Latest news with #WallaceKou
Yahoo
15-06-2025
- Business
- Yahoo
SMI CEO says no PCIe 6.0 SSDs for PC 'until 2030', Nvidia demands SSDs with 100 million IOPS — Wallace C. Kou on the future of SSDs
When you buy through links on our articles, Future and its syndication partners may earn a commission. The consolidation of the storage industry in the 2010s has injected every major SSD supplier with an in-house team designing SSD controllers, leaving the market with only a few independent SSD controller makers. These three makers — Maxio, Phison, and Silicon Motion (SMI) — are thriving, and their businesses are growing rather rapidly. At Computex 2025, we sat down with Wallace C. Kou, the founder and chief executive officer of Silicon Motion. Silicon Motion is one of the leading independent developers of SSD controllers, and we discussed the company's strategy as well as industry trends. During the conversation, we discussed numerous topics, including PCIe 5.0 and PCIe 6.0 SSDs, how the market of SSDs has changed over the last 10 years, why vertically integrated 3D NAND manufacturers are poised to continue using controllers from third parties, the cost of chips produced on advanced process technologies, SMI's plans to use Samsung Foundry in addition to TSMC, AI storage, as well as the viability of PLC 3D NAND and other exotic types of non-volatile memory. Anton Shilov: Large makers of NAND and SSDs have acquired multiple SSD controller startups from 2015 to 2020. However, they not only continue to work with you, but they even use your controllers for many of their branded products. What is your secret? Or their weakness? Wallace C. Kou: What is our strategy in order to win? We make sure our roadmap direction is aligned with current and future market trends and NAND makers' plans [and capabilities]. Compared to 5–10 years ago, [the] NAND flash market is very different. Back then, investments for 2D NAND were smaller, but with 3D NAND, the capital expenditure (CapEx) has doubled. So, NAND makers must focus on areas where they can be profitable and grow. So, each of these have a different play. Looking at Samsung and SK hynix, they have quite different businesses than SanDisk because the latter does not have a DRAM business. We leverage what we are good at. Fundamentally, we support NAND makers who need to sell wafers (This involves selling uncut wafers to SSD makers, which then dice, test, and and package them themselves for use in their products), or enable their channel business. We also help module makers manage their inventory or utilize excess supply, building out a broader ecosystem. This gives us a much better opportunity to grow. Now, we engage not only with NAND technology for each generation, but also with internal projects. Whenever they have a need, they come to us for all sorts of support. I think even 10 years ago, we already saw that NAND makers couldn't do everything themselves. For certain products, they have to outsource to SMI, right? They keep the most important parts in-house, but for others, where they need more control, they work with us. Some NAND is great for mobile, some for client, some for enterprise, some for automotive — in certain areas they need help, and that is where we step in. That is how we continue and make sure we can capture opportunities whenever they arise. Third-party controllers are also a key part of the current solution. You can see it with all the NAND makers today, including YMTC. When they have a new-generation pre-sample, they come to SMI. We quickly test it and give them feedback. That is how we build relationships — from technology to personnel, from management to R&D, from planning to sales — across all departments. We are probably the only controller maker today that works with all six or seven NAND makers, depending on how you count. And we do it independently — collaborating not just with R&D, but also with executive teams, planning, marketing, sales, and procurement. Anton Shilov: Indeed, SMI supplies all types of controllers for all types of applications, starting from humble PCs and then going up to enterprise-grade controllers and even automotive-grade controllers. Surprisingly, you can address all the segments of the market. Which of them will grow faster, what kind of market share should we expect? Wallace C. Kou: I mean, it is a very natural trend for a company like ours to grow. We have to grow bigger because client SSD controller revenue alone — even a hundred million dollars in some areas — is not that much, right? So, moving into enterprise and automotive is a natural direction for us. And we see the muscle we have. I can give you a couple of examples. Last week, while I was in Boston attending the JP Morgan Investor Conference — the 53rd conference — it was overwhelming with investors. I had not been to that event for 15 years, but I sent a very clear message. Silicon Motion has four major categories: client consumer SSD controllers, mobile eMMC/UFS controllers, enterprise controllers, and automotive controller solutions. These are the four major product lines where we will continue to grow. Especially for enterprise and automotive, we will grow much faster because the base is still small. For client SSDs, we already have about 30% market share. We are confident we can grow to 40% within three years — maybe even two years, depending on how fast PCIe 5.0 drives become mainstream. With eight NAND channel PCIe 5.0 controller [the SM2508], this is the first time we have had a real opportunity to serve the top tier. In the past, we never had the chance. Now, among 3D NAND makers, we have won four of them, and nearly all of the module makers. So, when [the] high-end PCIe Gen5 [platform] starts to ramp [at module makers] in July, we will have more than 60% market share (This is a targeted projection). There are only two makers I cannot name, but they have their in-house solutions. Eventually, I believe they will also come to us — I cannot say 100%, but that is my belief. So, 60% is our goal. Even for four-channel [PCIe 5.0 SM2504XT controller] mainstream CPO (Client Platform OEM) designs, which will start ramping in the middle of next year, we expect to win minimum 50% market share. So if you do the calculation, as PCIe Gen5 adoption continues to grow, our blended market share will move up to 40% or even higher. Anton Shilov: So, is it safe to say that once you have the core IP technology, which can manage certain types NAND, you can actually leverage that core technology to different types of applications. Wallace C. Kou: So, our, our core [IP] is in our ASIC architecture, LDPC error correction, and efficiency. I have to make sure the ASIC area is sufficient but not too large. We have to carefully manage margins — keeping around 50% gross margin — to stay competitive against internal [in-house] controller solutions. Otherwise, customers would not choose our controllers. Anton Shilov: This is exactly what I am talking about. The moment you have the right implementation of the NANDExtend technology, you can use it for different types of applications. Wallace C. Kou: In certain areas, we can reuse the IP, but for some [new 3D NAND] generations, you still need innovation — that's key. Let me give you an example: Kingston (A shareholder of Phison, SMI's major rival). Kingston definitely uses our controllers. I think their CEO once said — people asked Kingston, 'Why don't you use SMI solution? [They] are cheaper, faster, better.' Then Kingston's David Sun [Kingston Technology's COO] said, 'We should really use Silicon Motion, because when I use SMIs controller, I can use Samsung NAND, I can use SK hynix NAND, I can use others — even YMTC.' So, they say we are the controller that supports multiple NAND sources, and that is very valuable for Kingston. That is why, even for companies like SK hynix or Samsung, sometimes it makes more sense not to develop their own controller [for an application]. Use mine, and sell [your] wafers faster and better by partnering with us. Anton Shilov: Now that you mentioned both Kingston, an SSD maker, and SK hynix, a NAND maker, what is the primary focus of the SSD business? OEMs, turnkey solutions? Wallace C. Kou: You asked a good question. I will tell you the trend. For module makers, the retail portion is getting smaller and smaller. OEM business is becoming bigger. So, we have to focus on OEMs now. For consumer SSDs, the OEM side is important — but that does not necessarily mean NAND makers are winning (with their own branded products). You should also watch the PC OEM business. It is starting to move away from NAND makers, especially in the value and mainstream segments. High-end still tends to stick with the NAND makers, but in the value line, more and more PC OEMs are accepting module makers. We already saw this trend starting last year. For example, Seagate now uses more module makers because their pricing is more competitive. Even Lenovo in China is using Union Memory for their domestic PCs — and 100% of Union Memory's controllers are from us. We see this trend continuing. NAND makers are trying to sell complete solutions to win back some market share, but the volume is still small. Meanwhile, we see Adata, Kingston, Longsys, and Biwin starting to engage with Acer, Asus, HP, and even with Dell. This is happening right now. That is why module makers are gaining more strength and position. The retail portion for module makers is going down, but their share in the PC OEM segment is getting big, an important part for everyone. Anton Shilov: But module makers must make those models more competitive in terms of pricing, right? Wallace C. Kou: Yes. NAND makers might be able to take 30% – 35% margins, but module makers can operate on much lower margins — even 5% or 10%, especially Chinese makers. That is why they see an opportunity. In the past, our main concern with module makers was always about quality. Price, they could always meet, but quality was not good enough. Now, with SMI controllers and firmware, over the past 10 years, they have built up their own test capabilities and improved their factories. Now, their quality can meet the standards required by Lenovo, Dell, and HP, which is very good. So, we see even more opportunities now. Module makers are more flexible and faster in meeting urgent demands from PC OEMs. Anton Shilov: How important is the OEM SSD market is to you? Wallace C. Kou: It is very, very important. We are very happy. Beyond just working with NAND