-year investments in enterprise and AI SSDs are starting to pay off, with Montaigne and our enterprise boot drive storage business now ramping in volume.

Jason Tsai: At the same time, our leadership in the merchant controller market and our multi-year investments in enterprise and AI SSDs are starting to pay off, with MonTitan and our enterprise boot drive storage business now ramping in volume. Our diversification strategy to expand beyond consumer-centric applications into automotive and enterprise is beginning to yield outsized results. Our wins in these new markets are for solutions that bring much better visibility, much longer product cycles, and much higher barriers to entry that ensure strong long-term revenue and profitability growth for Silicon Motion. We will be less subject to consumer cyclicality as these new wins scale in a diverse range of end markets. Our visibility and predictability will further improve significantly. Together, these drivers are the foundation of the transformation Wallace spoke about earlier and will set the stage for significant revenue growth at Silicon Motion in 2026 and well beyond.

Speaker #1: Our diversification strategy to expand beyond consumer-centric applications into automotive and enterprise is beginning to yield outsized results. Our wins in these new markets are for solutions that bring much better visibility, much longer product cycles, and much higher barriers to entry that ensure strong, long-term revenue and profitability growth for Silicon Motion.

Speaker #1: We will be less subject to consumer cyclicality as these new wins scale in a diverse range of end markets and our visibility and predictability will further improve significantly.

Jason Tsai: We will be less subject to consumer cyclicality as these new wins scale in a diverse range of end markets. Our visibility and predictability will further improve significantly. Together, these drivers are the foundation of the transformation Wallace spoke about earlier and will set the stage for significant revenue growth at Silicon Motion in 2026 and well beyond. I look forward to sharing more on our progress next quarter. This concludes our prepared comments. I'd like to open it now for questions. Operator?

Speaker #1: Together, these drivers are the foundation of the transformation Wallace spoke about earlier and will set the stage for significant revenue growth at Silicon Motion in 2026 and well beyond.

Speaker #1: I look forward to sharing more on our progress next quarter. This concludes our prepared comments. I'd like to open it now for questions. Operator?

Jason Tsai: I look forward to sharing more on our progress next quarter. This concludes our prepared comments. I'd like to open it now for questions. Operator?

Speaker #2: Thank you. To ask a question now, please press star one-one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one-one again.

Operator: Thank you. To ask a question now, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for first question. We will now take our first question from the line of Neil Young of Needham & Company. Please ask your question, Neil. Your line is open.

Speaker #2: One moment for this question. We will now take office question from the line of Neil Young of Needham and Company. Please ask your question, Neil.

Speaker #2: Your line is open.

Speaker #3: Hey, everyone. Thanks for letting me ask a question. So it sounds like there's some bigger contribution from ferrite that I think people have expected.

Neil Young: Hey, everyone. Thanks for letting me ask a question. It sounds like there's some bigger contribution from Ferri that I think people have expected. I was wondering if you could give us the approximate boot drive revenue contribution in Q2 or maybe some idea of the percentage split between the boot drive, enterprise boot drive, and Ferri. Maybe what's embedded in the Q3 guidance between the two of those. Then I have a follow-up. Thanks.

Speaker #3: So I was wondering if you could give us the approximate boot drive revenue contribution in Q2 or maybe some idea of the percentage split between the boot drive enterprise boot drive and ferrite and maybe what's embedded in the 3Q guidance between the two of those.

Speaker #3: And then I have a follow-up. Thanks.

Speaker #4: Yeah. Neil, we're not giving out that level of granularity. I can tell you, though, that we are seeing tremendous growth across both of those categories.

Jason Tsai: Yeah. Neil, we're not giving out that level of granularity. I can tell you, though, that we are seeing tremendous growth across both of those categories. This isn't really driven by one or the other. It's driven by both. For Q3, again, we're not going to be providing that much detail, but certainly from the backlog that we've talked about, that we've seen, that we have in building, the order patterns that we're seeing, we're seeing very strong contributions across all of these SSD solution products.

Speaker #4: So this isn't really driven by one or the other; it's driven by both. For Q3, again, we're not going to be providing that much detail, but certainly from the backlog that we've talked about, that we've seen, that we've been building, and the order patterns that we're seeing, we're seeing very strong contributions across all of these SSD solution products.

Speaker #3: Okay, great. Thanks, that's helpful. And then on Montaigne, you obviously gave the update on the customers and production, and sort of what you're expecting through the rest of the year.

Neil Young: Okay, great. Thanks. That's helpful. On MonTitan, you obviously gave the update on the customers and production, sort of what you're expecting through the rest of the year. Are you still guiding to that 10% revenue run rate exiting 2026? Maybe helpful if you could distinguish the timing of the TLC compute and the KV cache programs from the QLC warm storage programs, just what you're seeing there. Thanks.

Speaker #3: Are you still guiding to that 10 percent revenue run rate exiting 2026? And then maybe helpful if you could distinguish the timing of the TLC compute and the KV cache programs from the QLC warm storage programs.

Speaker #3: Just what you're seeing there. Thanks.

Speaker #4: Yeah, we're still on track. I think Wallace had mentioned that we're well on track to achieve that 5 to 10 percent of the of our overall revenue coming from Montaigne exiting this year.

