Good morning for those who are here in the room, and welcome to everybody on webcast. It's a pleasure for me to invite you to Q2 financial result from Nordic Semiconductor. First I'll do the headlines, and then Pål will go through the numbers as usual. I come back and talk about business outlook and what have happened during the quarter. This quarter, we did end at $52.7 million. It's actually the same as the same quarter last year, and it's up 32% quarter-over-quarter this year. Last time I stood here, I was very positive about what happened in January. We had a strong January in Nordic, and then we came into February, which basically was pretty bad, and it's been a tough ride for us, I would say, all the way up until end of April.
May, June has been tremendously good when it come to a revenue point of view. We, I will talk more about this, and Pål will go through the numbers. Bluetooth Smart consists of $27.2 million, and the important thing is that these were constituted by lots of medium-sized small customers. We don't have these two large customers that were driving revenue last year at the same time. We see that proprietary sales is come back to stable, normal size. We had some issues end of last year. We also see that we still have designs outside PC accessory, which contribute to revenue. Approximately 30% of the revenue of proprietary were outside PC accessories. The excellent thing about this first half of 2016 is the fast and strong design-in ratio we have had on the nRF 52 family.
We've been basically shipping nRF 52 before we've been fully qualifying or not fully optimization of yield, but that's good. Customers want nRF 52, and we are shipping nRF 52. If, for those of you that follow Bluetooth closely, Bluetooth SIG announced Bluetooth 5.0. With 5.0, Nordic will get a new market to play in. I will also discuss that a little bit later. Pål , I hand over to you, and you do the numbers.
Thank you, Svenn-Tore. I will today focus on the financials for Q2. You can read most of the numbers in the report, so I'll focus on the three main topics we have this quarter: revenue, gross margin, and cash flow, finally. As Svenn- Tore Larsen said, revenue came in at $52.7 million. The underlying number there, or the underlying stable number from last year, is that we had the growth in proprietary of around 12%. This growth came as a result of sort of a catch-up from the very slow second half we had last year. Bluetooth Smart declined 9.4%.
This decline came as a result of two relatively large accounts that we had last in 2015, but not in 2016, which I will talk more about later. Compared to last quarter, we believe we have accelerating growth. The growth there was 30%, and we believe that this growth, which is really coupled by the Bluetooth Smart, is higher than the seasonally adjusted revenue we can see. I'll come back to that more. In this quarter, we've had some issues with the yield on the nRF 52. That means that we've prioritized selling to our key customers, so we've ramped up to respond to them. Large volume production will come in the second half of the year.
The result of this yield issue on the nRF 52, you can see on the gross margin, which has gone down to 47.2% compared to 47.9 same period last year. EBIT, due to high investments in R&D also and low gross margins, our EBIT is at $4.7 million, down from $9.8 million at the same period last year. We do see a strong increase from Q1, where we had around 0 in EBIT. Cash flow-wise, net operating cash flow is seasonally down $10 million. The reason I say seasonally is that you can see historically, we always have a reduction in cash during the Q2 . Bluetooth Smart revenue, as I said, was down 9% compared to last year.
You can see that reflected in the last 12 months revenue, that is stable year-over-year. This reduction in revenue compared to last year came as a result of one large wearable customer, where we have limited revenue this year, and one large gaming account we had in 2015, which hasn't occurred also in 2016. However, I think we'd like to focus on the growth we've seen in the Q2 . Bluetooth Smart has grown by more than around 50% quarter-over-quarter. This growth comes as a result of the underlying strong growth in designs, underlying strong growth in new filings with the Bluetooth organization, and the very strong underlying growth in new or customers within Bluetooth Smart.
As Svenn- Tore Larsen mentioned, he'll go into details on the customer base, but I think it's a very valid point. We are driving the long tail, which is a very important market for us, but we are also very good positioned for the future to take the future growth in large verticals like wireless charging, beacons, home automation, which we will see come also. Svenn- Tore, you talked about the first half of this year. What we saw in Q1, especially around Chinese New Year, that it was very hard for our ODMs, which are sort of the main end customers, to get financing in China. In May, no, in January, February into March, we saw very limited or very weak sales into the market.
