Welcome to Nordic Semiconductor's Q3 presentation of the financial results. As usual, I do the business update, Pål, our CFO, goes through the financials, and then we look at what's ahead of us. This quarter, Nordic, with a revenue of $78.7 million. Its new all-time high was a 19.9% year-on-year growth. We had 19% growth in Bluetooth. Year-to-date means that we are 36.7% growth in Bluetooth. We had a very strong proprietary growth, 35.5%, which means it brings us to plus over year-over-year in proprietary. I think something is wrong with the microphone. The lack of Bluetooth growth, it should have been more than 19.0%. We recognize that. 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 one, new designs, and we now see that the life cycle of proprietary is significantly prolonged. It's a very good sign for Nordic. We basically know we have two product lines in the short range that will contribute to revenue going on years to come. Maybe the most exciting thing about this quarter is that we are entering into the market with over a four-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%. It's an expansion of 2.4 points year-over-year. It's a solid operation performance. For the first time in the nRF52 Series life, it exceeded the nRF51 Series. We had strong growth in EBITDA. It was at $14.3 million. It's 71% year-on-year.
It really shows that Nordic is managing to invest in future products, enhance our company, and make good money at these margins. If you take away investment in Finland, we did $18.2 million in EBITDA. That means a 23% EBITDA margin on the short-range proprietary business only. If you look at the annual growth rate of Bluetooth, it's down to 32%. It is slower than we forecasted for Q3. It was negatively impacted by one application with three customers in the building and retail market. Strong growth in proprietary, it's driven by new designs, and it is designs that will prolong the life cycle of proprietary. We said going into this year that we expected 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%. What we see is that Bluetooth BLE is trending above targets on quarters and below in others. Fluctuation is driven by larger customer designs. If you remember back in Q4 2016, 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. We've had a much slower revenue in Q3, was larger than the customer that we lost in Q4 2016, despite we managed to grow BLE in Q3. We expect to be within the target because we see that Q4 will grow again. We know that the situation with these customers will be washed out in 2019, and we expect to be back on our growth trend going forward from 2019.
This issue will only affect second half of 2018. One important thing is that we historically have been driven by long-tail market. As the BLE market has matured, we now see large industry players have started to employ BLE. Two things are good. One is volume. Second 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. It has not been that good in projecting their revenue. We are delivering our strategy to strengthen ASP. What we see is there is a continuous strong market pull for system ownership, integration, and connectivity. If you look down where Nordic is not playing is in the baseline system ownership.
It is the baseline connectivity where you have your selfie stick, where you are just going to connect from one point to the other. That is not Nordic playground. If you look up to the right corner, you see much more advanced product where you need MCU power. That is where Nordic is playing. If you look on the graph on the right-hand side here, you see that the nRF52 Series of product now represent more than 60% of our revenue. It really shows that the high-end, high complexity is the part that is preferred in the market. Improved operation leverage. We are on track to meet our objective for profitability for 2018. We had a revenue growth of 20% with gross margin up 2.4 points. We have EBITDA at 14.3, as I said, 71% year-on-year. If we isolate short-range business, we have an EBITDA margin of 23.1%.
While we have been building organization to be able to deliver and gain more market share in new products that which we are entering the market with today. We are very proud of the LTE products and how we enter the market, and I will spend quite some time on the outlook to discuss LTE. Customer growth. We have a 28% growth in our active customers year-on-year. We see that the split between non-consumer and consumer is still a good split where we are entering into a non-consumer market. Some of these new segments are very exciting because they have never been using BLE before, but there is great potentials in some of them, and I am going to show you some of them later on. This is where we do it. If you look here, you have Xiaomi new product. It is a tire pressure.
It is something you put onto your tire, and you can read on a separate screen in your car. Estimote is asset tracking, again, designing in nRF52. There was some message here that Polar is going with competitive technology. That is partly not true. Basically, all advanced product at Polar are using Nordic. If you look at my previous file where I discussed left corner about simple products, heart rate monitors is such a simple product that does not need much performance. Inspur Asset Tracking is a new company here in Norway that is working with Posten Norge, is tracking all post containers using Nordic. We have been talking about professional light control for some time. Most of these companies we picked up on here, Acuity Brands, are using the Nordic BLE and the Bluetooth Mesh stack.