Jason Tsai: Yeah, we're still on track. I think Wallace had mentioned that we're well on track to achieve that 5% to 10% of our overall revenue coming from MonTitan exiting this year. We are confident that we can achieve that. In terms of where we're seeing more contribution, certainly initially, we're seeing more contribution from TLC-based solutions, but we are seeing early QLC shipments that'll begin late this year. We don't expect QLC to become more meaningful until probably late 2027 into 2028 as 2-terabyte dies become more affordable.

Speaker #4: So we are confident that we can achieve that. In terms of where we're seeing more contribution, certainly initially we're seeing more contribution from TLC-based solutions, but we are seeing early QLC shipments that'll begin late this year.

Speaker #4: But we don't expect QLC to become more meaningful until probably late 2027 into 2028 as 2 terabit dies become more affordable.

Speaker #3: Thank you.

Neil Young: Thank you.

Operator: Thank you. We will now take our next question. The next question comes from the line of Manny Hosaini of SIG. Please ask your question, Manny. Your line is open.

Speaker #2: Thank you. We will now take our next question. The next question comes from the line of Manny Hosseini of SIG. Please ask your question, Manny.

Speaker #2: Your line is open.

Speaker #5: Yes. Thanks for taking my question. I think it's for the team. I think it would be very helpful for us and the investment community if you guys could elaborate on a revenue mix by end market, like enterprise consumer and auto.

Mehdi Hosseini: Yes, thanks for taking my question. This is for the team. I think it would be very helpful for us and the investment community if you guys could elaborate on a revenue mix by end market, like enterprise, consumer, and auto, and how it would map to specific products. I understand you don't want to be specific, but any kind of a qualitative view on how end market and products are mapping will be great. I have a follow-up.

Speaker #5: And how it would map to a specific product and I understand you don't want to be specific, but any kind of a qualitative view on how end market and products are mapping would be great.

Speaker #5: And I have a follow-up.

Wallace Kou: I think, as we said in the past, all our product line are growing in 2026. Of course, our Edge SSD, I think because the PC market unique decline. However, due to the multi share gain, we continue to grow 50% compared with the last year, H1. Our enterprise, because the base is small, so we grow faster enterprise controller. For Ferri and for automotive and boot drive, we do have multiple major customers supporting our growth trends. We expect to see continued growth through the 2026 and to 2027.

Speaker #6: I think, as we said in the past, all our product lines are growing in 2026. Of course, our edge SSD, I think because of PC market, you need decline.

Speaker #6: and for automotive, and our boot drive, we do have a multiple major customer supporting our growth trends. So we expect to see continue growth through the 2026 and to 2027.

Speaker #4: I think another way to look at it also is the majority of EMMC and UFS is really going to be consumer-centric. Today, SSD controller sales, the majority of that is going to be consumer-centric going to edge SSD controllers, but certainly as we exit this year, getting to that 5 to 10 percent coming from Montaigne contribution.

Jason Tsai: I think another way to look at it also is the majority of eMMC and UFS is really going to be consumer-centric. Today, SSD controller sales, the majority of that is going to be consumer-centric, going to Edge SSD controllers, but certainly, as we exit this year, getting to that 5% to 10% coming from MonTitan contribution. Ferri and boot drives, Ferri for automotive, and enterprise boot drive solutions. Again, you can imagine those are going to be less consumer-centric.

Speaker #4: Ferrite and boot drives—ferrite for automotive—and boot drives, enterprise boot drive solutions. Again, you can imagine those are going to be more or less consumer-centric.

Speaker #5: Okay. Moving on to my next question. The 2 terabit die and the timing of the QLC ramp, it's been more than a year of waiting.

Mehdi Hosseini: Okay. Moving on to my next question. The 2 terabyte die and the timing of the QLC ramp. It's been more than a year of waiting, I'm just wondering if Wallace could share with us, is that the qualification that is an issue? Is that the capacity? Is it something else? I'm asking this question in the context of, would this actually provide an opportunity for controller suppliers like Silicon Motion? Is it just a manufacturing ramp that is delayed? Any comment will be great.

Speaker #5: And I'm just wondering if Wallace could share with us, is that the qualification that is an issue? Is that the capacity? Or is there something else?

Speaker #5: And I'm asking this question in the context of would this actually provide an opportunity for controller suppliers like Silicon Motion? Or is it just a manufacturing ramp that is delayed?

Speaker #5: Any color would be great.

Speaker #6: So, I think you asked a very good question. We have been waiting for this for a very long time too. The 2-terabit QLC is supposed to be the great darling for the NAND industry.

Wallace Kou: Actually, they're very good question. We have been waiting for also a very long time, too. The 2 terabyte QLC is supposed to be the great darling for the NAND industry and to drive the QLC-based storage SSD to be a next level. However, due to the price increase, supply shortage, I think high capacity data storage drive is less attractive because the price is too high. We also see, the DRAM NAND maker, the DAPANDI, putting more focus and CAPEX into the DRAM HBM. That's why the development for 2 terabytes, or to fine-tune the quality to next level, it'll take a much longer time. This is why, at the current market situation, DAFANI, I think the DDR5 HBM is more attractive and driving more high profit. It just has to take some time.

Speaker #6: And to drive the QLC-based storage SSD to be a next level. However, due to the price increase, supply shortage, I think high capacity data storage drive is a less attractive because the price is too high.

Speaker #6: And we also see the dynamic that definitely put more focus and KPAC into the DRAM HBM. That's why the development for 2 terabit of the fine-tune the quality to next level is to take a much longer time.

Speaker #6: So this is why it's the current market situation definitely is, I think, the DDR5 HBM is more attractive and driving more high profit. But it's just a take some time.