However, this has changed. We had a turning point in May, and then especially in June, where we saw a completely different attitudes in the market, especially in China. What we've analyzed, we've analyzed the underlying sales to end customers in the last month of the year, last month of the quarter, has been a growth adjusted for the wearable and the gaming customer of around 50%. We believe that this growth is very healthy and will continue going forward. Backlog is at $24 million, $4 million up compared to last quarter. As we mentioned in the Q1 presentation, management does not focus on backlog.
We see that there's much less visibility, there's much less predictability from the customers. They don't put in so much large orders as they did before. Due to the issues with the nRF 52, we still don't have large orders for the nRF 52. The decline from last year, we don't think is dramatic. It's where we expect it to be. I'm going to go into the different markets. First of all, we have the established markets. This is where you see a strong seasonal effect. You see that in both consumer electronics and wearables. Wearables increased around 30% from last quarter. This increase came actually despite the loss of the one large customer, which and adjusted for that, we have an increase also from last year.
One of the reasons we do have this growth in consumer electronics is, as Svenn- Tore talked about, that proprietary is not only just PC, we also have other customers within PC, and then especially the gaming and toys sector. Last quarter, we did mention that we had good expectations for wireless charging in the second half of the year. What we've seen now is that there are several PC manufacturers that have announced or launched products with wireless charger in, built in. However, none of the handset manufacturers has actually come out with a product. As we've talked about so many times, we are very well positioned in this market. When a handset producer comes out, we believe it will be a very important market for Nordic. Back to wearables. Wearables is adjusted for the lost customer. We have a stable revenue year-over-year.
However, we have a very, very good seasonal increase of around 66%. The reason we do have this is that we have a very broad design activity within the nRF 52, and we released a few weeks ago, the chip-scale package, the CSP package, which is one-fourth of the footprint of the normal chip. We believe that this chip will drive the growth of wearables for Nordic in the future. Emerging markets, I'm not going to talk so much about that. However, this is a very important market because it does not have the seasonal adjustment as the growth markets. Building and retail increased 62% from last year and up 25% versus last quarter.
One of the main reasons we're seeing this growth is that the large RFID customer that we had in 2014 is back into high numbers, also with new designs. Beacons is still important, around really positive numbers in beacons this quarter. What is also going to be a very interesting market within payment solutions is the cards. We had an announcement on cards last week. Svenn- Tore is going to talk more about that, which is a good potential for us. Also, on healthcare, good increase from last year and a decent increase from last quarter. This market is dominated by two main customers within hearing aid and glucose metering, but the long tail is also apparent there. There's lots of Chinese customers building healthcare products.
Other markets, first of all, we have the other, which is where we do not have an end customer identified or we're selling to module producer. Significant growth, and as we've announced before, we have more than 70 module manufacturers using our products. What's very interesting in the module market is that the module are one of the main adopters of the nRF 52, because the module manufacturers really appreciate how simple it is for them to change from the nRF 51 to the nRF 52 and getting the advanced, the better performance that the nRF 52 gives. We see a lot of new module manufacturers changing to nRF 52 from the nRF 51. Gross margin. As I talked about during the Capital Markets Day, Nordic has had a very good development within getting our costs down.
We've had a lot of work on raw materials, also the test and assembly times, but also more importantly, the yield issue we had during 2014 and 2015 on the 51 and 24 has more or less been fixed. Back before in 2015, we did see improved margins, even if there was a price erosion in general in the market. The shift from quarter to quarter is really depending on both the mix between customers and mix between the Bluetooth Smart products and Bluetooth Smart and proprietary. However, what has happened in 2016? Well, as I said before, 2016, we've had some yield startup issues with the nRF 52. This is very common in ramp up, fab ramp up of new products in the semicon industry.