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. If you sum up revenue, $78.7 million, 19.9% growth year-on-year, 10.6% quarter-on-quarter. Bluetooth 54.3%, 19.9% growth. We could say it is disappointing compared to our goal, but the situation that arose was something we could not see. The good thing about it is that it shows how strong the Nordic customer base is, that even if we lose such a significant customer in one quarter, the rest are lifting the company with 20%. Revenue proprietary 22.8% is 35.5% year-on-year growth. It is the revival of proprietary. We got new applications on existing parts. Gross margin, we have been working on optimizing production, optimizing test, and it resulted in a gross margin of 50.2%. It is up 1.2 points from last quarter.
EBITDA, this is while we've been investing to bring the LTE product to the market, is $14.3 million. This was the summary. I hand over to Pål to do the financial update.
Thank you, Svenn-Tore . I will start with the operational performance model that we always start the finance part with. As Svenn-Tore said, we had 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 quarter with strong growth. The increase from last year is 2.4 percentage points, which comes from both cost improvements on the product and the favorable customer and product mix that I will talk more about later. Overall, when we come to the OpEx part of the slide, overall OpEx is positively impacted by the higher revenue in the quarter. However, still, the underlying OpEx numbers show less growth that we have seen in previous quarters.
Even if we're growing the company, we are keeping a strict control over cost. Total cost in the quarter is 32.1%, which is down from 33.5% last year. Compared to last quarter, we actually had 35% 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 Q1. We increased the capitalization on Cellular and decreased it on short range, which is more in the commercialization phase. In Q1, we, in total, capitalized $3.1 million. This is half a million less than we did in Q2. The main reduction relates to there is less tape-outs in the third quarter versus the second quarter. Short range, we continue expansion in the short range business, especially increasing our capabilities and functionality on the chips.
R&D cellular, spending of NOK 3.9 million this quarter. If you look at the cash operating expenses, since we did capitalize NOK 2.3 million on the cellular business, was NOK 6.1 million. The same number in last quarter was NOK 6.8 million. On both SG&A, we sort of keep the same target at around 12%-13%, so 11.9%. The underlying number is NOK 5.4 million, which is up from NOK 7.8 million a year ago. To the bottom, as Svenn-Tore 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 EBITDA margin of 13.7%, up from 11.3% the same period last year. On the previous slide, we showed the operating model on sort of a quarterly basis.
It's also interesting to see it on a last 12 months or a trailing basis. As you can see, the total cost is trailing down with the higher revenue and strict cost control. We are seeing leverage in the cost base with increased revenue. In total, we spent 22.8% on R&D 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. If you 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&A. We're at 14.3%, around the target level for our business. I'll now jump to the revenue by market. Overall, we see positive impact or positive development in all markets except for the building retail.
This is, of course, a 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%. I'll now go into each of the markets. We start with consumer electronics, which had a 34% year-over-year growth from NOK 26.1 million last year to close to NOK 35 million 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. We also see a very strong take 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 NOK 10.6 million last year.
Wearables had a low a year ago. However, 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 nRF52 in the Chinese tier 1 business and also in the Chinese ODM business. Overall, building retail, wearables had a strong quarter. We go to building and retail, which, as Svenn-Tore Larsen talked about, fell by close to 20% in the quarter from NOK 15.7 million a year ago. As mentioned, Q3 2017 was exceptionally strong within one application within building retail, which showed disappointing numbers this quarter. However, as we've been talking a lot about, we still see building and retail as the growth driver for the company. On the previous slides, Svenn-Tore Larsen showed five design wins. Four out of these design wins were within the building retail market.
We still focus a lot on building retail and see the positive momentum in this business. Healthcare, also a strong quarter, 52.9% increase from NOK 4.56 million 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 and retail. Others, an 83.6% increase from NOK 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 module customers is that we broaden our sales force a lot versus going out and selling direct. We're taking leverage of the sales force of the module vendors. I'll jump to gross margin. As I mentioned, we had a 2.4% percentage point year-over-year increase in gross margin.