Speaker #6: We believe because still high demand for the through the AI inference for the data storage. So demand for storage is much bigger than the current supply.

Wallace Kou: We believe, because still high demand through the AI inference for the data storage. Demand for storage is much bigger than the current supply. Through the new CAPEX, we see the arrangement, 2028, we'll see meaningful recovery from NAND supply. That's why we see all the NAND makers should have a 2 terabyte QLC by that time.

Speaker #6: And through the new KPAC, we see the arrangement 2028 will see meaningful recovery from nail supply. And we see that's why we see all the nail makers should have a 2 terabit QLC by that time.

Speaker #4: And I want to make it clear, Maddie, that the delays here are on availability of NAND side. Our controllers are here. Our controllers are ready.

Jason Tsai: I want to make it clear, Mehdi, that the delays here are on availability of NAND side. Our controllers are here, our controllers are ready. As we said, we're going to be starting to early ramp of some of the QLC-based solutions with our customers by the end of this year. This isn't something that's a controller issue, this is an industry availability issue of the NAND.

Speaker #4: As we said, we're going to be starting to ramp early ramp of some of the QLC-based solutions with our customers by the end of this year.

Speaker #4: So this isn't something that's a controller issue. This is an industry availability issue of the NAND.

Speaker #5: Thank you.

Wallace Kou: Thank you.

Mehdi Hosseini: Thank you.

Speaker #2: We will now take our next question. And the next question comes from the line of Matthew Bryson of Wedbush. Please ask your question, Matthew, your line is open.

Operator: We will now take our next question, the next question comes from the line of Matthew Bryson of Wedbush Securities. Please ask your question, Matthew, your line is open.

Speaker #5: Thanks. Congratulations on the great results. Just with gross margins, given how strong the embedded piece was and that's typically a lower gross margin, a segment for Silicon Motion, I would have expected a little bit of a headwind there.

Matthew Bryson: Thanks. Congratulations on the great results. Just with gross margins, given how strong the embedded piece was, that's typically a lower gross margin segment for Silicon Motion, I would've expected a little bit of a headwind there. Can you talk a little bit about the puts and the takes that affected the gross margin line in Q2?

Speaker #5: Can you talk a little bit about the puts and the takes that affected the gross margin line in Q2?

Speaker #4: Yeah. So I think what we've always said is that our Montaigne controllers are margin accretive. And so as those have begun to ramp, that's been able to help offset and drive strong gross margins for us here.

Jason Tsai: Yeah. Well, I think what we've always said is that our MonTitan controllers are margin accretive. As those have begun to ramp, that's been able to help offset and drive strong gross margins for us here in Q2 as well as in H2. H2, we're also going to benefit from additional growth in our PCIe 5.0 controllers, for example. All of these things are going to be margin accretive. That's going to offset some of the margin pressure that we see from the solutions business.

Speaker #4: In the second quarter, as well as in the back half of the year, the back half of the year, we're also going to benefit from additional growth in our PCI 5 controllers, for example.

Speaker #4: So that's all of these things are going to be margin accretive. That's going to offset some of the margin pressure that we see from the solutions business.

Speaker #5: And Jason, just when we're thinking about things moving forward with Montaigne seemingly being a successful as it's been, I know longer term you've talked about kind of gross margins being a little bit below 50.

Matthew Bryson: Jason, just when we're thinking about things moving forward with MonTitan seemingly being as successful as it's been, I know longer term you've talked about gross margins being a little bit below 50%. Should we be rethinking that, if MonTitan's going to ramp like this? Any commentary there would be really helpful.

Speaker #5: Should we be rethinking that if Montaigne is going to ramp like this? Any commentary that would be really helpful.

Speaker #4: Yeah, I think we're still comfortable with the 48% to 50%. I think we've said in the past, we're going to see a little variability in that depending on mix in any given period.

Jason Tsai: Yeah, I think we're still comfortable with the 48% to 50%. As I think we've said in the past, we're going to see a little variability to that depending on mix in any given periods. We're still targeting 48% to 50%, certainly in certain periods like Q2, Q3, when we're seeing a little bit above that. We're certainly going to be able to take advantage of some of these mix benefits in the near term, but long term, we still expect to be in that 48% to 50%.

Speaker #4: So we're still targeting 48 to 50 percent, certainly in certain periods like Q2, Q3, when we're seeing a little bit above that. We're certainly going to be able to take advantage of some of these mixed benefits in the near term, but long term, we still expect to be in that 48 to 50 percent.

Speaker #5: Awesome. Thank you.

Matthew Bryson: Awesome. Thank you.

Speaker #2: The next question now comes from the line of Sebastian Naji of Willem Blair. Please ask your question, Sebastian. Your line is open.

Operator: The next question now comes from the line of Sebastien Naji of William Blair. Please ask your question, Sebastian. Your line is open.

Speaker #7: Good morning and thank you for taking the questions. Congrats on another quarter of record results here. First, I just wanted to ask about what you're seeing in the mobile market and specifically at the Chinese smartphone makers.

Sebastien Naji: Good morning, thank you for taking the questions. Congrats on another quarter of record results here. First, I just wanted to ask about what you're seeing in the mobile market and specifically at the Chinese smartphone makers. Last night, Qualcomm reported and posited that calendar Q2 will be the trough for China handset demand in their business. Given your exposure to some of those vendors, could you maybe just comment on whether you're seeing the same signals that point to a potential recovery in the H2, or if you're seeing anything different?

