Good afternoon, everyone. Welcome to Realtek 2024 Q4 Earnings Call. This call is chaired by Realtek Spokesperson, Yee-Wei Huang. The presentation will be available on the company website before 6:00 PM today. At the beginning, our spokesperson will report our Q4 financial results and give a management remark. After that, we will have a Q&A session. You are welcome to type your questions in the box at the lower right corner on the screen. We will answer the questions accordingly. During the call, you can browse through the pages of the presentation at any time. Note that portions of what is presented in this call contain forward-looking statements. Investors are cautioned that forward-looking statements involve risk and uncertainty. Actual results may differ materially from the results forecasted or implied in such statements. Investors should not place undue reliance on such statements.
Now, I'll pass this call to our spokesperson, Yee-Wei.
Okay. Good afternoon, ladies and gentlemen on the line. You are currently participating in the Q4 2024 webcast earnings release hosted by Realtek Semiconductor Corp. Now, first, let us go through the Q4 2024 financial results. Q4 revenue was TWD 26.35 billion, down 14.3% compared to the last quarter. It represents, nonetheless, a 16.6% increase compared to the same period last year. This outcome, by and large, aligns with our expectations and their seasonality. Q4 gross margin stood at 48.3%, marking a 3.1 percentage point decrease quarter- over- quarter. The decline in gross margin from the previous quarter is partly due to product mix change, as a significant portion of the pull-ins consisted of entry-segment products and also partially attributed to the diminishing impact of the reversal of the slow-moving inventory write-off. Q4 operating expenses were TWD 9.86 billion, representing 37.4% of revenue.
It indicates a 70.1% decrease in the OpEx dollar amount and a 1.3 percentage point decrease in the OpEx ratio compared to the previous quarter. This reduction is in line with our expectations of short-term fluctuations in operating expenses. We still anticipate that operating leverage will help lower the OpEx ratio over the mid- to- long term. Q4 operating income was TWD 2.88 billion, which accounted for 10.9% of revenue. The operating margin shows a decline from the previous quarter's 12.7%, largely attributable to a reduced gross margin. Q4 non-op income was TWD 762 million, a slight uptick from the previous quarter due to increased government subsidies. Q4 net income was TWD 3.4 billion, or 12.9% of revenue. Q4 EPS, as a result, was TWD 6.63 compared to 8.53 in the Q3 2024 and TWD 4.25 in Q4 2023.
Regarding inventory, Q4 inventory turnover days were 94 days, an increase of nine days from the 85 days in Q3. This rise was anticipated due to customers informing Realtek of their intention to boost orders after the new year, partly driven by the potential tariffs from the Trump administration. Otherwise, inventory levels at Realtek and within the channel remain healthy. This concludes Realtek Q4 2024 financial results. Next, we'll briefly go through Realtek 2024 full-year operational results. 2024 net revenue was TWD 113.39 billion, a 19.1% YoY growth. 2024 gross margin was 50.4%, compared to 42.8% in 2023. 2024 operating expense was TWD 43.66 billion, or 38% of revenue. The OpEx ratio went up 2.7 percentage points compared to 35.8% in 2023. 2024 operating income was TWD 13.5 billion, or 11.9% of revenue, compared to 7% in 2023.
2024 non-op income was TWD 2.84 billion, compared to TWD 2.89 billion in 2023. 2024 net income was TWD 15.29 billion, or 13.5% of revenue, compared to TWD 9.15 billion, or 9.6% of revenue in 2023. 2024 EPS, as a result, was TWD 29.82, compared to TWD 17.85 in 2023. We also have the Q4, as well as the 2024 full-year balance sheets and cash flow statements for your reference and your convenience. This concludes Realtek Q4 2024 and 2024 full-year financial reports. Despite fewer working days in the Q1 2025 due to the Lunar New Year holiday, the company's outlook remains positive and stable, driven by increased short-term stocking demand from clients. We believe Realtek will continue its growth in 2025, driven by the solid demand from customers with spec upgrades and expanding end markets. Now, let's review the top product lines at Realtek.