makers and module makers, we now work directly with PC OEMs. For example, we have quarterly reviews with Lenovo — both in Europe and Shanghai — with their procurement teams. We also have quarterly reviews with Dell in Singapore to talk about roadmaps, firmware updates, security requirements, performance, power budgets, everything. We discuss their needs and how we can provide value. This makes us more and more suitable as a partner. Sometimes, we even know better than the NAND makers how to help provide a stronger solution. With HP, the meetings are a bit less frequent compared to Lenovo and Dell, but we still maintain regular contact. Anton Shilov: Your focus on OEMs is probably one of the reasons why Silicon Motion was late with enthusiast-grade PCIe 5.0 controllers compared to Phison. Wallace C. Kou: But you need to understand why. PC OEMs do not plan to launch [PCIe 5.0 SSDs] until the middle of this year, right? Phison, on the other hand, is focused on retail, so they wanted to create buzz early. But if you look at how many units they have actually sold so far — it is not that much. Anton Shilov: Alright, but what do you think about enthusiast-grade SSD market? Are drives for gaming an important product category for Silicon Motion? Wallace C. Kou: Gaming was not our major focus. But right now, for PCIe 5.0 eight NAND channel SSDs, we are the only ones offering a low-power, 6nm solution on the market. So, it has become very popular — the 'darling' — for gaming PCs, workstations, high-end notebooks, and even what is called white-box servers. By default, they are using our SM2508 controller — I do not even know why exactly — but that is the situation. That is also why we faced shortages in Q1. Customers were buying off the shelf. So, we are not particularly trying to penetrate the gaming market, but it just happened because we are the only available eight-channel solution with DRAM, high performance, low power, and total power consumption under 7W. Anton Shilov: Do you expect nearline storage to become a big focus for you over the next few years? Wallace C. Kou: Yes, because if you follow the announcements, Meta has already said they are moving to QLC 3D NAND, and you probably know who Meta's suppliers are. Also, Pure Storage announced a major hyperscaler design win. I do not want to comment specifically, but if you look at Meta, Microsoft, Google, Amazon — in the past, they only used 16 TB drives. There was no need for bigger density because they managed storage on the cloud side with their own software. But now, they all want to move to higher-density QLC — they want to go to 128 TB drives as soon as possible. It is about slot density — they need higher density for AI training and inference because that requires massive amounts of storage. That's why not only us but also Chinese companies want to replace part of the nearline HDD market. Nearline SSDs will eventually replace tape drives, too. So, I think both the HDD and SSD markets are going to grow rapidly over the next five years. Anton Shilov: Now that you have mentioned 6nm as a means to reduce power consumption, it is well known that SSDs and SSD controllers are getting hotter. Can you deal with that by adopting more advanced process technologies earlier? Wallace C. Kou: Yes. Our PCIe 6.0 enterprise controller with 16 NAND channels — which is in development, uses 4nm. You have been in the industry for a while, so you know the history and are familiar with the competitive landscape. Starting from PCIe 5.0, we have seen competition decrease because the requirements for signalling and design make it very difficult for startups to enter. For example, if you do not count R&D expenses and just focus on the IP and mask costs for PCIe Gen5 — including memory, controllers, and Arm cores — you probably need at least $16 to $20 million just for one tape-out at 6nm. If you make mistakes, the costs add up even more. For 4nm, the costs are even higher — about $30 to $40 million for one tape-out, again without including R&D expenses. It is a huge investment. That is why it is very hard for new entrants, and it makes us even more unique. In the past, we saw many startups, especially in China and the U.S.— maybe 20 to 30 players — trying to enter the enterprise SSD market. But now it is shrinking. I do not see any of them announcing PCIe Gen6 designs. I am not even sure if they can survive until the end of the year if they do not have enough cash. Anton Shilov: Well, PCIe 6.0 is hard both in terms of controller and in terms of Physical Layers (PHY). Good to hear that SMI is developing its own PCIe Gen6 solution for enterprise applications. When do you expect it to come to market? Wallace C. Kou: Late 2026 to 2027 — probably late 2026. I think our customers want to align with Nvidia's Rubin platform. But it is a tough schedule because PCIe Gen6 is much more complicated, and the industry — especially the media side — is trying to push storage to the next level, particularly compute storage, to align with Rubin. For traditional data storage, I do not think PCIe 6.0 is really needed until maybe late 2027 or 2028. But for compute storage, they want to try to launch it together with Rubin, since it connects GPU and SSDs for direct access. Anton Shilov: How are these extra costs expected to affect the pricing of PCIe 6.0 controllers for enterprise applications? Wallace C. Kou: I expect the price of enterprise PCIe Gen6 SSD controllers to be at least 25% to 30% higher compared to enterprise PCIe Gen5 SSD controllers. Anton Shilov: When would you expect consumer-grade PCIe 6.0 drives to arrive? Wallace C. Kou: For consumer? You will not see any PCIe Gen6 [solutions] until 2030. PC OEMs have very little interest in PCIe 6.0 right now — they do not even want to talk about it. AMD and Intel do not want to talk about it. That is why we feel very good about the situation — because we dominate PCIe 5.0, both 8-channel and 4-channel controllers. For the next four years, we will be in a comfortable position to continue growing in the client market. Anton Shilov: I have seen a demonstration of a PCIe 6.0 SSD at Computex. Wallace C. Kou: Micron tries to be the first with PCIe 6.0 SSDs, but I think Nvidia has to figure out how they want to use compute storage first. It takes some time for them to figure out how to support peer-to-peer communications from SSD to GPU right now. But the solution is too expensive. Anton Shilov: That solution is expensive because it uses a very specific switch, advanced retimers, and specific software. But if you need it today — for peer-to-peer SSD to GPU communications, you are going to pay for this. Wallace C. Kou: It is true, but compared to the Rubin platform, maybe it is a relatively not that big [in terms of volumes] anyway. Anton Shilov: You mentioned that with every new node, tape outs get more expensive, so you have to choose nodes that provide the right balance between price, yields, and power. Wallace C. Kou: Yes, for returns. You need to have the customer lined up, and you need to have a certain market demand. Otherwise, the investment will not deliver a return. Anton Shilov: Would you expect SSD controllers to get more expensive over time because of more expensive IP, photomasks, and production? Wallace C. Kou: From PCIe 5.0 to PCIe 6.0 controllers, — yes. But for PCIe 4.0 and PCIe 3.0, prices will still gradually decline because there is still competition, especially from some Chinese customers like Maxio and others. PCIe 4.0 controllers will stay in the market environment for at least three to five more years. So, we also have plans to reduce our costs — we are working on cost reduction strategies and will leverage Samsung Foundry to help with that. Anton Shilov: When it comes to Samsung Foundry, which nodes are we talking about? Wallace C. Kou: If I tell you everything, then everyone will know our plans! [laughing] But I can say we have certain technologies that fit perfectly for PCIe 4.0 and 5.0 SSDs. We also want to make sure TSMC does not have any concerns, because currently about 95% of our products are manufactured at TSMC. We use Samsung Foundry for specific reasons — either for Samsung-related projects or for certain cost reductions. If you are asking about process technologies. For TSMC, we are use 12nm, so when we want cost reduction with Samsung, we would choose 8nm for that level (possibly Samsung's 8LPP, which is closer to 10nm than to 7nm-class nodes). If we are on TSMC 6nm and want further cost reduction, we would move to Samsung's 5nm. That gives you a reference. But the big challenge is IP — how to get the IP quickly. Our internal resources are limited, and our teams are already fully focused on new-generation technologies like PCIe Gen6 and UFS 5.0. So, how we manage IP — that is an important secret between Silicon Motion and Samsung Foundry, and it is key to how we grow together. If there is a need to reduce the price, we will have a Samsung version ready. Anton Shilov: Okay, so you are talking about double-sourcing the same controllers? Wallace C. Kou: Not really, just for certain cost reductions. If I see my margins are under threat, I have to lower the costs. But you know, for NAND makers, once they have a design win [with a PC OEM], it is hard for them to change. They do not want to change unless there is a major generational shift, otherwise, it is just a name change. That is why we feel very comfortable. Module makers may need more competitive pricing, but Phison has a different business model than us. They try to sell their full solutions (a controller with NAND). [Inaudible], for example, is [their] only for mobile SSDs — and they can't really expand beyond that. Anton Shilov: Alright, so just to clarify — when you talk about Samsung, does it mean double-sourcing the same controller or developing a new controller to be produced exclusively at Samsung Foundry? Wallace C. Kou: New controller — it will be a new controller, because I have to redesign everything. I have to think about how to maintain the same performance while reducing costs — not just from wafer pricing, but also from design improvements. I need to make sure my product stays competitive, not only for module makers but also for some NAND makers like Micron or SanDisk. They do not focus on retail; they want lower pricing, so I have to offer them something. Anton Shilov: So, in the future, you are going to have more controllers — some produced by TSMC, others by Samsung? Wallace C. Kou: Well, PCIe 