Speaker #7: Last night, Qualcomm reported in positive that calendar Q2 will be the trough for China. Handset demand in their business. And given your exposure to some of those vendors, could you maybe just comment on whether you're saying the same signals that point to a potential recovery in the second half or you're seeing anything different?

Speaker #6: Yeah, we see the China smartphone market is very challenging. Due to the price increase of both LPDDR5 and also the storage product. And for that, especially value line, I think the software much more because if you're looking for the DRAM and the NAND, almost 50, 60 percent of the total bond cost for the low-end smartphone.

Wallace Kou: Yeah. We see the China smartphone market is very challenging, due to the price increase of both the LPDDR5 and also the storage product. Especially value line, I think they're suffering much more because, if you're looking for the DRAM and the NAND, almost 50% to 60% of the total BOM cost for the low-end smartphone. This is a challenge. However, because we work with the NAND maker outsourcing to us in certain model, and module maker continue gain market share, and we benefit from collaborate with smartphone maker directly through the QLC development. We see our demand for smartphone, for our UFS and eMMC, they continue grow from Q2 and also moving to next quarter. I think we do not have a significant market share in the low end. That's why the impact for our business is relatively small.

Speaker #6: So this is a challenge. But however, because we work with the NAND maker outsourcing to us in certain model, and the module maker continue gain market share, and we benefit from collaborate with smartphone maker directly through the QLC development.

Speaker #6: So we see our demand for smartphone for our UFS and EMC, it continue growth from Q2 and also moving to next quarter. We I think we do not have a significant market share in the low end.

Speaker #6: That's why the impact for our business is relatively small.

Speaker #7: Got it. Okay. Okay. That's helpful. And then maybe for my follow-up, just on the boot drive business, can you comment on whether you're starting to see the benefit of Bluefield for sales in either Q2 or your Q3 guidance as NVIDIA starts to ramp their Vera Rubin platform or has much of the growth so far been tied to the first generation Bluefield 3 program?

Sebastien Naji: Got it. Okay, that's helpful. Maybe for my follow-up, just on the boot drive business, can you comment on whether you're starting to see the benefit of BlueField 4 sales in either Q2 or your Q3 guidance as NVIDIA starts to ramp their Vera Rubin platform? Has much of the growth so far been tied to the first generation BlueField 3 program?

Speaker #6: We cannot comment specifically regarding the timing, but I think the BlueField-4 will definitely go with customers' announcements, right? But we do have a pretty large share for BlueField supply for the boot drive.

Wallace Kou: We cannot comment specific regarding the time, I think the BlueField 4 definitely would go with customers' announcement, right? We do have a pretty large share for BlueField supply for the boot drive, we're very happy when it ramped up in H2 this year.

Speaker #6: So we're very happy when they ramp up in the second half of this year.

Speaker #7: Okay. Great. That's helpful. Thank you.

Sebastien Naji: Okay, great. That's helpful. Thank you.

Speaker #2: Thank you. And our next question comes from the line of Craig Ellis of B. Riley Securities. Please ask your question, Craig. Your line is open.

Operator: Thank you. Our next question comes from the line of Craig Ellis of B. Riley Securities. Please ask your question, Craig, your line is open.

Speaker #8: Yeah. Thanks for taking the question. And team, congratulations on the AI solution evolution that your engineering with the business. Wallace, I wanted to start by seeing if you could characterize the growth that we could expect to see in the FarEye and DPU business over the next few quarters versus what we've just seen.

Craig Ellis: Yeah, thanks for taking the question, and team, congratulations on the AI solution evolution that you're entering with the business. Wallace, I wanted to start by seeing if you could characterize the growth that we could expect to see in the Ferri and DPU business over the next few quarters versus what we've just seen, that 110% rise, and similarly, help us frame the right expectations for MonTitan. I wanted to see if, in so doing, you could also help us understand if you thought the MonTitan business could, over time, rise to the size of what you're seeing with Ferri and DPU.

Speaker #8: That 110 percent rise and similarly help us frame the right expectations for Montaigne and I wanted to see if in so doing you could also help us understand if you thought the Montaigne business could over time rise to the size of what you're seeing with FarEye and DPU.

Speaker #6: Yeah. We cannot comment specific customer, but what I can tell you about boot drive business going to grow very strong. Not just through one customer, it's through multiple customer.

Wallace Kou: Yeah. We cannot comment specific customer, but what I can tell you, the boot drive business is going to grow very strong, not just through one customer, it's through multiple customers. We said last time, boot drive not only winning for DPU, also winning for TPU and the telco company, and we see we're engaged with a leading server maker, too. Boot drive will grow very broadly, but definitely with the leading GPU company, it will grow even much stronger, and even for next year. Our MonTitan is very exciting. We have 2 Tier 1 customers ramping from Q2. We'll add five more customers coming H2. We believe next year we're going to ramp much more revenue growth than this year. We saw PCIe Gen 6 have much broader design win even before we even tape out.

Speaker #6: We said last time, our boot drive not only winning for DPU, also winning for TPU and the telco company. And we see we're engaged with the leading server maker too.

Speaker #6: So our boot drive will grow very broadly. But definitely with the leading GPU company, it will go even much stronger. And even for next year.

Speaker #6: Our Montaigne is very exciting. We have two tier one customer ramping from second quarter. We're at a five more customer coming second half. And we believe next year we're going to ramp much more revenue growth than this year.