First, we observe that PC versus non-PC revenues is approximately 31/ 69 in the Q4. Now, on Ethernet, orders have slowed down in the Q4, following three strong quarters in 2024. However, we expect a rebound in the Q1 of 2025. Regarding the different generations of specifications, demand for 2.5 Gb Ethernet and 5 Gb Ethernet is increasing for PC peripherals and telco markets, gradually replacing the Gigabit Ethernet. Furthermore, we anticipate a rise in 10 Gb Ethernet demand by the end of this year or early next year, as managed switches, Wi-Fi 7 routers, and 10G PON become more prevalent.
On switch, after a sluggish 2023, the switch market has steadily recovered throughout 2024, including the Q4, as some companies pull in their orders to stay ahead of potential tariff increases by Trump's administration, a trend likely to persist into the Q1 of 2025. Independent of geopolitical factors, the market is experiencing a consistent upgrade in specifications toward multi-gig switches. For instance, 2.5 Gb unmanaged switches are increasingly becoming the preferred choice to complement Wi-Fi 7 routers when necessary. As for managed switch, Realtek sees plenty of headroom for growth in the campus switch market in the near term and in the near and mid term, as well as the data center market over the long term. Now, on Wi-Fi, despite a seasonal slowdown in Q4, Realtek Wi-Fi concluded 2024 with robust growth.
Among the major application segments, Realtek Wi-Fi experienced the most significant growth in the telco, broadband, and network sectors, both in the Q4 and throughout the entire year. Looking ahead to 2025, we anticipate that telco, broadband, and network applications will continue to spearhead Wi-Fi growth. By various market reports, Wi-Fi 7 penetration reaches over 4% in 2024 and is projected to increase to over 10% in 2025. Such estimation aligns with our observations of Wi-Fi 7 adoption in PC and router markets. Consequently, older Wi-Fi specifications are expected to maintain their dominance in the market in 2025, playing a crucial role in driving the growth of Realtek Wi-Fi business alongside the advancements of Wi-Fi 7. On audio codec, according to the International Data Corporation (IDC), a total of 262.7 million PCs were shipped in 2024, a mere 1% increase from 2023.
IDC projects that the total PC market to expand by 4.3% in 2025, primarily driven by a commercial refresh cycle due to the end of Windows 10 support. Realtek's PC audio codec business roughly mirrored the overall market performance, with significant order pull-ins anticipated in Q1, driven by geopolitical uncertainties. For consumer electronics audio codec, growth potential is foreseen in 2025, particularly in the Chromebook and gaming sectors. On TV, TrendForce projects the 2024 full-year TV shipments at 196.7 million units, a meager 0.6% annual increase, but ending of a five-year streak for TV shipment declines. In the Q4, we saw a notable seasonal drop in TV orders despite the subsidy on TVs and consumer electronic goods in China. On 8 January 2025, the Chinese government expanded its subsidy program's scope and coverage. Concurrently, TV panel prices appear to be stabilizing.
These developments are likely to boost TV sales in the Q1 of 2025, while the full-year 2025 TV sales outlook remains uncertain. It is expected that Realtek will increase its market share in 2025. Now, on automotive Ethernet, Realtek has successfully completed the fifth full year of mass production shipment in the automotive Ethernet sector. The shipment growth in the Q4 and throughout 2024 significantly outpaced the corporate growth, despite the global car market growing at a slow pace of 1.7% to 88.1 million cars in 2024, as reported by ING Research in December 2024. This restrained growth trend is projected to persist, with sales expected to rise by only 1.6% to 89.5 million vehicles in 2025. Despite the sluggish growth in the global automotive market, we anticipate that Realtek's automotive Ethernet business will continue to outperform both the car industry and Realtek's overall corporate growth.
This robust expansion is driven by two main factors. First, the increasing electrification of vehicles, which facilitates the integration of Ethernet as a network backbone, and second, the more advanced use of Ethernet in automobiles, resulting in greater quantity and higher specification of Ethernet solutions.
Thank you, Yee-Wei. Now, we are entering the Q&A session. Please type your questions in the box at the lower right corner on the screen. We will reply accordingly. The first question is from Brad Lin, Bank of America. Compared to last quarter, is Realtek more optimistic or less optimistic on each application?
Well, the outlook undoubtedly is more optimistic. In the Q1, the surge in orders is clear, driven by clients increasing their short-term stock level. Despite the prevailing market uncertainties, the long-term trend remains clear and consistent.
