Good afternoon, everyone. Welcome to Realtek 2025 second quarter earnings call. This call is carried by Realtek Spokesperson, Yee-Wei Huang. The presentation will be available on the company website before 6:00 P.M. today. At the beginning, our Spokesperson will report our second quarter financial results and give a management's 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 of 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 will pass this call to our spokesperson, Yee-Wei.
Thank you, Amy. Good afternoon, ladies and gentlemen on the line. You are currently participating in the second quarter 2025 webcast earnings release hosted by Realtek Semiconductor Corporation. Now, let us go through the second quarter 2025 financial results. Q2 revenue was TWD 31.91 billion, an 8.87% decrease from the previous quarter, but a 4.04% rise from the same period last year in NT dollars. The QoQ decrease was mainly a result of a sharp New Taiwan Dollar appreciation against the U.S. dollar in the second quarter, while the overall demand remained stable. In U.S. dollars, Q2 revenue dropped 3.3% QoQ, but increased 8.5% YoY. Q2 gross margin was 50.23%, a 1.33 percentage point decrease quarter- over- quarter. The main reasons include product mix and diminishing inventory write-back as expected. Q2 operating expenses totaled TWD 12.02 billion, accounting for 37.7% of revenue.
The OpEx expenses declined by 8.6% in absolute dollars, while the OpEx ratio was essentially unchanged compared to the first quarter 2025. Q2 operating profit was TWD 4.01 billion, representing an operating margin of 12.6%. This lower margin was primarily due to a reduction in gross margins. Q2 non-Op income was TWD 616 million, a drop from TWD 702 million in the previous quarter, mainly due to the lower fair value of financial assets and less FX gains. Q2 net profit was TWD 3.90 billion, or 12.2% of revenue. Q2 EPS as a result was TWD 7.62 compared to TWD 9.28 in Q1 or TWD 8.55 in Q2 2024. Regarding inventory, Q2 inventory turnover days rose to 92 days, up from 75 days in Q1, a 17-day increase that was generally anticipated given the ongoing market uncertainty. Despite the challenges, both Realtek inventory levels and those within market channels remain healthy and robust.
We also have the second quarter 2025 balance sheet and cash flow statement for your reference at your convenience. This concludes Realtek's second quarter 2025 financial results. Entering the third quarter, the short-term market remains affected by multiple factors such as macroeconomic conditions, exchange rate fluctuations, and uncertainties in tariff policies. Consequently, Realtek maintains a cautious outlook for its third quarter operations and stays attentive to changes in demand across various end markets. Now, let's examine the key market segments that Realtek serves. The PC market experienced robust growth during the second quarter of 2025, with global shipments exceeding 68 million units according to IDC, marking the strongest year-over-year increase since 2022.
At Realtek, our PC-related product lines such as PC Ethernet, PC Wi-Fi, PC webcams, and Type-C solutions performed above the corporate average in Q2, driven largely by pre-tariff stocking and heightened commercial demand as enterprises and public institutes pushed upgrades in anticipation of Windows 10 end-of-support deadline in October this year. Consequently, Realtek's second quarter revenue split between PC and non-PC segments stood at approximately 37% - 63%. Despite this strong start to the year, most PC industry executives anticipate only modest shipment growth for the entirety of 2025, projecting a global year-over-year increase between 2.4% and 4.1%, with the bulk of that growth already captured in the first half. As a result, the PC market is expected to level off in the third quarter and through the remainder of the year.
It is also notable that Windows on Arm, WoA, garnered attention in the first half of 2025 as an appealing notion for ultra-portable devices and battery-conscious users, helped by broader native software support and improved emulation. However, WoA has not yet matched Windows on x86 in areas such as heavy workloads, legacy application support, or gaming. Realtek PC peripherals solutions, particularly our PC camera controllers, are already compatible with WoA. We remain committed to collaborating closely with stakeholders in the WoA platform ecosystem. The global consumer electronics market experienced healthy growth overall throughout both the second quarter and the first half of this year, driven by demand for smart home devices and sustained expansion in emerging markets.
For Realtek, we saw, in particular, growing demand in the gaming and AIoT sectors in the first half of the year and take a cautious view for continuing stability into the second half of the year. The networking infrastructure market showed distinct regional dynamics in the second quarter and first half of 2025. China remained a major player in network infrastructure and digital connectivity tender projects, although the market is increasingly favoring local solutions with an emphasis on cost competitiveness. India's network infrastructure market was growing with relatively limited export exposure to the U.S., thereby allowing more moderate impact from tariffs than China to support steadier network infrastructure investment. The U.S. and Europe both maintained their positions as major markets for network infrastructure.
Despite ongoing trade tensions and tariffs, demand for Realtek managed switches and 10 GbE solutions remained robust in the U.S., while our 10 GbE products continue to see strong uptake in Europe. These trends are expected to persist throughout the second half of the year. In summary, at Realtek, we observed continuing network infrastructure spec upgrades with increasing demand for Realtek 10G-PON Multi-Gig, Ethernet Multi-Gig, managed switches, and Wi-Fi 7 solutions. The global automotive market in the first half of 2025 showed mixed results. While certain regions experienced growth, many others faced stagnation or decline. Sales of battery electric vehicles started to face headwinds, with a slowdown in major markets like Europe and North America due to the phasing out of subsidies.
