Welcome to Nordic Semiconductor's Q3 presentation of the Finance results. As usual, I do the business update. All of our CFO go through the financials let me look what's ahead of us. So this quarter, Nordic with a revenue of $8,700,000. It's a new autumn high.
It was a 19.9 year on year growth. 6.7% growth in Bluetooth, with a very strong preparatory growth, 35.5 which means brings us to plus over year over year in Proprietary. I think something wrong with the microphone is The lack of Bluetooth growth more issued have been more than 19.0 percent. We recognized that, past we unfortunately got very muted by one application in the Chinese market, And it was in the building and retail market. We report this product.
When it comes to proprietary, we have 1 new designs, and we now see life cycle of proprietary is significant prolonged. It's a very good sign for Nordic. We basically now we have 2 product lines in the short range that we contribute to revenue going on years to come. And maybe the most exciting thing about this quarter is that we are entering into the market with our 4 year investment in Finland. We'll spend quite a bit of time on Finland later on in the presentation.
Our gross margin went to 50.2%. Is an expansion of 2.4 points year over year. So it's a solid operation performance. For the first time in the 52 Series life, it exceeded the 51 Series. We had strong growth in EBITDA.
It was at US14.3 million dollars, it's 71% year on year. It really shows that Nordic is managing to invest in future products, enhanced our company and make money in Finland, we did $18,200,000 in EBIT. The means that 23 percent EBITDA margin on the short range proprietary business only. If you look at the annual growth rate of Bluetooth, is down to 32%. It is slower than we forecasted for Q3.
It was negatively impacted by one application with 3 customers in the building and retail market. Strong growth in Proprietary and is driven by new designs. And in is the signs that will prolong the life cycle of proprietary. We said going into this year that we expect that proprietary to drop around high single digit percentage. We see that's not going to happen and we also see that it will be significant contribution for 2019.
If you look at our historical Bluetooth growth, it's been in the range between 30 to 40 And what we see is that Bluetooth DLE is trading above targets on quarters and below in others. And fluctuation is driven by larger customer designs. If you remember back in Q4 'sixteen, We had a customer that disappeared. It really impacted Nordic. The customer that we now have a much slower revenue, but it's not disappeared, that have much slower revenue in Q3 was larger than the customer that we lost in Q for 'sixteen, despite the managed to grow BLE in Q3.
And we expect to be within the target because we see that Q4 will grow again. And we know that the situation with these customers will be washed out in 2019, and we expect to be back on our growth going forward from 2019. So this issue will only affect second half of twenty eighteen. And one important thing is that we he historically, I've been driven by long tail market. As the BLE market has mature, we now see large industry players as start to employ things are good.
1 is volume. 2nd thing is basically stability when we get into the right products, we know life cycle we have forecast we can trust. Some of the customers have been building up Nordic has not been that good in projecting their revenue. So we are delivering our strategy to strengthen ASP. What we see there is a continuous strong market pool for system ownership, integration and connectivity.
If you look down where Nordic is not playing is in the baseline system ownership. It's the baseline connectivity where you have your selfie stick, where you just come to connect from one point to the other, That's not Nordic playground. If you look up to the right corner, You see much more advanced product where you need MCU power. That's where no is Bay. And if you look on the graph on the right hand side here, you see that the 52 series of product, no represent more than 60% of our revenue.
It really shows that the high end, high complexity is the part that is preferred in the improved operation leverage. We are on the track to meet our objective for profitability for 2018. We had a revenue growth of 20% with gross margin up 2.4 points. We had EBITDA at 14.3, as I said, 71% year on year. And if we isolate short range business, the EBITDA margin of 23.1 percent, while we've been building organization to be able to deliver and gain more market share in new products, which we are entering the market today.
And we are very, very proud of the LTE products and how we enter the market and will spend quite some time on the outlook to discuss LTE. Customer growth we had a 28% growth in our active customers year on year. And we see that the split between nonconsumer and consumer is, still a good split where we are entering into a non consumer exciting because they've never been using BLE before, but there is great potential in some of them, and I'm going to show you some of them later on. And this is where we do it. If you look here, you have Xiaomi new product.