The recent buzz surrounding the release of DeepSeek underscores the market's focus on AI, particularly the pursuit of achieving AI capability with fewer resources. In alignment with this trend, Realtek is dedicated to mass-enabling the widespread adoption of AI by offering IC solutions that facilitate seamless connections between devices, as well as between devices and humans, through natural audio and video interfaces. For many years, Realtek has been at the forefront of providing such solutions for PC communications network, consumer electronics, and automotive applications. In time, we will also be expanding our expertise into wellness industry and server sectors.
The next question is from Aaron Jeng, Nomura, related to 2025 growth drivers. Which segment or product line could bring highest revenue-wide growth in 2025?
Based on what we can see today, the communications network and automotive solutions are anticipated to lead the year-over-year revenue growth in 2025. Within the communications network segment, growth is being driven by the ongoing expansion of connected world and advancements in LAN, wireless LAN, and broadband connectivity specifications. In the automotive industry, the increased use of Ethernet for more subsystems, as well as the in-vehicle network backbone, is fueling the growth of automotive Ethernet.
The next question is from Rick Hsu, regarding seasonality in 2025. Recently, there have been customers pulling in orders early due to tariff concerns. Has Realtek experienced this phenomenon? If so, do you expect this to make Q1 2025 perform better than usual seasonality? And could it potentially affect Q2 2025 performance?
First, of course, yes. We are expecting a stronger-than-usual performance for Q1 2025, mainly attributable to the stocking demand from clients and order pull-ins prompted by tariff concerns. The pull-ins could potentially affect the performance of the Q2.
The next question is from Sunny Lin, UBS, about foundry strategy. With US trade restrictions targeting Chinese material foundries, does this impact your foundry partnership strategy, which is China versus non-China?
Well, Realtek's foundry policy ensures Realtek business continuity by diversifying our fab locations. This approach allows us to remain flexible and meet customer preferences, even in cases when certain locations are preferred or embargoed by specific clients. Realtek foundry partners follow the proverbial 80/20 principle, with over 80% of the wafer being sourced from TSMC and UMC, with the corporate strategy to develop high-value-added solutions and leverage advanced technology nodes. This arrangement is projected to continue unaltered in the foreseeable future.
The next question is from Sunny Lin, UBS, related to China's stimulus policy. Are you seeing any upside from China's continued stimulus policies on the consumer electronics products into first half 2025? How's the China consumer demand overall?
China's 2024 economic stimulus package was unveiled on 24 September 2024, introducing comprehensive measures across monetary property and capital markets, aimed at stabilizing the economy and bolstering investor confidence. From Realtek's perspective, the impact of the stimulus became evident only around November. Absent the stimulus, consumer demand in China has remained subdued. On 8 January 2025, the Chinese government announced an expansion of its subsidy program's scope and coverage. Based on previous experience, we anticipate a delay before the effects of the 2025 stimulus program are observable in the market. We will monitor the impact of the 2025 stimulus closely.
The next question is from William Yang, J.P. Morgan. What are the main gross margin impacting factors for this year? In terms of ASP, foundry cost, inventory, etc., which impact the most this year and which may provide upsides or downsides to 2025 gross margin?
Now, the gross margin is generally influenced by three primary factors: average sales cost, ASC, average selling price, ASP, and product mix. In 2023 and 2024, Realtek's gross margin was additionally impacted by aged inventory write-offs and the subsequent reversals. However, this influence is no longer a significant factor for 2025. This year, the primary determinants of the gross margin will be the ongoing dynamic between ASC and ASP, a challenge Realtek has historically managed well. We are confident in our ability to manage these variables effectively this year. Moreover, the evolving product mix, which trends towards higher specification and increased AI features, is expected to prop up the gross margin over time.
The next question is from Kevin Wang, Mizuho, related to OpEx. What is your plan of operating expense in 2025?
We anticipate a slight reduction in the OpEx ratio in 2025 compared to 2024, driven by expected operating leverage through healthy revenue growth. In the long term, our strategy remains focused on further reducing the OpEx ratio through enhanced operating leverage.
Next question is from Sunny Lin, UBS. What is the current inventory level at Realtek and at channels? What is your latest inventory management strategy, especially with the strong demand pull-ins happening recently?