5.0 is just now ramping and not yet at full scale. You probably will not see that until maybe two years from now. Anton Shilov: Speaking of IPs, do you actually invent them in-house, or do you license them from third parties? Wallace C. Kou: Key IPs — we always want to develop in-house. But for certain IPs, like DDR controllers or I/O controllers, where we do not have deep expertise, I don't think it's necessary to insist on owning everything. For those, we use third-party IP. As for Samsung — there are certain secrets I cannot share with you. Anton Shilov: But what about PCIe IPs? Wallace C. Kou: All PCIe IPs are in-house today. All UFS IPs are also in-house. Anton Shilov: Apart from SSDs, which segments of the storage market do you expect to grow explosively over the next, say, three to five years? Wallace C. Kou: Enterprise is definitely our focus, not just our focus, but also the focus of NAND makers. Look at what Jensen Huang says — everyone tells you AI relies on three major technologies: compute, storage, and networking. We are already playing in storage, and in the future, we also want to play in connectivity. To really reach certain goals, storage and connectivity must come together to reduce latency, of course. If you ask me where future investments will go, I would say, we definitely need to develop certain networking and connectivity technologies. We are looking at integrating these into a single package — a single chip — to reduce latency and improve efficiency. This can solve some of the infrastructure problems we see today in AI systems. It is something similar to what Intel tried to do with Optane — but they did not really get it done properly. I also see Nvidia trying to build an ecosystem with BlueField. I do not know if you know, but we had a design win with Nvidia's BlueField-3, providing Boost storage. From BlueField, they connect through PCIe switches (likely coming from Broadcom) to 30+ SSDs in a storage bay or storage system. We are also trying to win storage bay and storage system projects with our MonTitan platform. For Boost storage, we already have a design win with Nvidia. Nvidia typically chooses two solutions — one is ours, and the other I cannot disclose, but it is another player that also uses SMI controllers and firmware, just under a different name. Anton Shilov: Do you plan to offer retimers? Wallace C. Kou: No, not retimers. Retimers are not in the picture. Boost Storage sits next to BlueField-3? BlueField is a networking accelerator — a data processing unit (DPU). It serves the storage network as an accelerator, helping offload tasks from the Grace CPU. This is really about data storage. Earlier on, they did not pay much attention, but starting from around Q4 2023 they began defining it seriously and kicked off the project. That is why we had already been working with Nvidia for two years, but it was not really aggressive until Q2 of last year. Since then, they have become very aggressive in defining the product, and they are planning to launch it in late Q3 or Q4 this year. Anton Shilov: You also mentioned compute storage. Does that mean you are working in that direction as well? Wallace C. Kou: No, we do not have the resources to develop compute storage ourselves, but our customers are moving in that direction. They are developing their own hardware and working with Nvidia. We provide the controller and the SDK, but we are not directly developing compute storage. Anton Shilov: Does that storage solution use CXL? Wallace C. Kou: It uses a PCIe interface. But I think we will have more internal meetings to review what they want to define, because right now they are aiming for 100 million IOPS — which is huge. The solutions you see today, like HBM3-based accelerators, are too expensive and not really workable. I believe they are looking for a media change. Optane was supposed to be the ideal solution, but it is gone now. Kioxia is trying to bring XL-NAND and improve its performance. SanDisk is trying to introduce High Bandwidth Flash (HBF), but honestly, I don't really believe in it. Right now, everyone is promoting their own technology, but the industry really needs something fundamentally new. Otherwise, it will be very hard to achieve 100 million IOPS and still be cost-effective. Anton Shilov: Now that you mentioned High Bandwidth Flash (HBF) — are you exploring various innovative types of non-volatile memory beyond NAND? Wallace C. Kou: Many startups come to us, but I do not see any that are really mature or executable at scale with acceptable costs. So far, it is very difficult. I do not see anything today that can replace NAND — it is very, very difficult. Kioxia's XL-NAND, which is 3D SLC NAND, could be one option, but it needs to become four times faster. And maybe it also needs a wider interface — I am not sure yet. We will have to see what the NAND makers can come up with, and how Nvidia will define what they really need — how to truly offload tasks. DDR5 and HBM cannot do that. What they want is to move data directly from GPU to SSD without involving the CPU — that would save a lot of transfer time and reduce latency. Anton Shilov: So basically, for now, you do not see anything replacing NAND in the next few years? Wallace C. Kou: I do not see anything happening in the next two or three years. But this is a long journey, and I am happy that at least now they are paying attention, starting to address the issue — because there is a real need. Anton Shilov: But you do not expect storage-class memory, like Intel's Optane, to become a major thing over the next, say, five years? Wallace C. Kou: I cannot say for sure about five years, but within the next three years, I would say no. Others are trying very hard — Micron has some development work, and others too, but nothing concrete yet. Except for XL-NAND from Kioxia — they are already selling it to hyperscalers today. Anton Shilov: Companies like Micron and SanDisk (previously Western Digital) have had SCM in their roadmap for years. So, they have shown SCM in the roadmap for years. Yet, these technologies change from time to time: from ReRAM a decade ago to something else today. There is no clarity at all. Wallace C. Kou: Today, Nvidia is stepping in to define things. Before, everyone talked about SCM — hyperscalers like Google, Microsoft, Amazon, and Meta — but in the end, they just showed interest; they did not actually commit. Now it is different — they are willing to pay, that changes everything. If they are willing to pay the price, it will change the whole mentality. If Jensen Huang really wants to drive this forward, it could transform the future of data centers — making AI training much faster and more efficient. This would create a new media ecosystem, and I think more players will invest and try harder to move in that direction. Anton Shilov: Then again, specialized storage solutions could be based on the NAND technology. Wallace C. Kou: It could be XL-NAND, just with a wider interface for extra bandwidth, right? Anton Shilov: You have mentioned QLC 3D NAND, XL-NAND. Would you expect PLC to become a viable thing over the next few years? Wallace C. Kou: Whatever Kioxia said before, I cannot comment on that. But I see it as very difficult for PLC to become commercial within the next five years. It's very challenging because the signal management would be extremely complex. I am already starting to see beyond 400-layer 3D NAND stacks, and the controller has to work very hard to overcome the inherent weaknesses of more bits per cell — like lower retention and endurance. We have already started using 16K LDPC (Low-Density Parity-Check) per codeword to provide better protection for enterprise products. There are many challenges — and nobody really wants soft decoding because it introduces the risk of reduced performance. At the same time, you must extend the lifecycle of the entire drive. It is all about balancing the technology and keeping up with the dynamic developments from NAND makers like Samsung, SK hynix, Kioxia, Solidigm, and YMTC. That is exactly what we are focused on. Anton Shilov: So, TLC and QLC will stay with us for years to come? Wallace C. Kou: Yes. Kioxia's and SanDisk's QLC is very good, and Micron's N69 QLC also looks strong. For Samsung and SK hynix, we are waiting to see their V9 generation next year — with 2TB QLC dies. They are promising very competitive products, but we'll have to test them before making any final comments. Anton Shilov: What is your short-term and mid-term business strategy and plans? Wallace C. Kou: Storage looks like it is going to grow rapidly — maybe not from unit volume, but from capacity, because storage sizes are getting much bigger. For us, our strategy is to keep gaining market share. In automotive, we are gaining share. In enterprise, we started from almost nothing and are gaining share. In client storage, we are definitely gaining share. Even in mobile, the market trend favors Silicon Motion. Today, we are about 20% of the 1.2 billion smartphone storage units, but within three years, we will grow to 30% for eMMC and UFS. I guarantee it, because the market trend favors us. You have to understand the whole mobile environment. For the past 15 years, Samsung, SK hynix, and Micron dominated mobile storage because they combined mobile DRAM and NAND in a single package — eMCP or uMCP — especially for mainstream and value-line smartphones. That made procurement much easier for smartphone makers. For us to win the smartphone business, we have to win over the NAND makers — Samsung, SK hynix, Micron. If they use fully integrated solutions, we are out. But we have worked very hard with module makers, starting more than 10 years ago with Longsys and Biwin. Back then, many mistakes were made, but three years ago, we started to see real results. Now, eMMC is declining in smartphones and UFS 2.2 is taking over. But eMMC is still growing in other areas — automotive, set-top boxes, smart TVs, IoT devices, even AI glasses. eMMC shipments are about 120 million units today and will grow to 130 million next year, and most of those devices use Silicon Motion controllers. Major DRAM players have exited eMMC because they do not see profits there anymore — that is where we stepped in. Similarly, UFS 2.2 is growing in value-line smartphones. We see a trend where Chinese smartphone makers — Oppo, Vivo, Xiaomi, Honor — are moving away from UMCP and instead using discrete NAND and LPDDR4/5 DRAM separately because it is cheaper and