The tire pressure is something you put onto your tire and you can read on that a private screen in your car. Estimate is asset tracking. Again, the signing in Nordic 52 there was some, message here that Polar is coming competitive, the, say, competitive technology. That's, partly not true. Basically all advanced product at Polar are using Nordic.
And if you look at my previous file where I discussed left corner about simple products, heart rate monitors is such a simple product that doesn't need much performance. Company here in Norway that's working with the Norwegian Post is tracking all POSS containers using Nordic. We've been talking about professional light control for some time. Most of these companies we picked up along here, Acuity are using the Nordic BLE and the Nordic mesh stack. And we believe that, lighting and professional lighting is a segment that is going to contribute with revenue for Nordic over years in pretty high volumes.
So if you sum up revenue, $78,700,000, 19.9% growth year on year, 10.6 percent quarter on quarter, diluted 54.3 19.9% growth. We could say it's disappointing to our goal, but the situation that arose was something we couldn't see. And The good thing about it is that it shows how strong the Nordic customer base is that even if we lose a significant customer in 1 quarter. The rest are lifting the company by 20%. Revenue Proprietary.8 is 35.5% year on year growth.
And it's the revival of proprietary we got new applications margin, we've been working on optimizing production, optimizing test and it resulted in a gross margin of 50.2. It's up 1.2 points from last quarter EBITDA, and this is why we've been investing to bring the LTE product to the market. Is $14,300,000. This was a summary. I hand over to Paul to do the financial 8.
Thank you, Centuri. I will start with, operational performance model, that we always start the finance part with, as Santo said, we have, close to 20% revenue growth in the quarter. Driven by strong proprietary whilst Bluetooth was slightly below our targets. Gross margins we reached our 50% target this quarter. I think a 50% target is good achievement in the with with strong growth.
The the the increase from last year is 2.4 percentage points, which comes from both cost improvements on the products and the favorable customer and product mix that I will talk more about later. Overall, when we come to the OpEx part of the the the slides, overall OpEx is, is positively impacted by the higher revenue in the quarter. However, still the underlying OpEx numbers show less growth that we've seen in previous quarters. So even if we're growing the company, we are keeping a strict control over costs. So total cost in the quarter is 32.1 percent, which is down from 33.5% last year.
Compared to last quarter, we actually had 35 percent, OpEx. So we have a good reduction since Q2. Capitalization is also important. As you remember, we did a change in how we capitalized the cellular IoT project in, in Q1. So so we increased the capitalization on cellular and decreased it on on on short range.
Which is more in the commercialization phase. So in Q1, we in total capitalized $3,100,000 This is half a 1,000,000 less than we did in in Q2. The main reduction relates to those less tape outs in the third quarter versus the 2nd quarter. Short range, we continue expansion in the short range business especially, increasing our capabilities and and functionality on the on the chips. R and D cellular spending of $3,900,000 this quarter.
If you look at the cash operating expenses since we did capitalize $2,300,000 on the cellular business was $6,100,000 the same number in last quarter was $6,800,000. On both SG and A we sort of keep the same, target at around 12 to 13%. So 11,900,000, 11.9%. The underlying number is 5,400,000, which is up from 7.8 a year ago. To the bottom, as Santoshi mentioned, we do have good operational leverage in this quarter with EBITDA margin of 18.2%.
Which is up 3.9 percentage points versus last year. Also interesting to look at the year to date number, this quarter or year to date September, we had an EBITDA margin of 13.7%, up from 11.3% the same period last year. On the previous slides, we sold the operating model on sort of a quarterly basis It's all also interesting to see it on the last 12 months or a trailing basis. As you can see, the total cost is trailing down with the higher revenue and restricted cost control. So we are seeing, leverage in the cost base with increased revenue.