We experienced the exact same thing when we introduced the 51, and we know that our other peers have the same issues when they're ramping their projects. It's, it's both related to the metal, but also the test programs we do have. Since we have focused on getting products out to our key customers, we've taken a hit on the yield and thereby increased the costs during the quarter. Adjusted for this, we are at 47%, which also includes some scrap of old materials. When will we have fixed these yield problems? Tore will talk more about that, but we expect that to happen during the second half of the year. That's why it's very difficult to predict exactly on which gross margins we would have for the whole year.
Quickly on headcount, increased 4% from last quarter and 30% during the last 12 months. The increase from last year is mainly through the Finnish operations. We're now at 120 people. We might increase that to around 150. That's more because we see there's lots of good talent within wireless in general in Finland. So we might have some more people there and not grow elsewhere. Also, a steady growth in sales and marketing because we see that the increased footprint, especially in China, needs more work from more field application engineers that are out traveling and meeting the key customers. Operating expenses, excluding depreciation, up 30% year-over-year to $17.5 million.
However, in this quarter, we are doing less development work on the nRF 52 since it's into production, so capitalization has gone down. Adjusted for this, cash operating expenses is at $19.3 million, which is the growth of 21% compared to last year. This is mainly driven by 27% more employees, of course, offset by an improved FX rate. Compared to last quarter, costs are slightly up, mainly due to higher IP and license costs that we have occurred during the month of June, also offset by a weaker Norwegian kroner. Last 4 months, total operating expenses are at 40% of revenue. I talked about at the Capital Markets Day that we target this around 25 in the long run.
40 is, of course, too high on the long run. Finland cost at $4 million this quarter. We still believe that we will go up to close to $5 million when we start doing the main tapeouts and test production of the LTE chips that we released yesterday. Operating expenses, operating profit. Last year, we had an EBIT margin of 25% or 18.7%. This is down to 8.8% this year, mainly due to high investments in people, not offset by higher revenue. However, it's important to also focus on the excluding Finland, because this is the underlying business. Last year, we had 25, it's at 16% this year. Finally, in Q2, we had a negative cash flow. The main reason for the negative cash flow is accounts receivable.
The reason accounts receivable increases, just like it did in Q2 last year, is mainly due to higher sales in Q2 versus Q1, and finally, sales late in the quarter. The reason we had sales late in the quarter is really the same explanation as last year, that it takes time for China to wake up after Chinese New Year. It's not until May, June, that you actually start getting revenue in, and those accounts receivable will then be open at the end of the quarter. This has then been offset by improvement in inventory and accounts payables. We target to get inventory down below $40 million. We did that in Q2, it's at $37 million now. So we've achieved that target.
Net working capital at 41%, slightly down compared to the same number last year. We had high CapEx this month at $4 million, versus $1 million last year. $4 million is slightly above the normal average at around $2 million–$3 million. The reason we're so high is that it depends on when we do large IT purchases. Okay? Tore, I'll hand over to you.
Thank you. Let me just spend 1 minute on proprietary business. As we see now that we have reached more or less a stable level, you should not expect that we continue this growth. I just want to stress that this is sort of the normal level, and we are pleased to see that we are back to normal level of business on proprietary. Proprietary business will not die out of Nordic revenue this year. It also will remain with us for next year. That's important point. Of course, the revenue growth will come from Bluetooth Smart. Development kit sales is a leading indicator, and first half of this year, we sold 18,600 development kits. Huge number. Importantly, is that 60% of these development kits were 51 Family.
As you see from my foil here, proprietary is still going to be there as a revenue. Fifty-one will continue to generate revenue. There's still a lot of revenue to be seen from new Fifty-one projects. Fifty-one is not going to be eaten up by Fifty-two straight away. On top of that, we have 40% of these 18,600 is new customer projects with Fifty-two. It's a great number, and we are proud to see that customers are engaging in over the development kits, and we will discuss why they do so later on. The number of active customers continue to grow. If you look at this chart, the number of active customers we got from Q1 to Q2 is the largest jump we ever had. When we see that number of customer increasing, we also see it diversify over revenue.