good enough. They use standard UFS solutions, and that is why module makers are jumping in. This also forces NAND makers to decide: should they continue offering UFS 2.2 integrated solutions, or should they work with Silicon Motion and outsource the controller and solution design? Anton Shilov: How is SMI's business split between SSDs, mobile storage, embedded storage, and expandable storage? Wallace C. Kou: So far, about two-thirds of our revenue comes from client SSDs, and about 30% comes from mobile storage. Mobile might even go a little higher this year. The rest — enterprise is still very small, and expandable storage is even smaller, just about 5%. But we are seeing growth in automotive — automotive already reached 5% of our revenue starting from Q3 last year. We expect automotive to grow and exceed 10% by 2026 – 2027. Enterprise should also grow — we expect it to reach around 5% to 10% of revenue by 2026 – 2027. Overall, non-client SSD and mobile segments will likely grow to around 20% by 2026 – 2027. So we want to become more balanced across segments. Also, we expect that by Q4, we will have a $1 billion revenue. Next year should be even stronger, and in the second half, you will start to see [new products] CR (customer ramp) revenue and new design wins ramping up. Even with tariffs and all the uncertainty, many investors and analysts tell us that most U.S. semiconductor companies are trimming down their guidance for the second half. But we look very promising because we are gaining market share, and our design-in pipeline is very strong. That's why we feel very comfortable with what we are doing today. Anton Shilov: What about your acquisition strategy? Over three decades you acquired Feiya Technology, Shannon Technology, and Future Communications IC (which was later sold). Only three companies. Why is that? Any future M&A plans? Wallace C. Kou: As I have mentioned before, we have done two major acquisitions in the past. The first was FCI (Future Communications IC). We were very interested in FCI because they were a successful RF company and a leader in mobile TV technology — particularly in Korea's mobile TV market. Japan was also launching mobile TV around that time — around 2005–2007 — and it looked very promising. We also saw some early adoption in Brazil, and the UK was trying to promote digital audio broadcasting. But in the end, mobile TV did not take off. iPhone did not support it, and video streaming — thanks to 4G — killed mobile TV before it could become mainstream. Even though FCI had success with Samsung for 4G and 5G RF, Samsung eventually developed their own RF solutions. Without strong demand and with no expertise on our side in RF, we decided to sell FCI to Dialog Semiconductor. The second acquisition was Shannon Systems, which we invested in starting around 2015. Shannon specialized in enterprise storage and had a unique architecture — atomic write and open-channel SSDs — and they worked closely with Alibaba and Baidu. Initially, it helped us gain a better understanding of the enterprise storage business in China. Revenue grew — Shannon almost reached $100 million a year — but it was difficult to make a profit because we had to procure NAND ourselves and build the whole product. Without strong, consistent customers and having to compete with NAND makers like Samsung, who could sell SSDs below cost, it was hard to sustain. Eventually, we changed our entire strategy. We decided to exit the full solution business because manufacturing and NAND procurement are not our strengths. Instead, we refocused on building high-quality PCIe controllers, because without strong PCIe IP and architecture, we could not grow in the mainstream market. About five years ago, we rebuilt the enterprise team. We shut down Shannon's solution operations and built a new controller architecture team — hiring people from Microchip, Marvell, and others. We expanded ASIC design, firmware development, C-modeling, qualification, and system architecture teams. That is how we developed MonTitan — our new enterprise controller platform — based on specifications from hyperscalers and leading enterprise server companies like Dell and HPE. MonTitan's architecture is unique, and it has helped us grow from PCIe 5.0 onward. Now we have tier-one customers in both the U.S. and China, and we're part of Nvidia's ecosystem. Looking ahead to PCIe 6.0, we have expanded our engine, and we already have formal engagements with top U.S. and Chinese customers. We have restructured R&D — China R&D focuses on Chinese customers, and U.S./Taiwan R&D focuses on U.S. customers. We maintain strict separation to avoid any IP crossing the Pacific Ocean and to stay fully compliant with U.S. regulations. At the same time, we continue to support our Chinese customers. We do not want to be labeled as anti-China — all major U.S. players still need their China business, and so do we. But we must balance that carefully and maintain a strong foundation for growing our enterprise business globally. Anton Shilov: Does that essentially mean that you strongly believe that internal organic development is a better strategy for growth than 'pure' M&A? Wallace C. Kou: For the enterprise portion, yes — I believe we need strong internal R&D teams. From an architecture perspective, we are capable, but I need more R&D resources — more ASIC and firmware engineers — to support many customers. I see QLC SSDs becoming very critical, and we are unique in our QLC management, especially with FDP (Flexible Data Placement), which makes us a complete solution provider and helps us build an ecosystem. For example, Kingston or Union can now be a supplier for SMI — many companies can use our controllers to make drives and support customers. But at the end of the day, I need to deliver real results. So far, I do not see M&A as a priority — at least not by acquiring large installed companies. If we were to consider acquisitions, I would prefer companies in Taiwan where I can manage them directly. U.S. or China M&A is very difficult — I have learned that lesson. U.S. acquisitions are too expensive, and with U.S.-China tensions, it is not practical. In the U.S., Korea, Japan, and China, we already have teams and we can grow organically. The bigger challenge is competition — it is hard to compete for R&D talent when Nvidia, Google, and others are hiring aggressively worldwide. But if there is a candidate in Taiwan that fits well, I would consider an acquisition — especially in IP areas related to connectivity. We have already started to build internal teams to develop PCIe Gen5/Gen6 controller IP and connectivity solutions separately, but I would like to have more resources to speed up development. I need more than just storage products — I need connectivity products too. Anton Shilov: You have navigated Silicon Motion through various crises, including the 2008–2009 financial crisis and the 2020–2021 pandemic. Do you have any special strategy for navigating through major disruptions? Wallace C. Kou: Yes. Since COVID and even through the failed MaxLinear acquisition, we've made significant management changes. We've upgraded our technology and algorithm leadership — changed our VP of legal, VP of operations, and manufacturing operations. We also moved to a business unit-driven model and strengthened our relationships with top-tier customers globally. So now, we know better how to manage through potential disasters and crises. Frankly, the Trump tariffs are another crisis. But we have been through enough to understand how to prepare. For example, in the U.S., we do not ship a lot directly — we have very few direct customers there — but Cisco is one of them. Anton Shilov: Tariffs were actually my next question. Wallace C. Kou: I can assure you, every major U.S. customer knows how to reduce their risks. They work with global manufacturing partners in Malaysia, Thailand, Mexico, Brazil — you name it. They know how to adapt, just like Kingston, which has a fully booked factory in California now because of this risk management approach. When I was at the JP Morgan conference last week, I heard many CEOs and even ambassadors talk about it. I would not say people ignore the tariffs, but they seem prepared. Everyone faces the same challenges, but they believe they will move on. As for Trump — he is very unpredictable — but in the end, I do not believe he would go extreme on tariffs, because that would harm himself and the Republican Party. Anton Shilov: It does not seem it makes sense for your to outsource part of your production to TSMC Arizona, does it? Wallace C. Kou: Never — because we are too small, and we have much more control in Taiwan. Why would I move unless someone forces me? Apple, maybe they have to. Nvidia might have to. Broadcom, Qualcomm — they need to do it to keep Trump happy. But we are too small to even show up on the radar, so I will not do it. Anton Shilov: Sure, and you just mentioned you have only one big direct customer in the U.S., so it hardly makes sense to produce chips there just for one client. Wallace C. Kou: Exactly. Most of my major customers manufacture overseas. They will figure out how to avoid the tariffs. I do not have to ship directly to the U.S. Anton Shilov: Do you think tariffs will affect the storage market in general, especially considering that NAND memory production is almost entirely based in Asia? Wallace C. Kou: So far, I do not think tariffs will affect storage much. I think the impact of tariffs on storage will be much less than on other sectors. Because of the AI trend, everything needs more capacity, right? And I do not count by unit sales — I count by capacity growth. As capacity demand increases, it drives storage demand. Meanwhile, NAND makers are trying to control bit output carefully to keep the market balanced, because overall channel demand is still weak. For example, smartphone growth is now only around 3% to 5%, and PC growth is about 4% to 5% — not the 7% to 8% growth people predicted late last year. Tariffs may have some impact, but storage demand is still strong. For us, I cannot control the impact of tariffs, but I can control gaining market share. As long as we continue to gain market share, we will be fine and we will grow. Anton Shilov: Thank you for a great interview with deep insights into the NAND industry. Wallace C. Kou: Thank you, Tom's Hardware on Google News to get our up-to-date news, analysis, and reviews in your feeds. Make sure to click the Follow button.