By the end of 2024, Realtek had an inventory turnover day of 94 days. Additionally, there could be roughly an extra one month's worth of Realtek IC distributed across various customer channels. Realtek's inventory strategy is a careful balance between customers' demand forecasts, actual delivery history, and managerial judgment in response to market dynamics. Notably, the 94-day inventory level was within expectation due to customers indicating their intention to increase orders after the new year in light of potential tariffs from the Trump administration.
The next question is from Brad Lin, Bank of America, regarding PC. How is the company's view on overall PC shipment in 2025 with the launches of AI PCs, Windows 10 retirement, and new products at CES? Would you please share your view on AI PC penetration in 2025 and 2026? When does Realtek expect Windows on Arm to contribute meaningfully?
Well, various market reports and customer feedback seem to share the view that the PC market is set for modest growth in 2025. For instance, IDC projects a 4.3% expansion for the PC market, while Canalys forecasts a 5.8% increase in PC shipments for the year. This growth is anticipated to be driven by three factors.
One, the emergence of AI PCs, which generally refers to premium PC products showcased at the 2025 CES. These devices feature state-of-the-art computing architecture that integrates various processing units, including CPU, GPU, and NPU, to optimize performance and efficiency for AI tasks such as AI chatbots, AI office productivity, and AI image enhancement and generation. It is worth noting that Intel defines an AI PC as one equipped with a Core Ultra platform featuring integrated NPU capabilities, while Microsoft characterizes an AI PC as a device with a new CPU, GPU, NPU, onboard Copilot software, and a dedicated Copilot key. Realtek offers a different perspective on AI PCs. Regardless of the central computing architecture, an AI PC from Realtek's vantage point could be distinguished by its premium peripherals with AI edge computing capabilities that enhance the PC's awareness of its surroundings and user behavior, thereby delivering an optimal user experience.
As today's premium technology becomes tomorrow's mainstream, it is conceivable that AI PCs, as we know them today, may achieve mainstream status within a year or two. Now, second, another factor driving PC growth is the retirement of Windows 10 in October this year, which is expected to trigger a refresh cycle, particularly among commercial buyers. Three, additionally, many PCs that were bulk purchased during the COVID-19 pandemic are now aging and due for replacement in 2025. Regarding Windows on Arm, while it offers potential advantages such as power efficiency and connectivity, it faces significant challenges in software compatibility, performance, and developer ecosystem support compared to x86. Above all, Microsoft is unlikely to abandon x86 support entirely. Its ambition to support multiple architectures to maximize its market opportunities is understandable but has yet to gain significant traction. Realtek's solutions can be found in WOA today.
We are closely monitoring its progress.
Another question on PC from William Yang, J.P. Morgan. If there is expected to be PC semi-order pull-in in Q1 2025, do we think this demand momentum could sustain into Q2 2025 or further?
Well, in the market now, other than telco tender projects, we are witnessing many order pull-ins, including those for PCs in the Q1 2025. Generally speaking, order pull-ins might provide temporary relief for the effects of tariffs or other uncertainties. They do not represent a sustainable business strategy. It is prudent to wait until the later part of the Q2 to accurately assess the underlying market demand.
The next is a question related to Wi-Fi from William Yang, J.P. Morgan. How can we think of the Wi-Fi spec migration this year? Do you see smoother upgrades to Wi-Fi 6 and 7?
It’s important to note that 2025 will only be the second year for Wi-Fi certified 7 and the seventh year for Wi-Fi certified 6. By our best estimate, the market share distribution may be approximately 31% for Wi-Fi 4, 31% for Wi-Fi 5, 33% for Wi-Fi 6E, and 5% for Wi-Fi 7. While these numbers are estimates and may not reflect the exact market share, they do indicate that Wi-Fi 6 and Wi-Fi 7 have yet to reach their full market potential. In real-world applications, each generation of Wi-Fi has its own place in today’s marketplace. It is quite possible that different versions of Wi-Fi will continue to coexist for some time. Wi-Fi 4 caters to 2.5 GHz single band and basic dual band applications such as IoT. Wi-Fi 5 supports CE mainstream dual band applications serving devices like TVs. Wi-Fi 6 is designed for high-throughput dual band applications.