If you look at this slide, last year, top 10 Bluetooth Smart customers stood for 53% of the revenue. This year, the same top was 41%. It really shows that we are broadening our customer base, which is very healthy. As På l said, if we should never really accept losing customers, but there's different reason for doing so. One of the customers we talk about within the toy industry, didn't sell their product. It's not that Nordic didn't deliver the right product, but end consumer didn't buy that product. The second one we lost was quite a few reasons, but in the end, we felt it was better that it ended that way, and that hurt us as a company that had more than 50% with the top 10 customers.
We are catching up, and last quarter, we basically were more or less equal on Bluetooth Smart. This quarter, it was the peak buildup for Q3, which really lifted the revenue from those two customers last year. We didn't made it all the way, but almost. With this new customer base and the way it looks forward, we're pretty sure you're going to see a good second half on Bluetooth from Nordic. Why do we basically give you a range that is pretty long? It's a wide range. We say second half, $105 million–$120 million. The thing is that we have projects like this. This is something from Korea called the card. It replaces all cards you have in your pocket, if you want.
You can basically read in your Visa, your Mastercard, your mileage cards, your shopping card, whatever card you have, into one card. We see that these customers like this are popping up every quarter. They are using Bluetooth Smart from Nordic, it's NFC embedded, and also have this magnetic strip. Into our nRF51822, they basically store all the information in our memory. These are application we didn't have previously. As I see, this is a card that can be huge volume, medium volume, or maybe not. We believe this is a very good example that shows the situation we are in. We are designing, we're depending on the customers to have success in the market. These kind of projects certainly do have potentials.
I think when you go back and we've been talking about our products, we talk about our strong performance in hardware, we talk about the ease of use, and we talk about in software, in-house software development. We put together here three quotes from some of our customers that have been announced recently. Something called Step L abs, say, "Low energy and powerful CPU with excellent floating point." I mean, the thing is that these customers are stating basically what we build the nRF 52 for. This is the data points that we've been out selling. These customers confirms it. We said we need to be easy to use. Arduino, which is making a lot of development kits, they call it engineer's best friend. Ease of use, Nordic inside. They actually call this a perfect match for Arduino, which we like.
If you look at Taiyo Yuden, one of the world's largest module makers, they say that because we do our own software, it's compatible with the Fifty-one family. Basically, if you want to enhance your existing product, you already have the protocol. There isn't much work, there isn't much software work you need to do to change from Fifty-one to Fifty-two. This underlines the strategy we have had when we bring new product to market. It's not only at Nordic, you bring new product to the market, but Bluetooth SIG is evolving. With 5.0 release that was announced from Bluetooth SIG a couple of weeks ago, we get two times speed and lower power. We get longer range, you can do the whole building, the whole house, and you get even more throughput.
Bluetooth Smart or Bluetooth Low Energy has been sort of restricted by the throughput. Now, it's opening and get even more throughput. We're going to get 2 Mbps. It's going to be longer battery lifetime. It's going to be what we call long range mode, which means that you can send data from a Nordic chip a further distance, which means that you will get more application that we can cover in Bluetooth Smart. Important thing, it will be mesh, and mesh is some kind of a buzzword today, where it's important that the radios can talk to each other, not from point to point, but from sensor to sensors. All this is enhancing the application, area and where Nordic can get the footprint. We are very excited by Bluetooth 5.
I can assure you, when Bluetooth 5 is ratified, Nordic is going to have Bluetooth 5. The same day. That was a bit about Bluetooth, but I think we promised you that we will talk about operation in Finland and give a bit information every quarter. Actually, this quarter, we announced our Cellular IoT products, the nRF91 Series. It was introduced actually one day ago, yesterday, and it includes both chipset and software. It's LTE-M and Narrowband IoT. We're going to see huge applications using these technologies in 2018-2021. We will continue to develop products. It's not only going to be one product, there will be a range of products. Because what you see is that different market will need different solution, and that's what we're going to deliver.
The nRF91, 2X family has been developed since 2015. We are starting to sample customers second half next year, and it will be into volume production in 2018. I don't know if you follow what's happening in the cellular space from base station point of view, but we've seen some major base station vendors actually releasing support for LTE-M, and also starting to talk about Narrowband IoT. The thing is that the infrastructure is evolving, and we are in time to get the products out when end users are going to use these new products. It's a large market. It's still very early days, but the range, and the important thing is security and reliability of these new sensors basically matches with the specification that Nordic do.