Wallace Kou: We believe next year we're going to ramp much more revenue growth than this year. We saw PCIe Gen 6 have much broader design win even before we even tape out. We have very high confidence our MonTitan Gen 5, Gen 4, going to carry significant growth for company for long-term growth and profitability.

Speaker #6: And with our PCIe Gen 6 have much broader design win even before we even tape out. So we have very, very high confidence our Montaigne Gen 5, Gen 4 going to carry significant growth for company for long-term growth and the profitability.

Wallace Kou: We have very high confidence our MonTitan Gen 5, Gen 4, going to carry significant growth for company for long-term growth and profitability.

Speaker #4: I'd also point out.

Jason Tsai: I'd also point out, Craig.

Craig Ellis: That's really. Yep.

Speaker #8: That's really.

Jason Tsai: Our solutions business in boot drive, just a reminder, it's a controller plus NAND. ASPs are going to be naturally much higher than what you're going to see on a controller only. While certainly we're excited about the scale and opportunity of MonTitan, just keep that difference in mind, where ASPs are going to be certainly lower on MonTitan than relative to the boot drive side.

Speaker #4: Our solutions business did boot drive remind it was just a reminder. It's controller plus NAND. So ASPs are going to be naturally much higher than what you're going to see on a controller only.

Speaker #4: So while certainly we're excited about the scale and opportunity at Montaigne, just keep that difference in mind where ASPs are going to be certainly lower on Montaigne than relative to the boot drive side.

Speaker #8: Yeah, and that really relates to my follow-up question, Jason, so thanks for the color. The question is this: Given the company's unusually long and broad expertise with NAND makers as a controller designer, and given the evolution we're seeing in the memory industry where customers really want full solutions, to what extent are customers asking for more of a full solution beyond what you're providing today, in businesses that may be auto-related or associated with Montaigne?

Craig Ellis: Yeah. That really relates to my follow-up question, Jason, so thanks for the color. The question is this: Given the company's unusually long and broad expertise with NAND makers as a controller designer, and given the evolution we're seeing in the memory industry, where customers really want full solutions, to what extent are customers asking for more of a full solution beyond what you're providing today in businesses that may be auto-related or associated with MonTitan? To what extent would that look attractive for you as a way to further evolve the business model? Thank you.

Speaker #8: And to what extent would that look attractive for you as a way to further evolve the business model? Thank you.

Speaker #6: Yeah. You raised a pretty good question. I think the today, Montaigne controller business, they are totally independent of boot drive business. However, I think certain cases, we see they add value together as a package sell and penetration.

Wallace Kou: Yeah, you raised a pretty good question. I think today, MonTitan controller business are totally independent of boot drive business. However, I think in certain cases, we see the added value together as a package sale and penetration. Because we do see our boot drive solution business have very unique position, because first of all, NAND maker does not have a dual list. It's enterprise SSD controller. Second, they have less interest to invest for, because it's a rather smaller market compared with the enterprise SSD solution. We are in very unique position to grow the enterprise boot drive business. In the same time, we can also offer the MonTitan controller business together to support the Tier 1 customer who don't get enough supply from NAND maker directly. That is how we play and try to grow together.

Speaker #6: And because we do see our boot drive solution business have very unique position because first of all, NAND maker does not have a dureless enterprise lead controller.

Speaker #6: Second, they have a last interest to invest because it's a relatively smaller market compared with enterprise D. Solution. So we are in very unique position to grow the enterprise boot drive business in the same time we can also offer the Montaigne controller business together to support the tier one customer who don't get enough supply from NAND maker directly.

Speaker #6: So that is how we play and try to grow together so far Montaigne because we already have very, very strong momentum and we have we don't even have enough R&D resources to support so many projects is very exciting to see the position we are today.

Wallace Kou: So far, MonTitan, because we already have very strong momentum, and we don't even have enough R&D resources to support so many projects. It's very exciting to see the position we are today, but we'll continue to invest, and we're definitely going to see much stronger growth in 2027.

Speaker #6: But we'll continue to invest and we definitely going to see much stronger growth in 2027.

Speaker #8: Thank you very much, Wallace. Good luck, team.

Craig Ellis: Thank you very much, Wallace. Good luck, team.

Speaker #2: Thank you. Our next question now comes from the line of Shubham Siganya from JP Morgan. Please ask your question, Shubham. Your line is open.

Operator: Thank you. Our next question now comes from the line of Shubham Singania from J.P. Morgan. Please ask your question, Shubham, your line is open.

Speaker #9: Yeah. Hi. This is Google. Can you hear me, Jason?

[Company Representative] (J.P. Morgan): Yeah. Hi, this is Gokul. Can you hear me, Jason?

Gokul Hariharan: Yeah. Hi, this is Gokul. Can you hear me, Jason?

Speaker #4: Yeah. We can hear you.

Jason Tsai: Yeah, we can hear you.

Speaker #9: Yeah. So hi. This is Google from JP Morgan. So first question, on the boot drive market, Wallace, could you help us kind of size this market a little bit?

[Company Representative] (J.P. Morgan): Hi, this is Gokul from J.P. Morgan. First question on the boot drive market. Wallace, could you help us size this market a little bit? Because it seems like this market is growing much faster, and become much larger than what we would have expected or even you would have expected maybe a year back when you outlined this market for us. Secondly, could you also address how the market share and competition you're expecting to shape up here, given it looks like right now Silicon Motion is a large majority of the market. Do you feel like there will be some competition entering this market in the next maybe one or two generations?