In total, we spent 22.8 percent on R&D at last 12 months. Of course, this number is above the industry averages of around 20%. However, we do have the high spending in the cellular IoT business. So if we do adjust for the cellular IoT business, the number would have been around 17%, which sort of is around the target level for our type of business. Same thing on SG And A, we're at 14.3 percent, around the target level for our business.
Allow to the revenue by market, overall, we see positive impact or positive developments in all markets, except for the billing retail. This is of course the result of the 20% overall growth, in the business. If we exclude the building and retail, markets, it's maybe interesting way to do it. See it. We would have an increase in the rest of the business of 38 percent.
I'll now go into each of the, the markets. We start with, consumer electronics, which had a 34% year over year growth from 26,100,000 last year to close to 35,000,000 this year Of course, the main driver of consumer electronics growth is the strong proprietary business in this quarter. Also, proprietary was slightly low, in Q3 last year versus the rest of the quarters of the year. But we also see a very strong take of, of the Bluetooth in, especially the HID. So the PC peripheral market which also impacts the consumer electronics, market.
Wearables, up 16.6% year over year from 10.6% last year. Wearables had a low, a year ago. However, in in Q3 2018, we see a very good take from all our Western companies. We also see that we have good traction with our high end MR52 in the in the Chinese Tier 1 business and also in the Chinese ODM business. So overall, building retail, no no wearables have the strong quarter.
Then we go to Building And Retail, which, as Sentula talked about, fell by close to 20% in the quarter, from 15,700,000, a year ago. As mentioned, Q3 2017 was exceptionally strong in one application within the billing retail, which showed disappointing numbers this quarter. However, as we've been talking a lot about we still see building a retail as the growth driver for the company. On the previous slides, the Sentul was sold 5 design wins 4 out of these design wins, were within the building retail market. So we still focus a lot on building retail and see the positive momentum in this business.
Healthcare also strong quarter 52.9 percent increase, from 4,560,000 last year. Previous quarters this year, we have talked about new designs with existing customers. These continue to take good numbers, in Q3. Finally, building a retail, oh, no, sorry, others, an 83.6% increase from 5.5 last year. This is mainly driven by our module customers.
We have a large number of module customers that take our products. The strength and the beauty of selling to is that we broaden our sales force a lot versus going out and selling direct. So we're taking leverage of the sales force of the module, lenders. Then I'll jump to gross margin. As I mentioned, we had a 2.4% this point year over year increase of in gross margin Q3 2017 sort of saw the down in the gross margin, with, issues on the yield of the NRF 52.
However, in Q3 2018, we've had solid operational performance to high yields both on the NRF 52 but also on the other projects. We have had very little scrap of inventory. We have improved purchasing And importantly, we have good visibility on the production, so we're able to plan the production and thereby reduce cost. We also have a very strong improvement of 1.2 percentage point from last quarter. This comes mainly as an effect of a favorable product mix, both in proprietary and in Bluetooth.
Quarter to quarter fluctuations are to be anticipated as we've said, maybe due to change in product mix and customer mix. However, we still believe our target of 50% is is what we aim for and is achievable with the current model. I will now turn to, cash operating expenses. So these, or these numbers are, of course, adjusted for the capitalization of, $3,000,000 that we did in the quarter. In relation to revenue, cash OpEx is, is down 0.3 percentage.
Points. However, the underlying cost has gone from 23,600,000 last year, to $28,000,000 this year, which represents an increase of 19%. Increase is driven by new product releases, which we continuously work on and the headcount growth. So we've increased head counts year over year with, close to 13% from 5 88 last year to 663 people. This year.
It's a mix of both people in R&D, both short range and long range, but also focus on broadening our sales and customer facing activities in both in Asia and the US. Compared to last quarter, cost is more or less the same in the absolute number. However, due to higher revenue, the the the the KPI is significantly improved. Although we do have more employees in this quarter than last quarter, we do have a positive effect of FX as the NOK has been weakening in Q3 versus what it was in Q2. However, we do see investments to continue in order to capture future growth for the company.