We are talking to end customers, the same way we did talk to end customers in PC accessories back in 2005 and 2006. We know that we're doing specifications that will bring value to the end customer. We know that you need to have low power. Power, size, range, and cost matters, and those are the DNA of Nordic. We are in a position to talk to all these customers upfront while we're doing the product. We know that low power will fuel new applications here, because sensors are very often standalone, coin cell battery operated. According to analysts, there is going to be around 1.5 billion connections in 2021. Remember, our ASP on these products are significant higher than Bluetooth Smart ASPs. We are not going into that market without having a target market share.
Whatever we're doing, we should have minimum 40% of the market share. That's our goal. If you take 1.5, multiply with higher ASP, and then multiply with 40%, there is a fantastic opportunity for Nordic within Cellular IoT market. This is a market, even though I see some people are talking about, this is not a market that's going to take off, and we know that that's wrong, because all the base station and infrastructure vendors are putting lot of emphasis on Cellular IoT. It will take us to the next level. It's going to be a third growth vehicle for Nordic. It's a complement for us when it comes to market space. Today, we lead in what we call the personal area network, where Bluetooth covers. This is basically going to be the long-range segment.
Nordic has the idea of taking a total footprint of IoT when you combine all the product portfolio. The most important thing is that we already have a lot of these in our technology platform. I use the word DNA, that is ultra-low power in Nordic. You have to use the same DNA here. It has to be ultra-low power. When we build a Bluetooth radio, all the other infrastructure on this technology node is the same we can use here with a different radio. We get a complete scale of all the investment we're doing around Bluetooth straight into a new market segment. We are in a unique position. Nobody thought that Nordic should become the leader of Bluetooth Smart. We were such a small company, it was a statement. We've proven that.
At that time, we were less than 200 people. Today, we are 500 people, we have a unique position. We have the best engineers that really understand LTE and cellular in Finland. We are very positive on development and the way we are proceeding in Finland. As Pål mentioned, we also see that the synergy effects are strong to existing product portfolio. We keeps on adding talent in Finland that maybe could have been in Norway, but we find them to be more available in Oulu. That's why we see that the ratio between what we expected to be in Oulu is a little bit higher, but that's basically because there is people in Oulu that also do Bluetooth Smart. How do we look when we lift our eyes and think of second half?
We see that the increased number of Bluetooth Smart customer will continue to grow, and that we grow into different segments, which means we're not dependent on one or five larger accounts. We're going to get a big pool of accounts that are going to contribute to the revenue. Pål discussed the nRF52 yield issues. I don't think we should spend too much time on it, but this is just a normal process. When you introduce a product in the market, usually you expect to have some time to sort of optimize the product. We didn't have time, because we released it at June, July last year, and the pickup and interest for customers have pushed us to start shipping the product ahead of normal cycle. We have some Q1 customers that start their production in Q2, and this will drive the revenue growth for second half.
We decided that or we need to listen to the financial market too, there have been sort of a lot of comments to Pål and myself that we have given too little information after we stopped reporting orders. We explained why we didn't want to report orders earlier. It's not that significant parameter for revenue, but we also respect your comments. As we now see that we get more accounts, we're not so dependent on a few large ones. We have a visibility, even though the range here is large, we have a visibility, and we dare at least to do some guiding. We say that the second half of this year, we expect to do somewhere between $105 million–$120 million. As I discussed, the Bluetooth 5.0, it will increase the design opportunities for Nordic.
We will get new market segment that we could start to design in. As we get closer to release of the products from Finland, we also see that we are maturing the opportunities for revenue at first customers, the customers we are discussing with as of today. We're not discussing with a large customer base, but we have picked out the top 3 in each segment that we believe this is going to bring value. We work very close with these guys, both with R&D from Finland and sales from Nordic. We are establishing very, very good customer relationships at a very early stage. I will show here a slide of new products that have been released. It's been fifty cents with nRF51822 for smoke and motion detectors. We have some new beacons, and we have the u-blox products using Nordic also.