Yahoo
30-04-2025
- Business
- Yahoo
Silicon Motion Announces Results for the Period Ended March 31, 2025
Business Highlights First quarter of 2025 sales decreased 13% Q/Q and decreased 12% Y/Y SSD controller sales: 1Q of 2025 decreased 10% to 15% Q/Q and decreased 20% to 25% Y/Y eMMC+UFS controller sales: 1Q of 2025 decreased 15% to 20% Q/Q and decreased 0% to 5% Y/Y SSD solutions sales: 1Q of 2025 decreased 20% to 25% Q/Q and decreased 35% to 40% Y/Y Announced new $50 million share repurchase program Financial Highlights1Q 2025 GAAP 1Q 2025 Non-GAAP* Net sales $166.5 million (-13% Q/Q, -12% Y/Y) $166.5 million (-13% Q/Q, -12% Y/Y) Gross margin 47.1 % 47.1 % Operating margin 5.9 % 8.9 % Earnings per diluted ADS $0.58 $0.60 * Please see supplemental reconciliations of U.S. Generally Accepted Accounting Principles ("GAAP") to all non-GAAP financial measures mentioned herein towards the end of this news release. TAIPEI and MILPITAS, Calif., April 30, 2025 /PRNewswire/ -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) ("Silicon Motion," the "Company" or "we") today announced its financial results for the quarter ended March 31, 2025. For the first quarter of 2025, net sales (GAAP) decreased sequentially to $166.5 million from $191.2 million in the fourth quarter of 2024. Net income (GAAP) decreased to $19.5 million, or $0.58 per diluted American depositary share ("ADS") (GAAP), from net income (GAAP) of $21.6 million, or $0.64 per diluted ADS (GAAP), in the fourth quarter of 2024. For the first quarter of 2025, net income (non-GAAP) decreased to $20.3 million, or $0.60 per diluted ADS (non-GAAP), from net income (non-GAAP) of $29.4 million, or $0.87 per diluted ADS (non-GAAP), in the fourth quarter of 2024. All financial numbers are in U.S. dollars unless otherwise noted. First Quarter of 2025 Review "Despite the challenging macro environment in the first quarter of 2025, we executed our plan and delivered quarterly revenue at the high end of our guided range and delivered another quarter of gross margin expansion," stated Wallace Kou, President and CEO of Silicon Motion. "Our industry leading PCIe Gen 5 controller experienced stronger than expected demand during the quarter, partially driven by growing AI inference demands from white box server makers leveraging more mainstream hardware components. Our eMMC and UFS controllers also experienced better than expected demand given a rebound in the smartphone market and our ongoing market share gains. While the near-term remains challenging given the broader economic challenges associated with tariffs and potential trade wars, we remain focused on delivering strong, sustainable long-term growth through product diversification; expanding into new markets; and growing market share across our portfolio of consumer, enterprise, automotive, industrial and storage solutions." Key Financial Results ($ in millions, except per ADS amounts) GAAP Non-GAAP 1Q 2025 4Q 2024 1Q 2024 1Q 2025 4Q 2024 1Q 2024 Revenue $166.5 $191.2 $189.3 $166.5 $191.2 $189.3 Gross profit Percent of revenue $78.4 47.1% $87.6 45.8% $85.1 45.0% $78.4 47.1% $87.9 46.0% $85.2 45.0% Operating expenses $68.6 $69.9 $67.2 $63.6 $58.3 $62.5 Operating profit Percent of revenue $9.8 5.9% $17.7 9.3% $18.0 9.5% $14.9 8.9% $29.6 15.5% $22.6 12.0% Earnings per diluted ADS $0.58 $0.64 $0.48 $0.60 $0.87 $0.64 Other Financial Information ($ in millions) 1Q 2025 4Q 2024 1Q 2024 Cash, cash equivalents, and restricted cash—end of period $331.7 $334.3 $349.3 Dividend payments $7.0 $7.3 $5.0 Dividend payments $17.0 $16.8 $16.8 Share repurchases $24.3 -- -- During the first quarter of 2025, we had $11.7 million of capital expenditures, including $7.0 million for the routine purchases of testing equipment, software, design tools and other items, and $4.7 million for building construction in Hsinchu, Taiwan. Returning Value to Shareholders On February 6, 2025, we announced that our Board of Directors had authorized a new program for the Company to repurchase up to $50 million of our ADSs over a six-month period. In the first quarter of 2025, we repurchased $24.3 million of our ADSs at an average price of $56.96 per ADS. Business Outlook "We are rapidly expanding our market opportunities as we invest in new products and enter new markets, which we anticipate will drive improved revenue and profitability for many years to come. In 2025, we expect to benefit from the introduction of several new products, including our 8-channel PCIE Gen 5 controller, our 4-channel PCIe Gen 5 controller targeting the mass market that will be introduced in late 2025, our higher-end UFS 4.1 and new low-cost UFS 2.2 controllers that will ramp in the second half of 2025. We introduced our first MonTitan enterprise/AI-class products at the end of 2024, and we expect these to ramp-up production with our first customers in the second half of 2025. Additionally, we continue to expand our automotive product portfolio and our market share across multiple applications. While the near-term environment remains challenging given the macro environment, including the potential impact of tariffs and potential trade wars, we continue to believe we will see a strong rebound in the consumer markets in the second half of 2025, enhanced by our new product introductions, and we continue to target a revenue run rate of $1 billion as we exit the year." For the second quarter of 2025, management expects: ($ in millions, except percentages) GAAP Non-GAAP Adjustment Non-GAAP Revenue $175 to $183 +5% to 10% Q/Q -- $175 to $183 +5% to 10% Q/Q Gross margin 47.0% to 48.0% Approximately $0.1* 47.0% to 48.0% Operating margin 6.6% to 9.2% Approximately $3.1 to $4.1** 8.9% to 10.9% * Projected gross margin (non-GAAP) excludes $0.1 million of stock-based compensation.** Projected operating margin (non-GAAP) excludes $3.1million to $4.1 million of stock-based compensation and dispute related expenses. Conference Call & Webcast: The Company's management team will conduct a conference call at 8:00 am Eastern Time on April 30, 2025. Conference Call DetailsParticipants must register in advance to join the conference call using the link provided below. Conference access information (including dial-in information and a unique access PIN) will be provided in the email received upon registration. Participant Online Registration: A webcast of the call will be available on the Company's website at Discussion of Non-GAAP Financial Measures To supplement the Company's unaudited selected financial results calculated in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the Company discloses certain non-GAAP financial measures that exclude stock-based compensation and other items, including gross profit (non-GAAP), gross margin (non-GAAP), operating expenses (non-GAAP), operating profit (non-GAAP), operating margin (non-GAAP), non-operating income (expense) (non-GAAP), net income (non-GAAP), and earnings per diluted ADS (non-GAAP). These non-GAAP measures are not in accordance with or an alternative to GAAP and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measure. We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. Our non-GAAP financial measures are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because they are consistent with the financial models and estimates published by many analysts who follow the Company. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with our forecasts, and for benchmarking our performance externally against our competitors. Also, when evaluating potential acquisitions, we exclude the items described below from our consideration of the target's performance and valuation. Since we find these measures to be useful, we believe that our investors benefit from seeing the results from management's perspective in addition to seeing our GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering: the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results; the ability to better identify trends in the Company's underlying business and perform related trend analysis; a better understanding of how management plans and measures the Company's underlying business; and an easier way to compare the Company's operating results against analyst financial models and operating results of our competitors that supplement their GAAP results with non-GAAP financial measures. The following are explanations of each of the adjustments that we incorporate into our non-GAAP measures, as well as the reasons for excluding each of these individual items in our reconciliation of these non-GAAP financial measures: Stock-based compensation expense consists of non-cash charges related to the fair value of restricted stock units awarded to employees. The Company believes that the exclusion of these non-cash charges provides for more accurate comparisons of our operating results to our peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact of share-based compensation on its operating results. Restructuring charges relate to the restructuring of our underperforming product lines, principally the write-down of NAND flash, embedded DRAM and SSD inventory valuation and severance payments. Dispute related expenses consist of legal, consultant, other fees and resolution related to the dispute. Foreign exchange loss (gain) consists of translation gains and/or losses of non-US$ denominated current assets and current liabilities, as well as certain other balance sheet items, which result from the appreciation or depreciation of non-US$ currencies against the US$. We do not use financial instruments to manage the impact on our operations from changes in foreign exchange rates, and because our operations are subject to fluctuations in foreign exchange rates, we therefore exclude foreign exchange gains and losses when presenting non-GAAP financial measures. Realized/Unrealized loss (gain) on investments relates to the disposal and net change in fair value of long-term investments. Silicon Motion Technology Corporation Consolidated Statements of Income(in thousands, except percentages and per ADS data, unaudited)For Three Months EndedMar. 