Silicon Motion Technology Corp. Q1 FY2025 earnings call

• Business developments: Delivered revenue at the high end of the range, with gross margin expansion due to new product introduction and mix shift. - Market trends: PC and smartphone markets showing signs of rebound. Geopolitical and tariff challenges impact the global economy but impact to Silicon Motion is limited. - Product launches: PCIe 5 8-channel and upcoming 4-channel DRAM-less controllers for client SSD; MonTitan solutions for enterprise and AI storage; SM2708 microSD Express controller for automotive and gaming. - Design wins: NVIDIA BlueField-3 DPU platform, and multiple flash maker and module maker wins for various products.

Client SSD Controllers: Revenue was at the high end of the range. The PCIe 5 8-channel controller, the first 6-nanometer PCIe 5 chip, accounts for over 5% of client SSD business and is expected to grow rapidly. The upcoming PCIe 5 4-channel DRAM-less controller has secured four flash maker wins. eMMC and UFS Business: Smartphone market showed signs of bottoming and recovery, with strong booking momentum for UFS 3.1, 2.2, and eMMC controllers. The market is shifting towards third-party controller solutions. MonTitan Business: Driven by enterprise class controllers, with a design win with NVIDIA's BlueField-3 DPU for boot storage, and targeting 128-terabyte QLC enterprise SSD. Automotive and Other Business: Automotive market position improved, with new products like the SM2708 microSD Express controller securing a design win for Nintendo Switch 2.

• Q2 revenue expected to increase 5%-10% to $175M-$183M. - Gross margin expected to expand to 47%-48%. - Operating margin expected to be 8.9%-10.9%. - Full-year target of $1B run rate by end of year, with gross margins aiming for 48%-50% by year-end. - Continued investment in advanced geometry products and MonTitan platform.

• Continued competitive pressure in the semiconductor industry affecting prices. - Unpredictable changes in technology and consumer demand for multimedia consumer electronics. - Changes in relationship with major customers. - Political, economic, legal, and social conditions in Taiwan impacting business.

Q: Inquiry on the enterprise SSD MonTitan program, specifically on customer engagements and production timelines.

A: Wallace mentioned previous six major customer engagements are on track to ramp from second half of 2025, with 2026 seeing more meaningful growth. NVIDIA BlueField DPU design win provides new opportunity for boot storage and high-density QLC SSD.

Q: Follow-up on enterprise SSD MonTitan program, asking about sizing the NVIDIA partnership and addressable market.

A: Jason and Wallace discussed the opportunity with BlueField-3, expecting meaningful ramp in 2026 and beyond, with TAM depending on enterprise storage market growth and global demand.

Q: Question on notebook market traction, premium notebooks, and outlook for 8 vs 4-channel products.

A: Wallace stated PC OEMs will ramp 8-channel PCIe 5 from July, with 5% of second half PC shipments, and 4-channel DRAM-less controller targeting 2026 production, expecting market share gains.

Q: Question on BlueField-3 DPU engagement, business model, and vendor qualification.

A: Wallace said there are two suppliers for boot drive opportunity, with Silicon Motion being one of them, nearing final qualification. Jason noted BlueField opportunity is separate from Solidigm's high density SSD.

Q: Question on revenue guidance and seasonality, specifically Q3, Q4 ramp.

A: Wallace and Jason mentioned Q4 momentum building towards $1B run rate, with new projects like NVIDIA and 128 terabyte enterprise MonTitan contributing, and conservatism in guidance due to macro uncertainties.

Q: Question on Switch 2 opportunity sizing and boot storage application.

A: Wallace stated Silicon Motion has 80% share in Switch 2 opportunity. Boot storage application provides opportunity to qualify in NVIDIA ecosystem and fill demand for enterprise SSD, with potential to be second player in 128-terabyte QLC SSD market.