One picture that has been blurred by our heavy investment in the cellular IoT is the strong margin on the short range business. So we therefore we included this slide, which sort of just shows the P and L for the short range business. So the short range business had of course $78,000,000 in revenue in Q3, OpEx of 21, which means that the OpEx just related to the to the short range is 27.2, percent. With the EBITDA of over $18,000,000. EBITDA margin of 23% which is above our target of 20% which we've talked about.
So the short range business is showing a very healthy operating model. Interesting also to look at year to date EBITDA margin for the short range business is 19.4%. Just slightly down from the same period last Finally, I will talk about the cash flow. So we have a strong financial position with close to $100,000,000 in cash. We have a consistent seasonal net cash flow.
That means that in Q3, you will normally due to higher revenue and build up for working capital, see a negative cash flow. This also happened in Q3 of this year where we had a negative cash flow of 12,000,000. However, this is higher than than sort of expected because due to holidays in Asia, large payments from customers sort of switched into Q4 and were paid in, in early October. This was $8,000,000 If we adjust for these $8,000,000, that were received on October 2nd, the, l sort of networking capital and percentage of revenue is 29%, which is, 3% higher than, than the same period. No, a quarter ago.
This is, as I said, normal due to seasonal variations. We had pretty high CapEx of $5,000,000 in the quarter, this is mainly driven by CapEx or Test equipment for production releases on the NRF 952 and the NRF 91. This is the start of the CapEx we talked about in connection with the capital raise in April. In addition, we have purchased some IT related to our short range business that's required for future growth of the company. We still have a disciplined cash strategy.
So overall for the year, we've had $20,000,000 net minus cash flow, driven by $12,000,000 in CapEx and then the seasonal effect on the working capital. Okay, Santula. I'll hand back to you and you can talk about the outlook.
So let's look forward. We start with the guidance for the second half of this year. We have discussed this situation with the application in Building Retail. It forces us to anticipate that the revenue will be in the lower range of our target or our guidance 150,000,000 dollars, $160,000,000 And if it's in the lower range, it will represent a growth for the company for 20% year over year. This is a situation that basically, as I said, will be washed out in Q1 'nineteen but it will affect Q4.
So we expect our target for Bluetooth growth to be between 20%, 25% for the second half of 'eighteen, but we will be on track on the trend line in 2019 again. Gross margin, we will be around 50% as we were this quarter All the work we've done will continue into Q4 and going ahead. So our backlog is SEK 77,000,000 to 17.9% growth. Year on year, strong backlog going into Q4. It's a healthy distributed over Q4 and Q1.
And as Paul said, is a good favorable product mix and is going to be good for keeping up the margins. Q4, we will see growth contribution from the 50 to 840 and thread. And I will come back to discuss thread. We are going to accelerate the Bluetooth growth compared to Q3. And we're going to see growth in both consumer and non consumer market.
But maybe the most exciting thing is we're going to recognize the 1st cellular IoT revenue. We will recognize our first LTE revenue in Q4. We still have a leading and a broad position in Bluetooth. If you see here on the right hand side, you see pretty high bar, almost catching up Nordic, which is a category called Others. This bar consists of around 20 small Asian companies that have few design each.
And it's all in left corner connectivity corner of products, which Nordic is not competing. Remember, we are aiming at the high end, high ASP market. And we have segments we want to win like SmartHome, where you need a lot of MCU capacity. You need memory. You might even need multi protocol, and we can have different protocols into the same ship.
5240 support threat, support and support But we got 100 and 21 new designs in Q3 with a significant number. And as you remember, we grew of a customer base with 28% from Q3 last year, to Q3 this year. These are the customers that come to contribute to that growth going forward. We are building momentum in thread. So a company called Particle Mesh have made the 1st IoT platform and modules based on the 52,840, based on the Nordic Mesh protocol.
They claim they have 35,000 pre orders and they start shipping now. Exciting development. Nordic just released a new SDK, the version 2 in September is full open thread capacity. And we see huge uptake of this product. So what have we been talking about working on for 4 years?