31,2024($)Dec. 31,2024($)Mar. 31,2025($) Net Sales 189,311191,160166,492 Cost of sales 104,191103,56088,125 Gross profit Operating expenses Research & development 85,120 54,39287,600 54,15678,367 55,026 Sales & marketing 6,3047,3607,115 General & administrative 6,4748,3506,460 Operating income Non-operating income (expense) Interest income, net 17,950 3,06617,734 3,7689,766 2,929 Foreign exchange gain, net 5881,046373 Realized/Unrealized gain(loss) on investments (1,608)9563,296 Subtotal 2,0465,7706,598 Income before income tax 19,99623,50416,364 Income tax expense (benefit) 3,9801,935(3,099) Net income 16,01621,56919,463 Earnings per basic ADS 0.48 0.64 0.58 Earnings per diluted ADS 0.480.640.58 Margin Analysis: Gross margin 45.0 % 45.8 %47.1 % Operating margin 9.5 %9.3 %5.9 % Net margin 8.5 %11.3 %11.7 % Additional Data: Weighted avg. ADS equivalents 33,508 33,690 33,634 Diluted ADS equivalents 33,70133,81433,827 Silicon Motion Technology Corporation Reconciliation of GAAP to Non-GAAP Operating Results(in thousands, except percentages and per ADS data, unaudited)For Three Months EndedMar. 31,2024($) Dec. 31,2024($) Mar. 31,2025($)Gross profit (GAAP) 85,12087,60078,367Gross margin (GAAP) 45.0 %45.8 %47.1 %Stock-based compensation (A) 7216273Restructuring charges -164-Gross profit (non-GAAP) 85,19287,92678,440Gross margin (non-GAAP) 45.0 %46.0 %47.1 % Operating expenses (GAAP) 67,17069,86668,601Stock-based compensation (A) (3,093)(9,585)(4,738)Dispute related expenses (1,532)(1,999)(277)Operating expenses (non-GAAP) 62,54558,28263,586 Operating profit (GAAP) 17,95017,7349,766Operating margin (GAAP) 9.5 %9.3 %5.9 %Total adjustments to operating profit 4,69711,9105,088Operating profit (non-GAAP) 22,64729,64414,854Operating margin (non-GAAP) 12.0 %15.5 %8.9 % Non-operating income (expense) (GAAP) 2,0465,7706,598Foreign exchange loss (gain), net (588)(1,046)(373)Realized/Unrealized loss (gain) on investments 1,608(956)(3,296)Non-operating income (expense) (non-GAAP) 3,0663,7682,929 Net income (GAAP) 16,01621,56919,463Total pre-tax impact of non-GAAP adjustments 5,7179,9081,419Income tax impact of non-GAAP adjustments (147)(2,049)(610)Net income (non-GAAP) 21,58629,42820,272 Earnings per diluted ADS (GAAP) $0.48$0.64$0.58Earnings per diluted ADS (non-GAAP) $0.64$0.87$0.60 Shares used in computing earnings per diluted ADS (GAAP) 33,70133,81433,827Non-GAAP adjustments 2618120Shares used in computing earnings per diluted ADS (non-GAAP) 33,72733,99533,847 (A)Excludes stock-based compensation as follows: Cost of sales 72 162 73Research & development 2,1436,6703,003Sales & marketing 347978862General & administrative 6031,937873Silicon Motion Technology Corporation Consolidated Balance Sheet(In thousands, unaudited)Mar. 31, 2024 ($)Dec. 31, 2024 ($)Mar. 31, 2025 ($) Cash and cash equivalents 294,814276,068275,140 Accounts receivable (net) 186,154233,744206,693 Inventories 253,316199,229180,903 Refundable deposits – current 49,61054,64553,015 Prepaid expenses and other current assets 17,94431,18732,102 Total current assets 801,838794,873747,853 Long-term investments 15,48917,32620,636 Property and equipment (net) 174,420188,398193,603 Other assets 32,52930,73929,310 Total assets 1,024,2761,031,336991,402 Accounts payable 64,810 17,773 23,048 Income tax payable 10,70213,10714,782 Accrued expenses and other current liabilities 135,425168,624130,277 Total current liabilities 210,937199,504168,107 Other liabilities 59,88359,54850,968 Total liabilities 270,820259,052219,075 Shareholders' equity 753,456772,284772,327 Total liabilities & shareholders' equity 1,024,2761,031,336991,402 Silicon Motion Technology Corporation Condensed Consolidated Statements of Cash Flows(in thousands, unaudited)For Three Months EndedMar. 31,2024($) Dec. 31,2024($) Mar. 31,2025($) Net income 16,01621,56919,463Depreciation & amortization 5,6087,2567,225Stock-based compensation 3,1659,7474,811Investment losses (gain) & disposals 1,608(956)(3,309)Changes in operating assets and liabilities (18,586)(43,774)22,082Net cash provided by (used in) operating activities 7,811(6,158)50,272 Purchase of property & equipment (10,749) (10,836) (11,661)Proceeds from disposal of properties -313Purchase of long-term investments -(4,173)-Disposal of long-term investments -4,432-Net cash provided by (used in) investing activities (10,749)(10,574)(11,648) Dividend payments (16,808) (16,814) (16,956)Share repurchases --(24,291)Net cash used in financing activities (16,808)(16,814)(41,247) Net increase (decrease) in cash, cash equivalents & restricted cash (19,746) (33,546) (2,623)Effect of foreign exchange changes 35(717)37Cash, cash equivalents & restricted cash—beginning of period 368,990368,596334,333Cash, cash equivalents & restricted cash—end of period 349,279334,333331,747 About Silicon Motion: We are the global leader in supplying NAND flash controllers for solid state storage devices. We supply more SSD controllers than any other company in the world for servers, PCs and other client devices and are the leading merchant supplier of eMMC and UFS embedded storage controllers used in smartphones, IoT devices and other applications. We also supply customized high-performance hyperscale data center and specialized industrial and automotive SSD solutions. Our customers include most of the NAND flash vendors, storage device module makers and leading OEMs. For further information on Silicon Motion, visit us at Forward-Looking Statements: This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or the negative of these terms or other comparable such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends or our actual results of operations, financial condition or business prospects 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 the unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis; the loss of one or more key customers or the significant reduction, postponement, rescheduling or cancellation of orders from one or more customers; general economic conditions or conditions in the semiconductor or consumer electronics markets; the impact of inflation on our business and customer's businesses and any effect this has on economic activity in the markets in which we operate; the functionalities and performance of our information technology ("IT") systems, which are subject to cybersecurity threats and which support our critical operational activities, and any breaches of our IT systems or those of our customers, suppliers, partners and providers of third-party licensed technology; the effects on our business and our customer's business taking into account the ongoing U.S.-China tariffs and trade disputes; the uncertainties associated with any future global or regional pandemic; the continuing tensions between Taiwan and China, including enhanced military activities; decreases in the overall average selling prices of our products; changes in the relative sales mix of our products; changes in our cost of finished goods; supply chain disruptions that have affected us and our industry as well as other industries on a global basis; the payment, or non-payment, of cash dividends in the future at the discretion of our board of directors and any announced planned increases in such dividends; changes in our cost of finished goods; the availability, pricing, and timeliness of delivery of other components and raw materials used in the products we sell given the current raw material supply shortages being experienced in our industry; our customers' sales outlook, purchasing patterns, and inventory adjustments based on consumer demands and general economic conditions; any potential impairment charges that may be incurred related to businesses previously acquired or divested in the future; our ability to successfully develop, introduce, and sell new or enhanced products in a timely manner; and the timing of new product announcements or introductions by us or by our competitors. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the U.S. Securities and Exchange Commission, including our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on April 30, 2024. Other than as required under the securities laws, we do not intend, and do not undertake any obligation to, update or revise any forward-looking statements, which apply only as of the date of this news release. Silicon Motion Investor Contacts:Tom Sepenzis Selina HsiehSenior Director of IR & Strategy Investor Relationstsepenzis@ ir@ View original content to download multimedia: SOURCE Silicon Motion Technology Corporation Sign in to access your portfolio Error in retrieving data
Malaysian Reserve
30-04-2025
- Business
- Malaysian Reserve
Silicon Motion Announces Results for the Period Ended March 31, 2025
