Silicon Motion Technology Corporation (SIMO)

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Silicon Motion Technology Corporation (SIMO)

UBS Global Technology Conference Call

November 14, 2012, 03:30 pm ET


Riyadh Lai - CFO


Nick Gaudois - UBS


Nick Gaudois - UBS

My name is Nick Gaudois, The Asia and Japan Tech Research for UBS. It’s my pleasure to have Riyadh Lai here from Silicon Motion presenting for us. Riyadh, over to you.

Riyadh Lai

Thank you, Nick. My name is Riyadh Lai; I am CFO at Silicon Motion. It’s a pleasure to be here today at the UBS conference. For the benefit of everyone, a quick introduction to our company. We are fabless semiconductor company focused on two specific applications. Controllers for NAND Flash based storage devices and another area of focus especially the RF for mobile handsets, primarily LTE transceivers specifically for Samsung.

Our mobile storage business where our controller set is about 60% of our total revenue last year and in that product segment we have controllers for eMMC embedded memory, SSDs as well as cards and USB flash drives.

In our mobile communications, our other product line accounts for about 25% of the total revenue last year. Our primary product there is our LTE transceiver, though in addition, we also provide transceivers for CDMA EV-DO and we also have mobile TV SoC solutions for certain markets such as Korea, Japan and Brazil.

We are a company that has done very well over the last two years. We grew our revenue 69% last year to $224 million. We grew our revenue 52% in the prior year and this year despite the uncertain economic outlook, we are still going to grow our revenue about 25% to 27% and with our core products as well as our new growth products that are coming online very nicely, we are fairly confident that based on some basic scenarios of growing our business at least 15% next year.

We are an industry that is very exciting. We are in perhaps the most exciting part of semiconductor industry relating to NAND Flash. We are providing silicon for some of the fastest growing applications out there, primarily smartphones and also tablets. We are providing technology for the NAND Flash industry going into the smartphones that are unique and provide us with beneficial ASD opportunities as well as margin opportunities focusing on some of the leading OEMs in the marketplace that allows us to both drive our current products as well as go into new market segments to further our longer-term growth and these would be embedded memory as well as SSD and in other area that is a little bit different from controllers, especially the RF where we've done very well providing 4G LTE transceivers for many of Samsung’s products including their flagship Galaxy SIII phones and those phones are using our transceivers in select markets, primarily Korea.

NAND Flash is a very dynamic fast growing part of the semiconductor industry with fast bit growth and we will continue to have fast bit growth as industry continue to scale process geometries, add new equipment and new fab and this will continue. There is a lot of demand for Flash going into embedded applications, going into storage for the cloud and so forth. It’s creating a lot of opportunity for us and will continue to as all these storage devices, whether cards, embedded memory, SSDs and so forth all these products using NAND Flash storage (inaudible).

In the past years, we've been primarily a supplier of controllers for cards and USB flash drives, but we have very successfully moved into embedded memory as a provider of eMMC controllers for embedded applications, where we are now shipping to Samsung and Hynix and already in our first year business for eMMC have about 5% to 7% market share in the 600 million market unit business.

With all the Flash being produced and will continue to be produced, one of the important demands for all this Flash is going to smartphones. Smartphones have been growing rapidly, will continue to grow rapidly and there is strong demand for NAND Flash from these smartphones or the embedded memory fitting in these devices as well as external memory brought into these devices through cards. We are the leading supplier of controllers for memory cards with a market share of well in excess of 30%. We have been supplying a lot to the OEMs and other customers who are providing these memory cards to the handset OEMs.

In addition, we are now supplying other pieces of silicon to these smartphones, mainly eMMC controllers going into the embedded memory. So you can think of eMMC as deeper mobile devices for smartphones as well as tablets. We are also supplying LTE transceivers for many of the smartphones going into the market, specifically the market leading smartphones of Samsung, the Galaxy S III phones and to create marketplace.

NAND Flash is a very important component going into a lot of devices. Its importance is growing as costs come down, as you are able to store more and more device for the same dollar value of memory. And one of the things that’s happening with Flash, it’s rapidly moving down the geometry curve; it’s also moving up the architecture curve from SLC to MLC to TLC and each, with each successive generation of Flash the products are getting weaker and weaker from an endurance perspective as well as from a data integrity perspective and with each successive generation of shrinks NAND Flash require more and more sophisticated controllers.

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