Q3 2017 saw the down in the gross margin with issues on the yield of the nRF52. In Q3 2018, we've had solid operational performance through high yields, both on the nRF52 but also on the other products. 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 points 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, mainly due to change in product mix and customer mix. We still believe our target of 50% is what we aim for and is achievable with the current model. I'll now turn to cash operating expenses.
These numbers are, of course, adjusted for the capitalization of NOK 3 million that we did in the quarter. In relation to revenue, cash OpEx is down 0.3 percentage points. The underlying cost has gone from NOK 23.6 million last year to NOK 28 million this year, which represents an increase of 19%. Increase is driven by new product releases, which we continuously work on, and the headcount growth. We've increased headcounts year-over-year with close to 13%, from 588 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 focused on growing our sales and customer-facing activities both in Asia and the U.S. Compared to last quarter, cost is more or less the same in the absolute number. Due to higher revenue, 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. 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. We included this slide, which just shows the P&L for the short range business. The short range business had, of course, NOK 78 million in revenue in Q3. OpEx of NOK 21, which means that the OpEx just related to the short range is 27.2%, with the EBITDA of over NOK 18 million. EBITDA margin of 23%, which is above our target of 20%, which we've talked about.
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 year. Finally, I will talk about the cash flow. We have a strong financial position with close to $100 million 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 million. However, this is higher than sort of expected because due to holidays in Asia, large payments from customers sort of switched into Q4 and were paid in early October. This was $8 million.
If we adjust for these $8 million that were received on October 2nd, the sort of net working capital in percentage of revenue is 29%, which is 3% higher than a quarter ago. This is, as I said, normal due to seasonal variations. We have pretty high CapEx of $5 million in the quarter. This is mainly driven by CapEx or test equipment for production releases on the nRF52 and the nRF91. 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. Overall, for the year, we've had a $20 million net minus cash flow, driven by $12 million in CapEx, and then the seasonal effect on the working capital.
Okay, Svenn-Tore, I'll hand back to you. You can talk about the outlook.
Thank you, Pål. 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 causes us to anticipate that the revenue will be in the lower range of our target or our guidance, $150 million-$160 million. 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 2019. It will affect Q4. We expect our target for Bluetooth growth to be between 20%-25% for the second half of 2018. We will be on track on the trend line in 2019 again. Gross margin, we will be around the 50% as we were this quarter. All the work we've done will continue into Q4 and going ahead.
Our backlog is NOK 77 million, 17.9% growth year-on-year. Strong backlog going into Q4. It is healthy distributed over Q4 and Q1. As Pål said, it is a good favorable product mix, and it is going to be good for keeping up the margins. Q4, we will see growth contribution from the nRF52840 and Thread. I will come back to discuss Thread. We are going to accelerate the Bluetooth growth compared to Q3, and we are going to see growth in both consumer and non-consumer markets. Maybe the most exciting thing is we are going to recognize the first 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 a 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 designs each, and it is all in the 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 smart home, 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 chip. nRF52840 support Thread, support ANT, support BLE. We got 121 new designs in Q3. It is a significant number. As you remember, we grew our customer base with 28% from Q3 last year to Q3 this year. These are the customers that are going to contribute to that growth going forward. We are building momentum in Thread.
A company called Particle have made the first IoT platform and modules based on the nRF52840, based on the Nordic Mesh protocol. They claim they have 35,000 preorders, and they start shipping now. Exciting development. Nordic just released a new SDK, version 2, in September. It is full OpenThread capacity. We see huge uptake of this product. What have we been talking about working on for four years? Cellular IoT. Now we are ready for revolution in Cellular IoT. Our product silicon performance meets all expectations. We said that we had stellar engineers in Finland. This proves that our engineering has done a great job. All the characterizations, qualifications, and testing are on plan. Remember, there are two software stacks in our LTE chip. It can support both LTE-M and Narrowband IoT. It is the only LTE module out there which does so.
Now LTE-M protocol is moving towards production release. We are sampling customers in the U.S. Narrowband IoT, we sample a lot of European customers, and we are going to widen our sampling, open for general sampling this quarter. The important thing is that all vendors, carriers are conducting field tests with Nordic, and we are ready to hook onto 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 the operators are using, so basically, we do all tests in-house before sending our products to the operators for compliance test. We know they work. We are doing all the regulatory certification like CE, FCC. We do the global certification, the GCF.