Business Highlights First quarter of 2025 sales decreased 13% Q/Q and decreased 12% Y/Y SSD controller sales: 1Q of 2025 decreased 10% to 15% Q/Q and decreased 20% to 25% Y/Y eMMC+UFS controller sales: 1Q of 2025 decreased 15% to 20% Q/Q and decreased 0% to 5% Y/Y SSD solutions sales: 1Q of 2025 decreased 20% to 25% Q/Q and decreased 35% to 40% Y/Y Announced new $50 million share repurchase program SSD controller sales: 1Q of 2025 decreased 10% to 15% Q/Q and decreased 20% to 25% Y/Y eMMC+UFS controller sales: 1Q of 2025 decreased 15% to 20% Q/Q and decreased 0% to 5% Y/Y SSD solutions sales: 1Q of 2025 decreased 20% to 25% Q/Q and decreased 35% to 40% Y/Y Financial Highlights 1Q 2025 GAAP 1Q 2025 Non-GAAP* Net sales $166.5 million (-13% Q/Q, -12% Y/Y) $166.5 million (-13% Q/Q, -12% Y/Y) Gross margin 47.1 % 47.1 % Operating margin 5.9 % 8.9 % Earnings per diluted ADS $0.58 $0.60 * Please see supplemental reconciliations of U.S. Generally Accepted Accounting Principles ('GAAP') to all non-GAAP financial measures mentioned herein towards the end of this news release. TAIPEI and MILPITAS, Calif., April 30, 2025 /PRNewswire/ — Silicon Motion Technology Corporation (NasdaqGS: SIMO) ('Silicon Motion,' the 'Company' or 'we') today announced its financial results for the quarter ended March 31, 2025. For the first quarter of 2025, net sales (GAAP) decreased sequentially to $166.5 million from $191.2 million in the fourth quarter of 2024. Net income (GAAP) decreased to $19.5 million, or $0.58 per diluted American depositary share ('ADS') (GAAP), from net income (GAAP) of $21.6 million, or $0.64 per diluted ADS (GAAP), in the fourth quarter of 2024. For the first quarter of 2025, net income (non-GAAP) decreased to $20.3 million, or $0.60 per diluted ADS (non-GAAP), from net income (non-GAAP) of $29.4 million, or $0.87 per diluted ADS (non-GAAP), in the fourth quarter of 2024. All financial numbers are in U.S. dollars unless otherwise noted. First Quarter of 2025 Review 'Despite the challenging macro environment in the first quarter of 2025, we executed our plan and delivered quarterly revenue at the high end of our guided range and delivered another quarter of gross margin expansion,' stated Wallace Kou, President and CEO of Silicon Motion. 'Our industry leading PCIe Gen 5 controller experienced stronger than expected demand during the quarter, partially driven by growing AI inference demands from white box server makers leveraging more mainstream hardware components. Our eMMC and UFS controllers also experienced better than expected demand given a rebound in the smartphone market and our ongoing market share gains. While the near-term remains challenging given the broader economic challenges associated with tariffs and potential trade wars, we remain focused on delivering strong, sustainable long-term growth through product diversification; expanding into new markets; and growing market share across our portfolio of consumer, enterprise, automotive, industrial and storage solutions.' Key Financial Results ($ in millions, except per ADS amounts) GAAP Non-GAAP 1Q 2025 4Q 2024 1Q 2024 1Q 2025 4Q 2024 1Q 2024 Revenue $166.5 $191.2 $189.3 $166.5 $191.2 $189.3 Gross profit Percent of revenue $78.4 47.1% $87.6 45.8% $85.1 45.0% $78.4 47.1% $87.9 46.0% $85.2 45.0% Operating expenses $68.6 $69.9 $67.2 $63.6 $58.3 $62.5 Operating profit Percent of revenue $9.8 5.9% $17.7 9.3% $18.0 9.5% $14.9 8.9% $29.6 15.5% $22.6 12.0% Earnings per diluted ADS $0.58 $0.64 $0.48 $0.60 $0.87 $0.64 Other Financial Information ($ in millions) 1Q 2025 4Q 2024 1Q 2024 Cash, cash equivalents, and restricted cash—end of period $331.7 $334.3 $349.3 Dividend payments $7.0 $7.3 $5.0 Dividend payments $17.0 $16.8 $16.8 Share repurchases $24.3 — — During the first quarter of 2025, we had $11.7 million of capital expenditures, including $7.0 million for the routine purchases of testing equipment, software, design tools and other items, and $4.7 million for building construction in Hsinchu, Taiwan. Returning Value to Shareholders On February 6, 2025, we announced that our Board of Directors had authorized a new program for the Company to repurchase up to $50 million of our ADSs over a six-month period. In the first quarter of 2025, we repurchased $24.3 million of our ADSs at an average price of $56.96 per ADS. Business Outlook 'We are rapidly expanding our market opportunities as we invest in new products and enter new markets, which we anticipate will drive improved revenue and profitability for many years to come. In 2025, we expect to benefit from the introduction of several new products, including our 8-channel PCIE Gen 5 controller, our 4-channel PCIe Gen 5 controller targeting the mass market that will be introduced in late 2025, our higher-end UFS 4.1 and new low-cost UFS 2.2 controllers that will ramp in the second half of 2025. We introduced our first MonTitan enterprise/AI-class products at the end of 2024, and we expect these to ramp-up production with our first customers in the second half of 2025. Additionally, we continue to expand our automotive product portfolio and our market share across multiple applications. While the near-term environment remains challenging given the macro environment, including the potential impact of tariffs and potential trade wars, we continue to believe we will see a strong rebound in the consumer markets in the second half of 2025, enhanced by our new product introductions, and we continue to target a revenue run rate of $1 billion as we exit the year.' For the second quarter of 2025, management expects: ($ in millions, except percentages) GAAP Non-GAAP Adjustment Non-GAAP Revenue $175 to $183 +5% to 10% Q/Q — $175 to $183 +5% to 10% Q/Q Gross margin 47.0% to 48.0% Approximately $0.1* 47.0% to 48.0% Operating margin 6.6% to 9.2% Approximately $3.1 to $4.1** 8.9% to 10.9% * Projected gross margin (non-GAAP) excludes $0.1 million of stock-based compensation.** Projected operating margin (non-GAAP) excludes $3.1million to $4.1 million of stock-based compensation and dispute related expenses. Conference Call & Webcast: The Company's management team will conduct a conference call at 8:00 am Eastern Time on April 30, 2025. Conference Call DetailsParticipants must register in advance to join the conference call using the link provided below. Conference access information (including dial-in information and a unique access PIN) will be provided in the email received upon registration. Participant Online Registration: A webcast of the call will be available on the Company's website at Discussion of Non-GAAP Financial Measures To supplement the Company's unaudited selected financial results calculated in accordance with U.S. Generally Accepted Accounting Principles ('GAAP'), the Company discloses certain non-GAAP financial measures that exclude stock-based compensation and other items, including gross profit (non-GAAP), gross margin (non-GAAP), operating expenses (non-GAAP), operating profit (non-GAAP), operating margin (non-GAAP), non-operating income (expense) (non-GAAP), net income (non-GAAP), and earnings per diluted ADS (non-GAAP). These non-GAAP measures are not in accordance with or an alternative to GAAP and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measure. We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. Our non-GAAP financial measures are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because they are consistent with the financial models and estimates published by many analysts who follow the Company. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with our forecasts, and for benchmarking our performance externally against our competitors. Also, when evaluating potential acquisitions, we exclude the items described below from our consideration of the target's performance and valuation. Since we find these measures to be useful, we believe that our investors benefit from seeing the results from management's perspective in addition to seeing our GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering: the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results; the ability to better identify trends in the Company's underlying business and perform related trend analysis; a better understanding of how management plans and measures the Company's underlying business; and an easier way to compare the Company's operating results against analyst financial models and operating results of our competitors that supplement their GAAP results with non-GAAP financial measures. The following are explanations of each of the adjustments that we incorporate into our non-GAAP measures, as well as the reasons for excluding each of these individual items in our reconciliation of these non-GAAP financial measures: Stock-based compensation expense consists of non-cash charges related to the fair value of restricted stock units awarded to employees. The Company believes that the exclusion of these non-cash charges provides for more accurate comparisons of our operating results to our peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact of share-based compensation on its operating results. Restructuring charges relate to the restructuring of our underperforming product lines, principally the write-down of NAND flash, embedded DRAM and SSD inventory valuation and severance payments. Dispute related expenses consist of legal, consultant, other fees and resolution related to the dispute. Foreign exchange loss (gain) consists of translation gains and/or losses of non-US$ denominated current assets and current liabilities, as well as certain other balance sheet items, which result from the appreciation or depreciation of non-US$ currencies against the US$. We do not use financial instruments to manage the impact on our operations from changes in foreign exchange rates, and because our operations are subject to fluctuations in foreign exchange rates, we therefore exclude foreign exchange gains and losses when presenting non-GAAP financial measures. Realized/Unrealized loss (gain) on investments relates to the disposal and net change in fair value of long-term investments. Silicon Motion Technology Corporation Consolidated Statements of Income(in thousands, except percentages and per ADS data, unaudited) For Three Months Ended Mar. 31,2024($) Dec. 31,2024($) Mar. 31,2025($) Net Sales 189,311 191,160 166,492 Cost of sales 104,191 103,560 88,125 Gross profit Operating expenses Research & development 85,120 54,392 87,600 54,156 78,367 55,026 Sales & marketing 6,304 7,360 7,115 General & administrative 6,474 8,350 6,460 