Cellular IoT. And now we are ready for revolution in cellular IoT. Our product silicon performance meet all expectations. We said that we had Stella engineers in Finland, This proves that over engineering has done a great job. All the characterizations, qualifications, and testing are on plan.
And remember, there is 2 softer stacks in over LTE ship. He can support both LTE M and Narrowband IoT. It's the only LTM module out there, which do so. And now LTM protocol Moving towards production release, we are sampling customs in the U. S.
NARband IoT, we sampled a lot of European customers, and we're going to vidder of a sampling open for general sampling this quarter. And the important thing is that All vendors, carriers are conducting field tests with Nordic, and we are ready to hook on to the networks and very soon within this quarter, we will be verified. All the certification is ongoing. We have strong collaboration with main infrastructure vendors, The testing is ongoing. We bought the same test vehicle that operators are using.
So basically we do all test in house before we sending our products to the operators for compliance test. So in no legwork. We are doing all the regulatory certification like CE FCC We do the global certification, the GCF, and We have done the test in Nordic and now we are doing it out at operators. We are pre-thirty 5 most carriers through putting other products through their labs, We're doing field tests in several territories, and we expect to be complete all certification within this quarter. Good achievement of the team in Finland.
We have device. We have development kits and is certified ready for the market this quarter. We have planned to produce 4000 kits during Q4. We have material in production to secure demand We have, as we will talk a little bit later on, supported a few selected customers up till now Now we have full support to all customers. We have wafers ICS, we have the ships all ready to go.
We have an excellent competitive position. What is important when it comes to LTE, low power. Most of this product will be running on batteries and Nordic have built everything from scratch for low power. We integrated memories and we use what we call product nodes at our vendor, which is for low leakage process, which makes us able to achieve this low power. It should be easy to use When you buy a LTE kit from Nordic, when you open it and put it onto your PC, It's a very familiar screen that pops up.
It's the same screen as you do when you do Nordic design with BLE. So all engineers been using used Nordic Kelly are familiar with software. And what we see is that using Arm also give us other advantages because they are really good on security. And security is key in many IoT application. We have the arm threshold and the creep percent technology implemented in our module And obviously connectivity is what it's all about.
This product should connect to Andy base station anywhere. We have not outsourced any protocols We have full ownership of both the RF, the baseband, and the software. And we know how to how ownership works. So we got very positive feedback from customers have been in the 1st phase to employ of a product. We had a simplified engagement module, model.
What you see out every products today is that the module supplier buy an LTE ship put it on a module and ship it to customer. What Nordic do is that we make the ship, we make the module and we send it to the customer. We are a one stop shop for cellular IoT. And we use the same strategy like we did when we start selling our Bluetooth STKs. We're going to reach the wide market as we discussed before, divided our market approach in the fast customers, the customer wants to be very fast in the market, and the big customers.
We obviously are working with some large potential customers that will take longer time The important thing now was to get to revenue fast and we took the fast medium sized small customers and we will see It's a good feeling to take this 4 year seller investment to the market. We expected to sell around 100 to 100 lead customers in Q3 We did 100 and 20. We adjusted our objective for the full year up to 300 customers And, as I said, we recognized revenue this quarter and we have an ambition to breakeven in 2020, same as we have said before. We have secured supply of kits and high volume samples to meet the demand knob in Q4. It's there ready to ship.
We showed 1 design win over the quarter. That's been press release, Stoltkit. The management there, so it's a great pleasure to work with us. And he said low power is important. High quality radio was important.
And high integration at the right price. So we are proud of the statement and we're very proud to say that we want this design from another existing LTE vendor into So we are on track for a strong 2018. We had strong revenue and profitability in Q3. We've gone through the numbers, but EBITDA margin was up 71%. Our gross margin above 50 Unfortunately, we had a situation with an application containing few customers in China.
Which was out of our control, we suddenly we expect it to be a little bit slow but we didn't expect it to fall off the cliff and that hurt us in the growth of BLE in the second half of this year. But that will be out when we start on the 'nineteen, and we will do that on the growth trend as we've been projecting previously. There is a strong design momentum and remember We are adding another leg now. It's the IO and the LTE products. In addition to that, we also see a prolonged lifetime on proprietary business due to new designs So all over, we really get a very well set for a strong 2019.