What happened during the quarter? I think we got a revenue that was basically in line, despite that we had the issue with the two customers that we discussed in length. The most important thing is that we see that the broadening of the customer base and the speed we had out of May, June is impressive. I look forward to talk to you guys again after Q3. Thank you. Any questions? Yep. You start down there.
Håvard Nilsson for Carnegie. I'm sorry if this has been addressed before, but can you give some color on why the guidance range is so wide? Is it design wins or volumes, or?
I think it's timeline. It's very much depending on whether we get the production in August or if we get it in October, it sort of impact the total revenue that this project will generate. We know we have lots of projects. We don't know when they're going to go into production this fall.
Guidance is all based on design wins you already have?
Absolutely.
Okay. Do you expect the gross margin to normalize from Q3, or?
That's an effect on getting the yield up on the nRF52.
Yeah.
Yes.
Thanks, Fredrik Thorsen with SEB. Back to Håvard's questions regarding guidance. You say that proprietary sales are now at a stable or normal level, than indicating around $23 million as in this quarter. I mean, if I split up then for the second half, Bluetooth Smart, the Bluetooth Smart part of that, I mean, that indicates a Bluetooth Smart year-on-year growth in the low end of -6% and in the high end of 17% year-on-year. I mean, well, can you provide some more color on that and what I might be misunderstanding?
You're not misunderstanding something, nothing, because the fact is that we are catching up from losing the 2 largest contributors to the revenue in 2015.
Okay. To gross margin, in the report, you write that it will normalize in the second half. Also again, will we see it pop up again to 50% in Q3, or since all these yields issues are behind you, or?
Yield is always improving as you run more production through the production line. What we're doing now is that we are running pretty high production through a non-mature production line when it comes to test. What we are doing continuously is to implement new test programs, and it will gradually improve for each version of test program. It will go in the right direction through Q3 and continue through Q4.
Okay. Then, just finally on Finland. I noticed your press release yesterday, and also, of course, followed your Capital Markets Day in Frankfurt earlier this year. In Frankfurt, you alluded to that you are also pursuing other wireless long-range technologies, other than those, yeah, so non-3GPP technologies. Like, yeah, I think slide 63 in Frankfurt showed Sigfox, Weightless, and some other stuff. I mean, last, the report or the press release yesterday indicated that it's still, that the focus is still 3GPP. Are you exploring other wireless technologies or is that kind of put aside now?
The product we released yesterday is not Sigfox or LoRa, it's all based on LTE. Yes, there is a yes to your ans- to your question also. We are not talking about that. I said we are going to talk about Finland and give a bit information each quarter going forward. You will get more information on Finland when we come to the next milestone.
Fredrik Sæther from Pareto Securities. In terms of the guidance for second half, can you give some more color and some flavor on how you see that split per market, for example, established such as consumer electronics, wearables and new markets such as beacons?
We've been basically looking at all verticals we sell into. We ended up with a number that has very long range. I think we shouldn't be more specific than this. We just wanted to give the best indication we could do. We haven't been so granular.
Okay. Can you indicate somewhere around the share of nRF52 based sales, for example?
We could, but it would be wrong. It all depends on the timing again. We have some of the nRF52 project that could start tomorrow, or it could start in October. It's depending on starting point, how much that we contribute, and that's why it's so difficult to give a range. Still, we felt that with all the existing customer base, at least we have a secure floor which we can go out and discuss.
Okay, thank you very much.
Thank you. Kristoffer Dande, starting off with the proprietary revenues, you mentioned, and I might have misunderstood that 30% of proprietary revenues did not come from PC accessories?
That's correct.
Could you state what they're coming from?
We have some project within RFID.
Also gaming and toys, which I mentioned.
You mentioned that you had significant, and we saw that in the cash flow as well, the significant IP purchases in the quarter. Could you give some elaboration on what those IP purchases are, please?