Operating income Non-operating income (expense) Interest income, net 17,950 3,066 17,734 3,768 9,766 2,929 Foreign exchange gain, net 588 1,046 373 Realized/Unrealized gain(loss) on investments (1,608) 956 3,296 Subtotal 2,046 5,770 6,598 Income before income tax 19,996 23,504 16,364 Income tax expense (benefit) 3,980 1,935 (3,099) Net income 16,016 21,569 19,463 Earnings per basic ADS 0.48 0.64 0.58 Earnings per diluted ADS 0.48 0.64 0.58 Margin Analysis: Gross margin 45.0 % 45.8 % 47.1 % Operating margin 9.5 % 9.3 % 5.9 % Net margin 8.5 % 11.3 % 11.7 % Additional Data: Weighted avg. ADS equivalents 33,508 33,690 33,634 Diluted ADS equivalents 33,701 33,814 33,827 Silicon Motion Technology Corporation Reconciliation of GAAP to Non-GAAP Operating Results(in thousands, except percentages and per ADS data, unaudited) For Three Months Ended Mar. 31,2024($) Dec. 31,2024($) Mar. 31,2025($) Gross profit (GAAP) 85,120 87,600 78,367 Gross margin (GAAP) 45.0 % 45.8 % 47.1 % Stock-based compensation (A) 72 162 73 Restructuring charges – 164 – Gross profit (non-GAAP) 85,192 87,926 78,440 Gross margin (non-GAAP) 45.0 % 46.0 % 47.1 % Operating expenses (GAAP) 67,170 69,866 68,601 Stock-based compensation (A) (3,093) (9,585) (4,738) Dispute related expenses (1,532) (1,999) (277) Operating expenses (non-GAAP) 62,545 58,282 63,586 Operating profit (GAAP) 17,950 17,734 9,766 Operating margin (GAAP) 9.5 % 9.3 % 5.9 % Total adjustments to operating profit 4,697 11,910 5,088 Operating profit (non-GAAP) 22,647 29,644 14,854 Operating margin (non-GAAP) 12.0 % 15.5 % 8.9 % Non-operating income (expense) (GAAP) 2,046 5,770 6,598 Foreign exchange loss (gain), net (588) (1,046) (373) Realized/Unrealized loss (gain) on investments 1,608 (956) (3,296) Non-operating income (expense) (non-GAAP) 3,066 3,768 2,929 Net income (GAAP) 16,016 21,569 19,463 Total pre-tax impact of non-GAAP adjustments 5,717 9,908 1,419 Income tax impact of non-GAAP adjustments (147) (2,049) (610) Net income (non-GAAP) 21,586 29,428 20,272 Earnings per diluted ADS (GAAP) $0.48 $0.64 $0.58 Earnings per diluted ADS (non-GAAP) $0.64 $0.87 $0.60 Shares used in computing earnings per diluted ADS (GAAP) 33,701 33,814 33,827 Non-GAAP adjustments 26 181 20 Shares used in computing earnings per diluted ADS (non-GAAP) 33,727 33,995 33,847 (A)Excludes stock-based compensation as follows: Cost of sales 72 162 73 Research & development 2,143 6,670 3,003 Sales & marketing 347 978 862 General & administrative 603 1,937 873 Silicon Motion Technology Corporation Consolidated Balance Sheet(In thousands, unaudited) Mar. 31, 2024 ($) Dec. 31, 2024 ($) Mar. 31, 2025 ($) Cash and cash equivalents 294,814 276,068 275,140 Accounts receivable (net) 186,154 233,744 206,693 Inventories 253,316 199,229 180,903 Refundable deposits – current 49,610 54,645 53,015 Prepaid expenses and other current assets 17,944 31,187 32,102 Total current assets 801,838 794,873 747,853 Long-term investments 15,489 17,326 20,636 Property and equipment (net) 174,420 188,398 193,603 Other assets 32,529 30,739 29,310 Total assets 1,024,276 1,031,336 991,402 Accounts payable 64,810 17,773 23,048 Income tax payable 10,702 13,107 14,782 Accrued expenses and other current liabilities 135,425 168,624 130,277 Total current liabilities 210,937 199,504 168,107 Other liabilities 59,883 59,548 50,968 Total liabilities 270,820 259,052 219,075 Shareholders' equity 753,456 772,284 772,327 Total liabilities & shareholders' equity 1,024,276 1,031,336 991,402 Silicon Motion Technology Corporation Condensed Consolidated Statements of Cash Flows(in thousands, unaudited) For Three Months Ended Mar. 31,2024($) Dec. 31,2024($) Mar. 31,2025($) Net income 16,016 21,569 19,463 Depreciation & amortization 5,608 7,256 7,225 Stock-based compensation 3,165 9,747 4,811 Investment losses (gain) & disposals 1,608 (956) (3,309) Changes in operating assets and liabilities (18,586) (43,774) 22,082 Net cash provided by (used in) operating activities 7,811 (6,158) 50,272 Purchase of property & equipment (10,749) (10,836) (11,661) Proceeds from disposal of properties – 3 13 Purchase of long-term investments – (4,173) – Disposal of long-term investments – 4,432 – Net cash provided by (used in) investing activities (10,749) (10,574) (11,648) Dividend payments (16,808) (16,814) (16,956) Share repurchases – – (24,291) Net cash used in financing activities (16,808) (16,814) (41,247) Net increase (decrease) in cash, cash equivalents & restricted cash (19,746) (33,546) (2,623) Effect of foreign exchange changes 35 (717) 37 Cash, cash equivalents & restricted cash—beginning of period 368,990 368,596 334,333 Cash, cash equivalents & restricted cash—end of period 349,279 334,333 331,747 About Silicon Motion: We are the global leader in supplying NAND flash controllers for solid state storage devices. We supply more SSD controllers than any other company in the world for servers, PCs and other client devices and are the leading merchant supplier of eMMC and UFS embedded storage controllers used in smartphones, IoT devices and other applications. We also supply customized high-performance hyperscale data center and specialized industrial and automotive SSD solutions. Our customers include most of the NAND flash vendors, storage device module makers and leading OEMs. For further information on Silicon Motion, visit us at Forward-Looking Statements: This news release contains 'forward-looking statements' within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. In some cases, you can identify forward-looking statements by terminology such as 'may,' 'will,' 'should,' 'expect,' 'intend,' 'plan,' 'anticipate,' 'believe,' 'estimate,' 'predict,' 'potential,' 'continue,' or the negative of these terms or other comparable such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends or our actual results of operations, financial condition or business prospects 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 the unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis; the loss of one or more key customers or the significant reduction, postponement, rescheduling or cancellation of orders from one or more customers; general economic conditions or conditions in the semiconductor or consumer electronics markets; the impact of inflation on our business and customer's businesses and any effect this has on economic activity in the markets in which we operate; the functionalities and performance of our information technology ('IT') systems, which are subject to cybersecurity threats and which support our critical operational activities, and any breaches of our IT systems or those of our customers, suppliers, partners and providers of third-party licensed technology; the effects on our business and our customer's business taking into account the ongoing U.S.-China tariffs and trade disputes; the uncertainties associated with any future global or regional pandemic; the continuing tensions between Taiwan and China, including enhanced military activities; decreases in the overall average selling prices of our products; changes in the relative sales mix of our products; changes in our cost of finished goods; supply chain disruptions that have affected us and our industry as well as other industries on a global basis; the payment, or non-payment, of cash dividends in the future at the discretion of our board of directors and any announced planned increases in such dividends; changes in our cost of finished goods; the availability, pricing, and timeliness of delivery of other components and raw materials used in the products we sell given the current raw material supply shortages being experienced in our industry; our customers' sales outlook, purchasing patterns, and inventory adjustments based on consumer demands and general economic conditions; any potential impairment charges that may be incurred related to businesses previously acquired or divested in the future; our ability to successfully develop, introduce, and sell new or enhanced products in a timely manner; and the timing of new product announcements or introductions by us or by our competitors. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the U.S. Securities and Exchange Commission, including our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on April 30, 2024. Other than as required under the securities laws, we do not intend, and do not undertake any obligation to, update or revise any forward-looking statements, which apply only as of the date of this news release. Silicon Motion Investor Contacts:Tom Sepenzis Selina HsiehSenior Director of IR & Strategy Investor Relationstsepenzis@ ir@
Business Insider
30-04-2025
- Business
- Business Insider
Silicon Motion reports Q1 non-GAAP EPS 60c, consensus 45c
Reports Q1 revenue $166.5M, consensus $162.71M. 'Despite the challenging macro environment in the Q1 we executed our plan and delivered quarterly revenue at the high end of our guided range and delivered another quarter of gross margin expansion,' stated Wallace Kou, President and CEO of Silicon Motion (SIMO). 'Our industry leading PCIe Gen 5 controller experienced stronger than expected demand during the quarter, partially driven by growing AI inference demands from white box server makers leveraging more mainstream hardware components. Our eMMC and UFS controllers also experienced better than expected demand given a rebound in the smartphone market and our ongoing market share gains. While the near-term remains challenging given the broader economic challenges associated with tariffs and potential trade wars, we remain focused on delivering strong, sustainable long-term growth through product diversification; expanding into new markets; and growing market share across our portfolio of consumer, enterprise, automotive, industrial and storage solutions.'