That was all. Then we open for questions. Yeah, please open.
Thanks a lot,
Christopher from TMB. So I was just wondering when approximately did you know about these customers in China that they would not deliver the same sales or comparable to last year. I'm just a bit disappointed because you said previously that this second half guidance, you were a bit cautious. You didn't take into the numbers any kind of optional big customers that you were a bit uncertain. Dom and now suddenly you're not 30% to 40% growth, but you're 19% growth year over year in Bluetooth.
Can you give some color on that? Why didn't you put the boundaries, for example?
Why, let's start with the second leg of your question. Why we didn't profit warrant is that basically we feel that it's 1 parameter, the important profit warrant on is revenue EBIT. So that's why when do we know this? It was quite a bit into the quarter that we saw that it was not sort of, going out from distribution as we should. And by the end of the quarter, we were aware of the situation.
So just I think you can't, on the one hand, say that you, that revenue growth is most important thing. And on the other hand, say that EBIT guidance is as important. I think growth is very important. So I think you should have profit on this, but could move on to the next question. I was just wondering on when you raised equity earlier this year, you said that part of the user proceeds was for increased working capital and ramp towards new Tier 1 customers.
The fact that this is not seeming, it doesn't seem like this is panning out at the moment. Does that mean that this is related to cellular and that we should expect this to come in 2019 or just
It's related to both And I think you will see, it is related to the BLE also going forward.
Okay. And for 2019, you're saying now that you're expecting still to get back to 30% to 40% growth in Bluetooth next year. Can you give us some color on why you're confident with that remark given that the tracker points downwards. The backlog is up around 17%. What will kind of kick that up to
When we talk about growth only, for example, we know that these customer are not contributing very strong in Q1. That's an obvious answer. And second thing is that we do have an alternative 1 new design here in Q3. We had 117 designs in Q2 that's new. And as I mentioned on my foil set is that As the technology have become more mature, you will see larger customer starting to get to market leading technology.
Yes. Hello, Axel from ABG. So, I have a couple of follow-up questions on the Bluetooth growth. Firstly, when you say that it won't impact 2019, does that mean that it won't impact from Q1 2019? And does that imply that there is a 0 revenue from these applications in Q1 2019 or that it has stabilized at a very low level or what does it exactly apply when you say it won't impact 2019?
I said that the revenue in Q1 2018 was not very high for this customer. They will continue producing by still using the Nordic ship in the application but the volume is significant constrained, which we because of political regulations, which we did not be able to control.
And, can you give some, can you be more specific on how much this did impact? How much did it drop from Q3 2018 to 2019?
It dropped significant. We don't want to talk specific about customers, but if you look at the market segment, if Paul got back to that market segment, you can see that it was down 19%. And there was new customers in the same segment, but the new customers didn't catch up this drop from the customer, which generated 19.1% from total segment. Okay.
On the certification on the cellular side, you seem to be very confident of achieving certifications now in this quarter. Do you expect to achieve it with 1 operator or several operators in the quarter?
No, we are working globally. So there will be we have initiative going on with more than 1 with the most important carriers in different areas of the group
And, you spoke a little bit about the big companies, you split between fast and big within cellular. And within big, how long do you think it will take until you get a revenue from a big customer. Is that something that you expect to achieve in 2019, or is the design in cycle so long that we will have to wait until 2020?
There it depends on the application. Some of the infrastructure of these customers is rather complex. Other infrastructure is relatively easy. So that will vary, but one that we've been working on for a long, long time still will use another year, year and a half before the total infrastructure is in place. Others will be able to place orders this quarter.
My name is Bernice from Kepler Cheuvreux. Just two follow-up questions for me. First of all, could you add a little bit of color to the prolonged life cycle in proprietary? Is this, does this mean that you have visibility for 2019 on the new cycle of products? Not with 20 or are you talking?