I think competition would like to know that. We would like to keep it for ourself.
That's a no, then. In terms of the yield issues that you had, could you give us some indication in terms of how much of your Bluetooth Smart sales came from the nRF 52 versus the nRF 51?
It's significant enough to drive down the margin, so it has a significant impact, as you saw on the margin.
It's only related to one part of the nRF52, as far as we understand. It's the metal encasing, is it? You don't have issues with respect to the plastic or?
No, we don't have issues with respect to the plastic, and we don't discuss. Basically, it's all about finding the right sort of test limits on the parts. When we do a part, we want to be pretty conservative in the beginning to ensure that we are within the test specification. When we get more secure on the product, we widen the test specification and more parts go through the test line.
We're just trying to sort of understand the overall impact there. If we were to assume, for example, that a sixth of your Bluetooth Smart sales came from nRF52, and that the nRF51 and nRF8001 series have about 50% gross margin, that would imply that your gross margin on the nRF52 is blended basis, some 33% at the moment. Does that sound about right, or?
Currently, we don't discuss much margins, and currently more occupied about getting this high winds into production. We are not calculating any margins on nRF52. We are focusing on establishing a product and a revenue growth for 2017, 2018, getting the product out there.
Finally, on the yield issue, you said that you expect the yield on the nRF52 to normalize during the second half. At the same time, you mentioned during the presentation that you were uncertain to as to when yield issues would improve over the next few quarters. Could you give us some indication?
Yeah
in terms of what you need to do and what sort of things we should look for, if anything, in terms of understanding that?
You won't be able to understand this before you get the next presentation from us. There is a lot of parameters we need to tune when we introduce new products on the test bench. Basically, we also need to do some testing to see which solutions that are best. We are tuning on parameters and based on experience, because this is nothing that is new to us. This happens to every semiconductor manufacturer. What's new to us is that we're shipping such volumes at such an early stage. Of course, we want to ship, and we're not too concerned about the short-term margin. We're more concerned about the long-term design win and production win.
On to sort of the statement you made at Q1, that you expect the significant wireless charging volumes in the second half. You didn't explicitly say that you did not expect significant wireless charging volumes, now, this time around, but you say that handset manufacturers haven't come out with a product, based on AirFuel yet.
That's right.
Could you sort of clarify what you mean? Do you still stick by your guns with respect to the significant wireless charging volumes for the second half of the year?
what we said is that we have strong design wins in this segment. Unfortunately, Nordic is not the one that put the product into the market. Again, we are a little hostage of the smartphone manufacturers when they will enter the market with a wireless solution for charging. We expect it will happen. We don't take the decision when it's going to happen.
In terms of your commentary in Q1 as well, that you expected shocking volumes in the second half of the year. I think you alluded to that being positive. If you say now that proprietary revenues is stable, you imply that you're roughly going to have sort of 40, low 40s in proprietary revenues for the second half as well. Which means that it is not gonna be that much of an uptick in Bluetooth Smart sales, as Fredrik alluded to. Could you give us an indication as to why, other than those two major clients, you're not seeing more progress than you're doing at the moment?
I think we're seeing a lot of progress. We've been hesitating to guide, because we don't know really the range, but we felt that it's important to give some information, and that was the best we could come up with based on secure sort of guidance.
My final question is Bluetooth ASPs on a blended basis. You stated there was price erosion in the market. Could you give us an indication of how much that has been over the past few quarters?
I don't think we should do quarter by quarter. It's more project by project. We see when we are getting into larger accounts, there is more eagerness to win, and there is more price pressure. It's account by account, and all driven by volume.
That really makes sense given the fact that you have so many new clients coming into the process that you don't have any comparables against. Wouldn't a weighted ASP give a better indication for us?
It depends on which direction the scale takes. If we get more of the larger ones, then it will impact on the lower end. If you do like you believe or as you indicate, have only medium size, yes, or small customers.
No indication?
No.
Okay. Thank you.
Cool. Well, I hope you all will have a nice day. I haven't seen the weather yet because was no weather when I woke up. Have a great day. Thank you.