Gokul Hariharan: Hi, this is Gokul from J.P. Morgan. First question on the boot drive market. Wallace, could you help us size this market a little bit? Because it seems like this market is growing much faster, and become much larger than what we would have expected or even you would have expected maybe a year back when you outlined this market for us. Secondly, could you also address how the market share and competition you're expecting to shape up here, given it looks like right now Silicon Motion is a large majority of the market. Do you feel like there will be some competition entering this market in the next maybe one or two generations?

Speaker #9: Because it seems like this market is growing much faster and becoming much larger than what we would have expected—or even you would have expected—maybe a year back when you outlined this market for us.

Speaker #9: And secondly, could you also address how the market share and competition you're expecting to shape up here given it looks like right now Silicon Motion is kind of a large majority of the market?

Speaker #9: Do you feel like there will be some competition entering this market in the next maybe one or two generations?

Speaker #6: Okay. I think that the boot drive business have a very, very wide range opportunity first of all, near CPU boot drive, that's with the conventional enterprise controller with a DRAM together.

Wallace Kou: Okay. I think the boot drivers have a very wide range opportunity. First of all, near CPU boot drive, that's with a conventional end-to-write controller with a DRAM together. With DRAM, you have a much better read and write performance, and with low latency. That's it for server CPU. Doesn't matter Intel or AMD or even Vera, they have a boot drive with DRAM. That business belong to NAND maker. It's conventional, traditional. We don't compete that sector. However, I think some of the server maker come to Silicon Motion, they will likely have a solution. We do provide some controller to either NAND maker or to module maker to support that portion with the DRAM for boot drive.

Speaker #6: Because with DRAM, you have a much better random write performance and with low latency. So that's for server CPU, doesn't matter Intel or AMD or even Vera.

Speaker #6: They have a boot drive with DRAM. That business belong to NAND maker. It's conventional, traditional. We don't compete that sector. However, I think some of server maker come to Silicon Motion they will have a solution.

Speaker #6: So we do provide some controller to either NAND maker or to multi-maker to support that portion with the DRAM for boot drive. But for the rest of other sector like DPU, like TPU, NPU, like PCIe switch, like NVLink switch, like Ethernet switch, there is a boot drive they need and today they favor dureless because the cost better without DRAM.

Wallace Kou: As for the rest of the other sector, like DPU, like TPU, NPU, like a PCIe switch, like a NVLink switch, like a Ethernet switch, there is a boot drive they need, and today they favor DRAM-less, because the cost is better without DRAM. We have a specific security support and performance also very good. As long we can secure the NAND supply, that portion is really our crown jewelry to grow in the next few years. We do see the demand is stronger because the boot drive number per server rack, that's huge. That's more than 30, 40. It depends the server rack. This is a really great opportunity we see. Not only the number of boot drive, but the capacity might be increased in the next few years. Right?

Speaker #6: And we have a specific security support and performance also very good. And as long we can secure the NAND supply, that portion is really our crown jewelry to grow in the next few years.

Speaker #6: And we do see the demand is stronger because the boot drive number per server rack, that's a huge. That's more than 30, 40. It depends the server rack.

Speaker #6: So this is a really, really great opportunity we see and not only the number of boot drive, but also capacity might be increased in the next few years.

Wallace Kou: This is a really great opportunity we see. Not only the number of boot drive, but the capacity might be increased in the next few years. Right? This really can boost our sale revenue growth in the top line and the bottom line.

Speaker #6: So this really can boost our sales revenue growth, as well as both the top line and the bottom line.

Wallace Kou: This really can boost our sale revenue growth in the top line and the bottom line.

Speaker #9: Any thoughts on competition, Wallace, from either regular NAND makers or any of the other module makers that you do see come into this market or you think you've got this largely locked down for the next couple of generations?

[Company Representative] (J.P. Morgan): Any thoughts on competition, Wallace, from either regular NAND makers or any of the other module makers that you do see come into this market? You think you've got this largely locked down for the next couple of generations?

Gokul Hariharan: Any thoughts on competition, Wallace, from either regular NAND makers or any of the other module makers that you do see come into this market? You think you've got this largely locked down for the next couple of generations?

Speaker #6: So far we see we are comfortable in good position. We did not see more competition and really to NAND maker because the density is really 256, 512 gigabyte compared with enterprise drive 16 terabyte, 32 terabytes much more smaller.

Wallace Kou: Far, we see we are comfortable in good position. We do not see more competition, and really to NAND maker, because the density is really 256 vital GB compared with the enterprise SSD, 16 TB, 30 TB, is much more smaller. We don't see competition from NAND maker come here. We are largest on merchant company. We also don't see the competition from module maker either.

Speaker #6: So we don't see competition from NAND maker come here. And we are largest from merchant company. We also don't see the competition from multi-maker either.

[Company Representative] (J.P. Morgan): Understood. That's clear. My second question is on MonTitan. Could you talk a little bit about your market opportunity, especially as you migrate to PCIe Gen 6 with your next generation MonTitan platform? What is the competitive landscape looking like? Because I can remember several enterprise controller companies are terminating or slowing down their development in PCIe Gen 6. Could you help us understand your market opportunity when it comes to MonTitan with PCIe Gen 6? I think originally it was mostly about QLC, but it definitely seems like you have expanded beyond just the QLC opportunity to KV cache offloading and some of the TLC opportunities as well.