We didn't add any color. We got new design wins. And as My experience is that when a customer start a new design win, usually the sign cycle is 3 to 5 years. So this new product will revive another 5 years, maybe 3.5 to 5 years. Okay,
thanks. And finally, on the gross margin side, you said that you are beyond the yield issues on the 52 and that you are experiencing favorable yield or product mix? But you are still at about $50,000,000, which is your target, but are we saying that in everything is going right, then you're reaching $50,000,000 and then that you should hover more around a 49% level. How do you how do you see this?
What we see that on short range products, we have a 50% margin target. We also said that we may get more LTE into the product mix, we will see a lower margin. So but we don't see the impact of ATE on the total margin in Q4 or Q1 'nineteen.
Exactly. But on the short range, isolated, you are saying that when you reach 50 as you did this quarter, this is due to both no yield issues and a favorable
We're not going to have any yield issues on existing product family because that's already the debug. So when we introduce new products, there will appear will be a period where we don't reach the theoretical yield But on existing product, we are at theoretical yield level.
Thank you. Christopher from DNB Markets again. Was wondering if you could comment a bit around your work on audio streaming of Bluetooth or your main competitor dialogue semiconductor has been quite vocal around that and said that they are expecting to launch a new product for this on in January at CES in Las Vegas and that they will have volume shipments of this in the middle of 2019. Does that imply that we should expect something similar from you or kind of just to gauge where you are compared to them on total roadmap?
Yes, we've been estimating that Bluetooth low energy will also be able to support audio in the years to come. So we've been working very close with leading audio semiconductor company to get a solution together with them. We have not released any data on this product and there is exhibitions around the world that this is normal to do. And we might do, we will do it on an exhibition. I can't tell which, yeah,
Great. And then just lastly on the cellular business, there has been some talk around the potential to get some subscription type revenues on the ALC cellular IoT business as well because you will be driving subscriptions for the mobile operators with your customers there. Can you talk a bit about the opportunity to partake in that value creation in terms of getting a cut of the the sales that you drive for the Telemores and the Ryizons and the AT and Ts of the world?
I don't like to discuss this strategy in front of the whole world. This is something we would like to keep for ourselves, but you're right. There is an opportunity for Nordic to get revenue outside hardware when we start discussing LTE. But that strategy is not communicated yet, and we want to finish our work on that before we share that.
Last one for me. There's been a lot of news lately. Both there's been the trade tensions between the U. S. And China.
Lately, there has also been news about these, these spy chipsets, what you call them coming from Supermark Growth Supply Chain, stuff like that. Can you talk a bit about how these kind of data points affect your business? How exposed are you to potential tariffs against China and what do you think about the security problems in the supply chains in China?
I can start on the tariffs maybe.
On the
On the tariff part. So so in relation to tariffs, nothing in the numbers today actually have impacted via the tariffs. So so the customers haven't been affected as of today. So the delay in payments does not have anything to do tariffs. We're all unsure on all customers, that we have.
Secondly, of course, there is uncertainty. Everyone is talking about it, right? So so that's not good for the business, but it's it's something we're monitoring very closely. Finally, of course, well, we also see when there's issues in China. Some of the government boards will pour liquidity into the markets to keep the ODMs running and being a not US player, that can, of course, be positive for Nordic.
So I think it's a very mixed signal what's going on in China. It's not all negative.
Options there in 2019?
That's out of our control. So it's nothing we can really comment on. But as I said currently, The only thing we hear is a lot of talk about it. And on the spy chips,
on security? The important thing is that it will more affect customers that are building a PCB. Nordic don't have a PCB. We have a dye that is packaged. So for Nordic, ship there is basically no chance of putting spice inside the Nordic silicon.
So if it affects anyone, it could be other customers that are producing in China, but that's again we haven't had any discussion with any customer regarding that. And the customer is deciding where he uses ODM So it's basically up to our customers to take those measurements. For Nordic, it does not have any impact, very unlikely.
Thanks a lot.
Okay, if there is one more question, thanks for coming. And welcome you back in February for Q4.