Wi-Fi 7, presumably, aims at extremely high-throughput tri-band applications. Turning our attention to two important applications for Realtek Wi-Fi: routers and PCs. We anticipate Wi-Fi 6 market penetration to rise by another 10 percentage points, reaching before 80% and 90% this year. Concurrently, Wi-Fi 7 could approach or exceed 10% market share by 2025. At Realtek, our Wi-Fi 6 shipments have already surpassed those of Wi-Fi 5 in 2025. We foresee continuing growth for our Wi-Fi 6 and Wi-Fi 7 solutions, further expanding their market presence in 2025.
Another question on Wi-Fi from Daniel Yen, Morgan Stanley. On Wi-Fi business, do we feel any pricing pressure in terms of Chinese competition? How's customers' feedback on our new Wi-Fi 7 products?
As Realtek embraces international standards in our solution, pricing pressures are all in a day's work for almost all Realtek products, including Wi-Fi, and in all regions, including China.
In the Chinese market, local companies predominantly offer Wi-Fi 4 and basic 1x1 Wi-Fi 6 solutions, which Realtek avoids competing solely on price. Instead, our solutions always come with extra features that attract users. For Wi-Fi 7, Realtek has garnered positive feedback from our customers. Our Wi-Fi 7 solutions for PCs introduce a new power-saving architecture that excels particularly in standby mode, outperforming our competitors. Additionally, our Wi-Fi 7 architecture for routers is exceptionally flexible, making it an ideal choice for the retail market with multiple configuration options. It is especially suitable for mesh routers, where it strikes a perfect balance between cost and coverage. Riding on positive feedback and new design successes, Realtek's Wi-Fi 7 business is poised for continued healthy growth in 2025.
The next question is from Brad Lin, Bank of America, regarding tender projects. For tender markets, can management provide the updates on both China and overseas tender orders for 2025?
Okay. Realtek estimates that the global 10G PON reached approximately 148 million units in 2024, with China accounting for 94 million or 63% of these units. Projections indicate that 10G PON could reach 160 million units in 2025, with China contributing 96 million or 60%. Some tender projects in China operate on a two-year cycle, with 2025 marking the second year. Deployment for these projects will continue as per the 2024 awards. Furthermore, the two key operators in China are anticipated to initiate new tender projects in 2025. Emerging trends in China's PON tender projects include an increasing demand for faster PON technology and a decline in router tender projects due to the aggressive deployment of FTTR fiber to the room.
While Realtek continues to cater to the China PON market, particularly for 10G PON, there is a growing recognition of substantial opportunities beyond China, also predominantly in the 10G PON segment. Realtek anticipates sustained healthy growth in its PON business in 2025, both in shipment volumes and revenue.
Next question is from Jason Zhang, CLSA, related to networking market. How's the demand and spec migration for networking market in 2025, especially for China and India markets?
Now, the demand and specification upgrades in the communications network market remain robust. However, we anticipate that demand growth could be more pronounced outside China, particularly in India, Vietnam, and Southeast Asia. As noted in our answer to the previous question, the transition to 10G PON is evident both in China and globally.
To the best of our knowledge, over 50% of new PON installations in China have already been upgraded to 10G PON. In 2024, Realtek began supplying 25G PON to mobile network operators in the US, providing an economical upgrade from 10G that integrates seamlessly with existing infrastructure. We foresee that other regions, including China, may continue to upgrade their PON to higher specifications in coming years.
The next question is from Luke Lin, KGI, related to XG-PON outlook. Given the delay in the GPON to XG-PON upgrade in 2024, what is the company's outlook for the XG-PON upgrade in the US, Europe, China, and other regions in 2025? Are there any drivers for market share gains in these regions?
Actually, we are not aware of specific information pointing to a delay in GPON to XG-PON upgrade in 2024 in any part of the world. On the contrary, the deployment for 10G PON technology is gaining momentum worldwide, as previously reported, with considerable advancements in China. The PON market is currently serviced by a limited number of players, including some from China and the US. However, geopolitical tensions have imposed market access limitations for solutions originating from both countries in various regions. This scenario presents additional opportunities for Realtek to expand its market presence.