Gokul Hariharan: Understood. That's clear. My second question is on MonTitan. Could you talk a little bit about your market opportunity, especially as you migrate to PCIe Gen 6 with your next generation MonTitan platform? What is the competitive landscape looking like? Because I can remember several enterprise controller companies are terminating or slowing down their development in PCIe Gen 6. Could you help us understand your market opportunity when it comes to MonTitan with PCIe Gen 6? I think originally it was mostly about QLC, but it definitely seems like you have expanded beyond just the QLC opportunity to KV cache offloading and some of the TLC opportunities as well.

Speaker #9: Understood. That's clear. My second question is on Montaigne and could you talk a little bit about your market opportunity especially as you migrate to PCIe Gen 6 with your next generation Montaigne platform?

Speaker #9: What is the competitive landscape looking like? Because as I remember several enterprise controller companies are kind of terminating or slowing down their development in PCIe Gen 6.

Speaker #9: So could you help us understand your market opportunity when it comes to Montaigne with PCIe Gen 6? I think originally it was mostly about QLC, but it definitely seems like you have kind of expanded beyond just the QLC opportunity to KV cache offloading and some of the TLC opportunities as well.

Wallace Kou: I think our MonTitan Gen 5 has already set a foundation for our customer. When we develop a Gen 6, not only Gen 6, Gen 5 customer all sign in, but we attract many tier 1 customer from NAND maker in the CSP. There's more than a dozen tier 1 customer waiting for MonTitan PCIe Gen 6 sample, and this have a very unique architecture. We offer a particular focus on either AI inference, especially around the NVIDIA CMX architecture, but also particularly for the data storage. Right. We have a multiple dimension and support, and support multi-host, and also it will be very efficient under the new AI route. As we work with closely with the NAND maker and also leading server maker as well as the CSP. This particular sound feature, we exclusively designed for certain customer.

Speaker #6: I think our Montaigne Gen 5 had already set a foundation for our customer. So when we developed Gen 6, not only Gen 6, Gen 5 customer all sign in, but we attract many tier one customer from NAND maker in the CSP.

Speaker #6: So there's more than a dozen tier one customer waiting for Montaigne PCIe Gen 6 sample. And this have a very unique architecture. We offer a particular focus on either AI inference, especially around the NVIDIA CMX architecture, but also particularly for the data storage.

Speaker #6: So we have a multiple dimension and support and support multi-host and also it will be very efficient under the new AI era. And as we work with so closely with the NAND maker and also leading server maker, as well as the CSP, and so this is particular some feature we exclusively designed for certain customer.

Wallace Kou: As we work with closely with the NAND maker and also leading server maker as well as the CSP. This particular sound feature, we exclusively designed for certain customer. We believe when MonTitan PCIe Gen 6 starts to ramp, will be much stronger and faster, quicker than our PCIe Gen 5.

Speaker #6: We believe when Montaigne and PCIe Gen 6 start to rent will be much stronger and faster, quicker than our PCIe Gen 5.

Wallace Kou: We believe when MonTitan PCIe Gen 6 starts to ramp, will be much stronger and faster, quicker than our PCIe Gen 5.

[Company Representative] (J.P. Morgan): Got it. Any idea about how much of the market can you address with this PCIe Gen 6 solution? Do you think you can address maybe 30% and 40% of the market already with that? Or that is too high an expectation?

Gokul Hariharan: Got it. Any idea about how much of the market can you address with this PCIe Gen 6 solution? Do you think you can address maybe 30% and 40% of the market already with that? Or that is too high an expectation?

Speaker #9: Got it. Any idea about how much of the market can you address with this PCIe Gen 6 solution? Do you think you can address maybe 30, 40% of the market already with that or that is too high an expectation?

Speaker #6: Well, we said the market just a minimum 15 to 20% at the beginning. Hopefully we can grow faster.

Wallace Kou: Well, we said the market is just a minimum 15% to 20% at the beginning. Hopefully, it can grow faster.

Speaker #9: Got it. Yeah. Thank you very much.

[Company Representative] (J.P. Morgan): Got it. Yeah. Thank you very much.

Gokul Hariharan: Got it. Yeah. Thank you very much.

Speaker #1: Thank you. As a reminder, before we take our next question, if you wish to ask a question now, please press stop. 11 on your telephone keypad.

Operator: Thank you. As a reminder, before we take our next question, if you wish to ask a question now, please press star one one on your telephone keypad. We will now take our next question. Next question comes from the line of Suji Desilva of Roth Capital. Please go ahead, Suji.

Speaker #1: We will now take our next question. And next question comes from the line of Suji, DeSilver of Ross Capital. Please go ahead, Suji.

Speaker #9: Hi, Wallace. Hi, Jason. Congratulations on the progress here. Maybe the first question for Jason. With the mix that's steadily shifting would we think that a seasonality would be more muted in the 2027 timeframe or 2028 perhaps?

Suji Desilva: Hi, Wallace. Hi, Jason. Congratulations on the progress here. Maybe the first question is for Jason. With the mix that's steadily shifting, would we think that a seasonality would be more muted in the 2027 timeframe or 2028 perhaps? Linearity be greater, more steady, or would that still be a further out trend?

Speaker #9: And will linearity be greater and more steady, or would that still be more of a longer-term trend?

Speaker #3: Yeah, we're not going to comment on 2027 yet at this time. We're only guiding one quarter out, so stay tuned on that. To your point, there are a lot of moving pieces; depending on how quickly certain businesses scale, that could certainly limit the seasonality that we historically would see.