We have done the test in Nordic. Now we are doing it out at operators. We are pre-certified most carriers through putting our products through their labs. We're doing field tests in several territories. 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 4,000 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 chips all ready to go. We have an excellent competitive position.
What is important when it comes to LTE, low power, most of these products will be running on batteries. Nordic have built everything from scratch for low power. We integrate the memories. We use what we call process 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. All engineers been using Nordic BLE are familiar with the software. What we see is that using Arm also give us other advantages, because they are really good on security. Security is key in many IoT application.
We have the Arm TrustZone and the CryptoCell technology implemented in our modules. Obviously, connectivity is what it's all about. This product should connect to any base station, anywhere. We have not outsourced any protocols. We have full ownership of both the RF, the baseband, and the software. We know how our chip works. We got very positive feedback from customers that have been in the first phase to employ our product. We have a simplified engagement model. What you see out every product today is that a module supplier buy an LTE chip, put it on a module, and ship it to customer. What Nordic do is that we make the chip, we make the module, and we send it to the customer. We are a one-stop shop for Cellular IoT.
We use the same strategy like we did when we start selling our Bluetooth SDKs. We're going to reach the wide market, as we discussed before. We are divided over market approach in the fast customers, the customer who want to be very fast to 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 the revenue fast. We took the fast medium-sized small customers. We will see, as I said earlier, revenue in Q4. It's a good feeling to take this four-year Cellular investment to the market. We expected to sell around 100 to 100 lead customers in Q3. We did 120. We adjusted our objective for the full year up to 300 customers.
As I said, we recognize revenue this quarter, and we have an ambition to break even in 2020, same as we have said before. We have secured supply of kits and high volume samples to meet the demand now in Q4. It's there, ready to ship. We showed one design win over the quarter that's been press released, Track-It!. The management there says, "A great pleasure to work with us." He said, "Low power is important, high quality radio was important, and high integration at the right price." We are proud of the statement, and we're very proud to say that we won this design from another existing LTE vendor into the design. We are on track for a strong 2018. We had strong revenue and profitability in Q3. We've gone through the numbers, EBITDA margin was up 71%, our gross margin above 50.
Unfortunately, we had a situation with an application containing a few customers in China, which was out of our control. We expected to be a little bit slow, but we didn't expect it to fall off the cliff. That hurt us in the growth of BLE in the second half of this year. That will be out when we start on the 19th, and we will be back on the growth trend as we've been projecting previously. There is a strong design momentum. Remember, we are adding another leg now, is the LTE products. In addition to that, we also see a prolonged lifetime on proprietary business due to new designs. All over, we will get very well set for a strong 2019. That was all. We open for questions. Yeah, Christoffer.
Thanks a lot. Christoffer from DNB. 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 on, and now suddenly you're not 30%-40% growth, but you're 19% growth here year in Bluetooth. Can you give some color on that? Why didn't you profit warn this, for example?
Well, let's start with the second leg of your question. Why we didn't profit warn it, is that basically we feel that is one parameter. The important to profit warn on is revenue EBIT. That's why. When did 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 it should. By the end of the quarter, we were aware of the situation.
Just, I think you can't on the one hand say that revenue growth is the most important thing, and then on the other hand say that EBIT guidance is as important. I think Bluetooth growth is very important. I think you should have profit warned this. Could we move on to the next question? I was just wondering on when you raised equity earlier this year, you said that part of the use of proceeds was for increased working capital and RAM towards new tier 1 customers. The fact that 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 a follow on that?
It's related to both. I think you will see it is related to BLE also going forward.
Okay, for 2019, you're saying now that you're expecting still to get back to 30%-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 this customer were not contributing very strong in Q1. That's obvious answer. Second thing is that we do have 121 new design here in Q3. We had 117 designs in Q2 that's new. 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 with the technology.
Thank you.
Yes. Hello. Axel from ABG. 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? Does that imply that there is zero revenue from these applications in Q1 2019, or that it has stabilized at a very low level? What does it exactly imply 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. They're still using the Nordic chip in the application, but the volume is significant constrained because of political regulations, which we did not able to control.