The next question is related to automotive Ethernet business from Bruce Lu, Goldman Sachs. Regarding automotive Ethernet, Realtek previously mentioned it will continue to outpace the company's corporate average growth rate in coming years. What specific technological advancements or market trends do you foresee driving this growth? And how is Realtek positioning itself to capitalize on the opportunity? Do we have updated views on the trend for this segment?
Overall, the automotive industry is navigating a complex landscape of technological innovation, regulatory changes, and economic challenges while seeking growth opportunities in emerging markets and through new technology like EVs and autonomous vehicles. Over the past decade, the rapid development of ADAS and smart cockpits has significantly enhanced in-vehicle Ethernet connectivity, raising the speed to over 100 Mbps . Today, automotive Ethernet reaches up to multi-gig, serving as a high-speed communication backbone for central computing units, zonal ECUs, LiDARs, and radar systems. The next evolution of automotive Ethernet will target 10 Mbps low-speed connections, focusing on sensing and controlling at the end node level. In alignment with this trend, Realtek has introduced a 10BASE-T1S integrated fiber with multi-drop feature, which reduces the number of transceivers in the electronic electrical architecture and enhances software integration through a complete Ethernet protocol.
This advancement positions Ethernet to effectively replace CAN-LIN bus systems within vehicles, contributing to a new dimension of Ethernet content growth in the car. With a comprehensive automotive product portfolio ranging from 10 Mbps to multi-gig, Realtek is well positioned to capitalize on the ongoing expansion of the automotive Ethernet 10.
Another auto question raised by Jason Zhang of CLSA about auto business. Can you give us more details on market share, spec migration, and content growth? As Chinese EV brands keep growing, how's Realtek's market share on those Chinese EV brands?
We have previously discussed the migration of specifications and content growth of automotive Ethernet. With an unwavering focus on excellence, superior quality, and a strong shipment record, coupled with a comprehensive product portfolio and unmatched services, Realtek stands out in the highly competitive automotive Ethernet market, maintaining a well-balanced customer mix across regions. We are confident that Realtek's automotive Ethernet solution will ultimately outperform and outlast marquee competitors like Broadcom, Marvell, and NXP. Realtek's automotive Ethernet customers are globally distributed, including significant representation in China. An increasing number of new energy vehicles in China are now integrating Realtek's automotive Ethernet solutions.
The next question is from Daniel Yen, Morgan Stanley. How's the business outlook of your Bluetooth products? What will be major growth drivers of this product line?
The outlook of Realtek Bluetooth is exciting. Realtek Bluetooth solutions are integrated into various applications such as wearables, remote controls, earphones, and electronic shelf labels (ESL), all of which are expanding, exemplified as follows. After smartwatches and wearable AI memory capsules, Realtek Bluetooth wearables solutions, along with our low-power IoT camera, are advancing to AI glasses.
These glasses function as an audio-visual interface to the cloud chatbot, with lead customers planning product launches later this year. For remote controls, Realtek Bluetooth solutions are expanding from TV controls to a wide range of home appliance controls, many of which are expected to enter the market in the second half of 2025. Realtek holds a strong position in gaming earphones, which complement gaming mice that use Realtek Bluetooth controllers. Additionally, Realtek's Bluetooth hearing aid soft solutions feature advanced AI noise reduction technology and ultra-low processing delay, ensuring that amplified and processed sound from the hearing aid is crystal clear and almost perfectly synchronized with the natural sound entering the ear canal. Last but not the least, customers using Realtek ESL solutions commence production shipments in the latter half of 2024, with a steady expansion anticipated.
The next question is from Sunny Lin, UBS, about TV. What's your forecast on TV shipment in 2025, especially after last year's base is already high due to demand driven by major sporting events? Are there opportunities for growth this year?
As previously noted, the forecast for TV sales for the full year of 2025 remains uncertain. However, there's a clear expectation of robust Q1 attributed to the stabilization of TV panel prices. As mentioned in our last earnings call, televisions are progressively evolving into platform-based applications. The most successful TV solutions will be those developed on leading TV OS platforms, with extensive support from content providers and advertising channels. Realtek TV SoC are well positioned on a couple of major TV OS platforms. We are confident in our ability to continue increasing market share this year.
Next is a question raised by Jason Zhang of CLSA, related to server or data center products. What kind of product do you plan to release? When will it start to contribute the revenue for Realtek?