Jason Tsai: Yeah. We're not going to comment on 2027 yet at this time. We're only guiding 1 quarter out, so stay tuned on that. To your point, there are a lot of moving pieces. Depending on how quickly certain businesses scale, that could certainly limit the seasonality that we historically would see. Right now, given how much we're in the early stages of some of these businesses ramping and some of these new customers coming on, it's hard for me to say right now, and we're not guiding that far out.

Speaker #3: But right now, given how much we're in the early stages of some of these businesses ramping and some of these new customers coming on, it's hard for me to say right now and we're not guiding that far out.

Speaker #9: No. Fair enough, Jason. Thanks. And then maybe a second question for Wallace, perhaps. The Fery roadmap—how are you evolving that to support newer end markets like robotics, and when might that be a meaningful contributor?

Suji Desilva: No. Fair enough, Jason. Thanks. Maybe the second question for Wallace, perhaps. The Ferri roadmap, how are you evolving that to support newer end markets like robotics? When might that be a meaningful contributor? How far out could that be?

Speaker #9: How far out could that be?

Speaker #6: This is a very good question, and we have been constantly monitoring the survey and engaged with robot developers from China and the U.S., also including the drone.

Wallace Kou: It's a very good question, we have been constantly monitoring the survey and engaged with the robot developer from China and US, also including the drone. We see the drone would coming earlier with a high volume, robot would probably come later. However, the diversify is so many new opportunity for the storage and not just a 1 solution per robot. There's multiple. There's many, we would like to engage and also provide certain reference as well as the custom design to show the differentiation with the robot maker. Now I think, the initial is about next year, the volume is still pretty small, but we believe 2029, certainly 2030, will be much higher volume, we want to start in the early stage and make sure we can occupy the higher market share.

Speaker #6: And so we see the drone were coming earlier with a high volume. And robot would probably come later. But however, the diversify is so many new opportunity for the storage and not just one solution per robot.

Speaker #6: There are multiple. So, there are many we would like to engage and also provide certain references, as well as custom designs, to show the differentiation with robot makers.

Speaker #6: And now I think the initial is for next year is a volume still pretty small. But we believe 29 certain 2030 will be much higher volume and we want a star in the early stage and make sure we can occupy the higher market share.

Speaker #9: Okay. Thanks, Wallace. Thanks, everybody.

Suji Desilva: Okay. Thanks, Wallace. Thanks, everybody.

Speaker #1: Thank you. Next is follow-up question from the line of Mayday Hossaini from SIG. Please ask your question, Mayday. Your line is open.

Operator: Thank you. Next is a follow-up question from the line of Mehdi Hosseini from SIG. Please ask your question, Mehdi, your line is open.

Speaker #2: Yes. Thank you. A couple of follow-ups. First one, would there be possible if you could just elaborate on the mix of EMMC and UFS either the mix of the specific product or mixed by like a smartphone versus other consumer electronics?

Mehdi Hosseini: Yes. Thank you. A couple of follow-ups. First one, would it be possible if you could just elaborate on the mix of eMMC and UFS, either the mix of the specific product or mix by a smartphone versus other consumer electronics? I do have another follow-up.

Speaker #2: And I do have another follow-up.

Speaker #3: So within the EMMC and UFS business, majority of revenue comes from UFS just given that it's a much higher ASP product. Unit volumes in EMMC are still very strong.

Jason Tsai: Within the eMMC and UFS business, majority of revenue comes from UFS, just given that it's a much higher ASP product. Unit volumes in eMMC are still very strong, but given the much lower ASPs in eMMC, it's a smaller contributor to our overall revenue. The vast majority of our UFS business is going to smartphones. The majority of our eMMC business is going to really more IoT consumer-centric connected devices.

Speaker #3: But given the much lower ASPs in EMMC, it's a much smaller it's a smaller contributor to our overall revenue. The vast majority of our UFS business is going to smartphones the majority of our EMMC business is going to really more IoT consumer centric connected devices.

Speaker #2: Gotcha. Thanks. And then, I'm not asking for a guide, but when I look into 2027, your commentary and excitement around new product ramp suggest to me that Ferai and Boot Drive could at least be a third of your revenue mix.

Mehdi Hosseini: Got you. Thanks. Then I'm not asking for a guide, but when I look into 2027, your commentary and excitement around new product ramp suggests to me that Ferri and boot drive could at least be a third of your revenue mix. Is that in the ballpark?

Speaker #2: Is that in the ballpark?

Speaker #3: Look, I think certainly the backlog we have and the strength we're seeing in the pipeline with our customers and new customers ramping, I think that's certainly a possibility.

Jason Tsai: Look, I think certainly the backlog we have and the strength we're seeing in the pipeline with our customers and new customers ramping, I think that's certainly a possibility.

Speaker #2: Thank you.

Mehdi Hosseini: Thank you.

Speaker #1: Thank you. We have now reached the end of the question and answer session. I'll now turn the conference back to Mr. Wallace Carousel closing remarks.

Operator: Thank you. We have now reached the end of the question and answer session. I'll now turn the conference back to Mr. Wallace Kou for closing remarks.

Speaker #6: 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.

Wallace Kou: 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 these events will be posted on the investor relations section of our corporate website. We look forward to speaking with you at these events.

Speaker #6: The schedule of these events will be posted on the investor relationship section of our corporate website. And we look forward to speaking with you at this event.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

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