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 Pål go back to that market segment, you can see that it was down 19%. There was new customers in the same segment. The new customers didn't catch up this drop from the customer, which generated 19.1 for 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 one operator or several operators in the quarter?
No, we are working globally. We have initiative going on with more than one with the most important carriers in different areas of the globe.
You spoke a little bit about the big companies. You split between fast and big within cellular.
Yes.
Within big, how long do you think it will take until you get revenue from a big customer? Is that something that you expect to achieve in 2019? Or is the design cycle so long that we will have to wait until 2020?
It depends on the application. Some of the infrastructure of these customers is rather complex. Other infrastructure is relatively easy. That will vary. One that we've been working on for a long time, still will use another year and a half, before the total infrastructure is in place. Others will be able to place orders this quarter.
Okay. Thank you.
I think.
Marius Berte, Kepler Cheuvreux. Just two follow-up questions from me. First of all, could you add a little bit of color to the prolonged life cycle in proprietary? Does this mean that you have visibility for 2019 on a new cycle of products but not 2020, or are you talking beyond that?
We didn't add any color. We got new design wins.
Okay.
As my experience is that when a customer start a new design win, usually design cycle is 3-5 years. This new product will revive another five years, maybe three and a half to five years.
Okay, thanks. Then 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. You are still at about 50%, which is your target, but are we saying that when everything is going right, then you're reaching 50%, and then that you should hover more around a 49% level? How do you see this?
What we see that on short range products, we have a 50% margin target. We also said that when we get more LTE into the product mix, we will see a lower margin. We don't see the impact of LTE on the total margin in Q4 or Q1 2019.
Exactly. 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 product mix.
We're not going to have any yield issues on existing product family because that's already debugged.
Okay.
When we introduce new products, there will be a period where we don't reach the theoretical yield.
Okay.
On existing product, we are at theoretical yield level.
Okay. Thanks.
Thank you.
Thank you.
Christoffer from DNB Markets again. I was wondering if you could comment a bit around your work on audio streaming over Bluetooth. Your main competitor, Dialog Semiconductor, has been quite vocal around that and said that they are expecting to launch a new product for this 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? Kind of just to gauge where you are compared to them on the product roadmap?
Yes. We've been estimating that Bluetooth Low Energy will also be able to support audio in the years to come. 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, there is exhibitions around the world that this is normal to do. We will do it on exhibition. I can't tell which yet.
Great. Just lastly on the cellular business, there has been some talk around the potential to get some subscription-type revenues on the LTE 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 sales that you drive for the Telenors and the Verizons and the AT&Ts of the world?
I don't like to discuss this strategy in front of the whole world. It's something we would like to keep for ourself. You're right, there is an opportunity for Nordic to get revenue outside hardware when we start discussing LTE. That strategy is not communicated yet, we want to finish our work on that before we share that.
Thank you. 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, and lately there's also been news about these spy chipsets, what you call them, coming from Supermicro 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 the 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. In relation to tariffs, nothing in the numbers today actually have impacted by the tariffs. The customers haven't been affected as of today. The delay in payments doesn't have anything to do with tariffs. We're all assured on all customers that we have. Secondly, of course, there is uncertainty and everyone is talking about it, right? That's not good for the business, but it's something we're monitoring very closely. Finally, of course, what 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. Being a not U.S. player, that can of course, be positive for Nordic. I think it's a very mixed signal what's going on in China. It's not all negative.
You don't expect any kind of disruptions there in 2019?
That's out of our control, so it's nothing we can really comment on. As I said, currently, the only thing we hear is a lot of talk about it. On the spy chips?
On security?
Yeah.
The important thing is that it will more affect customers that are building a PCB. Nordic don't have a PCB, we have a die that is packaged. For Nordic chip , there is basically no chance of putting spies inside the Nordic silicon. If it affects anyone, it could be our customers that are producing in China, but that again, we haven't had any discussion with any customer regarding that, and the customer is deciding where he uses ODM. 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 no more question, thanks for coming, and welcome you back in February for Q4.