Well, leveraging our extensive expertise in SoC design and high-speed network connectivity, Realtek plans to develop IC solutions for edge servers, distinct from traditional cloud servers or data centers. It's making steady progress. Realtek plans to launch 100G optical fiber products this year and is actively developing PAM4 DSP chips that support cutting-edge 400G and 800G modules, comprehensively targeting future data center applications. At this stage, however, it remains premature to offer any revenue projections. For the year 2025, the company's growth will continue to rely on our current range of products and key applications we currently serve.
Next question is from Kevin Wang, Mizuho. Any update for your Arm-based processor project?
Well, Realtek is an inaugural design service partner in Taiwan within Arm Total Design. We are committed to provide comprehensive ASIC services, including the design and integration of Neoverse CSS. To achieve this, Realtek is advancing design flows for cutting-edge process nodes, specifically 5 nano and 4 nano, as well as developing pertinent IPs for the targeted SOCs. This initiative aligns with our strategic plan to penetrate the edge server market. Updates will be provided in due course.
Next question is from Sunny Lin, UBS. Can you talk about the company progress or roadmap in USB 4 and PCIe 5.0? Presumably, your focus is on the device end.
It has been approximately five and a half years since USB 4 specification was introduced in 2019. Despite this, the overall market for USB 4 devices, including PC motherboards, notebooks, desktops, game consoles, and peripheral devices, remains relatively sparse as of early 2025.
When a device does come with this USB4, the number of available ports is often limited, one in many cases, making USB4 hub and essential peripheral for many users. Notably, Realtek has recently achieved a significant milestone by becoming the first in the world to have a multi-port USB4 hub controller fully pass USB- IF certification. The need for a retimer to be physically close to each USB4 port is frequently highlighted, suggesting a significant TAM for USB4 retimers, according to many market reports. However, the exact number of devices currently using USB4 retimers remains speculative. Realtek is a strong proponent of USB4, yet maintains a realistic perspective on its current market presence. We offer what is likely the most comprehensive USB4 product portfolio available today, which includes USB4 controllers, USB4 hubs, USB4 video hubs, USB4 redrivers, and USB4 retimers.
These products are at various stages of customer design- ins and design wins. Additionally, we are developing USB4 Version 2 products, and Realtek PCIe 5.0 IP has been ready since Q4 2023, with a SerDes running at 32 Gbps per LAN. The PAM4 service running at 64 Gbps per LAN is planned to be ready for PCIe 6.0 in 2025.
This question raised by Daniel Yen from Morgan Stanley concerns the potential impact for the tariff increase on imported chips imposed by the Trump administration. What is Realtek's level of exposure to US market?
Well, this question now is too vague to answer. Realtek products are primarily shipped to module makers or ODMs, the majority of which are based outside the US. From there, products incorporating Realtek solutions are purchased by brand customers worldwide, including those in the US. Only a small fraction of Realtek chips is directly shipped to the US. We will conduct thorough assessments if and when tariffs are actually imposed on semiconductors shipped from Taiwan to the US.
Benson Pan from Point72 has a question regarding opportunities in the humanoid robot market. Could the management elaborate on the market potential and Realtek's role in this space?
Well, microcontrollers, AI processors, motors, sensors, power management controllers, and batteries are often identified as essential components in humanoid robots. It is crucial to recognize that these elements must be interconnected and operated in synchrony. Additionally, robust AI edge computing capabilities are necessary to facilitate seamless human interaction through audio and video interfaces. To this end, Realtek connectivity solutions play an integral role in connecting devices as well as connecting humans and devices. We are actively monitoring and participating in this emerging sector and will provide upgrades as developments unfold.
The last question is raised by Rick Hsu, Daiwa. How do you see DeepSeek impact your business?
Well, as briefly mentioned before, DeepSeek is really telling the world that AI can be done in some cases with fewer resources, making it easier to implement in many different devices. So to this end, we believe the revelation of what DeepSeek can do will help the AI. There's a widespread AI development, and that will benefit Realtek.
Thank you, Yee-Wei Huang. Due to the time constraints, we will conclude the meeting now. Thanks for your participation today. Please feel free to contact our IR team if you have further questions after the meeting. The replay will be available on the IR page of the company website before 6:00 PM today. Thank you and have a good afternoon.