Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sequential revenue growth ahead of expectations, driven by strong demand from NAND flash customers.
- Gross margin achieved at the high end of guidance range due to better mix and pricing.
- Significant market share gains with top NAND flash makers, leading to increased visibility and growth.
- Introduction of new products, including enterprise-class MonTitan family and PCIe 5.0 and UFS 4.0 controllers.
- Strong pipeline of design activity and new product introductions expected to drive future revenue growth and profitability.
Negative Points
- Higher NAND prices and weaker retail demand due to inflationary pressures.
- Muted seasonal demand expected for retail aftermarket SSDs, impacting overall sales.
- Increased R&D expenses due to the development of next-generation controllers, impacting short-term profitability.
- Operating margin expected to decline in the third quarter due to tape-out costs for new controllers.
- Continued competitive pressure in the semiconductor industry and unpredictable changes in technology and consumer demand.
Q & A Highlights
Q: Wallace, can you talk about the progress on NAND OEM share gains and how it compares to your initial expectations for the year?
A: So far, we are on track with our projects and maintaining close relationships with NAND makers. We believe we will continue to gain share, aiming for around 25% to 30% by year-end.
Q: Can you provide a summary of the PCIe Gen4 mix this year and the expected shift to PCIe Gen5 next year?
A: PCIe Gen5 will start ramping in early 2025, primarily for high-end notebooks and PCs. Next year, PCIe Gen4 will still dominate, but by 2026, PCIe Gen5 could occupy around 30% of the market.
Q: Jason, can you size the expected tape-out costs for Q3 and any continued tape-outs in Q4?
A: Tape-out costs for 6-nanometer controllers typically run $15 million to $20 million. For Q3, expect a $5 million to $10 million charge. No additional tape-outs are expected in Q4, so OpEx should come down.
Q: Wallace, can you update us on the MonTitan customer additions and your capacity to take on more customers in 2025?
A: We can handle up to four Tier 1 customers simultaneously. One customer is developing firmware themselves, which helps offload resources. We aim to support more than four Tier 1 customers in 2025.
Q: What is the expected mix of QLC in SSDs and smartphones by 2025 and 2026?
A: For SSDs, QLC should be 20% to 25% by 2025. For smartphones, QLC adoption will be very low next year, less than 5%, but will expand to multiple models after successful trials.
Q: How will the ramp of MonTitan impact your gross margins in 2026-2027?
A: It's too early to say definitively, but MonTitan could potentially lift our margins above the historical 48% to 50% range.
Q: Do you expect another heavy investment year in 2025, or will there be more operating leverage?
A: We expect to see dividends from this year's investments next year, leading to revenue growth. OpEx growth should not be as fast as this year.
Q: What is the content uplift for SSDs in AI PCs compared to non-AI PCs?
A: AI PCs have better performance and shorter latency, driving demand for PCIe Gen5 SSDs. However, overall PC unit shipments are expected to remain stable or see single-digit growth.
Q: Can you provide a framework for MonTitan ASPs and content per server or rack?
A: Enterprise SSD controllers typically range from $50 to $75. MonTitan 16-channel controllers are priced between $55 to $65, and 8-channel controllers are $42 to $50.
Q: How should we think about inventory levels for client SSDs and mobile solutions with OEM customers?
A: Inventory levels in the channel are relatively healthy, but demand is weak. NAND makers have much less inventory for client SSDs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