China's EV market continued its upward trajectory, though fierce competition among leading manufacturers like BYD, Tesla, Xpeng, and NIO sparked price wars that, according to the People's Daily in early July, are unlikely to benefit any party. For China's automotive industry, confronting a structural crisis rooted in overcapacity, the momentum may be irreversible, according to Bloomberg. Nevertheless, Realtek's automotive Ethernet business stands out, consistently surpassing overall market trends thanks to its proven quality and comprehensive product portfolio.
Thank you, Yee-Wei. Now, we are entering the Q&A session. Please type your questions in the box at the lower right corner of the screen. We will reply accordingly. The first question is from Bruce Lu, Goldman Sachs, related to the second half 2025 outlook. As tariff uncertainties begin to settle in July, what are Realtek's growth expectations for second half 2025? Should investors anticipate lower than seasonal growth for second half 2025 due to strong early-order pull-in prior to tariff uncertainties in first half 2025? Which product lines are expected to continue showing strength?
Okay. For every market that Realtek serves, the growth expectations for the second half of 2025 are generally tempered as a significant portion of demand was front-loaded in the first half of 2025 in anticipation of tariff hikes and related trade policy uncertainty. Fortunately, the uncertainty of tariffs is expected to be clear in the coming days. Nonetheless, the exchange rate between the New Taiwan Dollar and the U.S. dollar may remain at its current level or see even further New Taiwan Dollar appreciation in the coming months. In other words, the average value of the New Taiwan Dollar in the second half of the year could be more than 8% stronger than that in the first half. This currency shift alone is poised to reduce our second half revenue by over 8% compared to our original projections.
Despite the headwinds, the company's core product lines, those enabling high-speed machine connectivity and intelligent man-machine interaction, are poised for sustained long-term growth thanks to solid underlying demand. In particular, Realtek's automotive Ethernet and consumer AIoT solutions are expected to continue to outperform the broader market in the latter half of the year.
The next question is from Brad Lin, Bank of America, about end-demand visibility. In the last quarter, you're concerned about the uncertainty in end-demand markets. Is the visibility improving? What's your current view on PC, TV, and CE markets?
Although nearly all our customers in the PC, TV, and consumer electronics markets have maintained their full-year outlook for 2025 since the start of the year, we observed that orders typically expected in the second half were instead placed earlier during the first half. Given this, there seems to be little reason to question the clear visibility for the rest of the year based on simple math in light of the consistent full-year forecast given by our customers. However, as we enter the third quarter, we are beginning to see a rise in short-term incremental orders. Currently, our visibility extends no further than one or two months ahead at best.
The next question is from Sunny Lin, UBS, regarding gross margin outlook. What's your guidance on gross margin in third quarter and second half 2025? How will the U.S. tariffs affect your gross margin outlook?
Okay. Tariffs can indeed affect the gross margin of IC design houses by driving up costs and exerting price pressure throughout the supply chain. Currently, at least three types of tariffs are being discussed: reciprocal tariffs, baseline tariffs, and those specific to semiconductors. Of these, semiconductor tariffs could have the most significant impact on a company like Realtek, while the other two are broader in scope and may exert indirect effects. The semiconductor tariffs hinge on the outcome of the U.S. Section 232 investigation, which encompasses semiconductors, semiconductor manufacturing equipment, and related derivative products. To date, no semiconductor tariffs have been imposed as the investigation remains ongoing. A conclusion is anticipated within 270 days from April 2025, which points to a timeframe of late 2025 or early 2026, though a faster decision is possible. In fact, it may come within the next couple of weeks, as announced by U.S.
Commerce Secretary Howard Lutnick on July 27. In summary, it is still too early to precisely assess the impact of potential semiconductor tariffs. Nevertheless, the ongoing threat of new tariffs and heightened trade tensions continue to create uncertainty. In response, Realtek is collaborating closely with both customers and wafer manufacturing suppliers to mitigate the possible effects of broad-based tariffs. Importantly, even if tariffs are implemented, the company does not anticipate a significant change in its gross margin from current levels.
Next question is from Brad regarding OpEx. Could you provide any insight on OpEx for third quarter and second half 2025? What's the proportion of R&D?
OpEx is composed of selling expenses, administrative expenses, and R&D expenses. In the second quarter, these categories represented 5%, 4.3%, and 28.5% of net sales, respectively. Although these percentages may fluctuate each quarter, the changes tend to be not large. Similar proportions may be expected in the third quarter or throughout the second half of the year. It is worth noting that among the three OpEx categories, selling expenses may be partially denominated in U.S. dollars, whereas administrative and R&D expenses are largely in New Taiwan Dollars and are thus more sensitive to foreign exchange rate fluctuations.
The next question is from Sunny about foreign exchange impact. What is the impact of NT dollar appreciation against the U.S. dollar for Realtek? Would the gross margin and operating margin impact be quantifiable? How does Realtek offset the impact from NTD appreciation?
Realtek conducts both purchases and sales largely in U.S. dollars. As a result, appreciation of the NT dollars against the U.S. dollars has a direct effect on our reported net sales. The negative impact on gross margin, however, may be delayed since products sold today might have been manufactured three months or more ago when the NT dollars was weaker, leading to higher reported cost of goods sold. Over the long term, though, the impact of foreign exchange on gross margin tends to be negligible. In contrast, the effect of foreign exchange on our operating margin cannot be ignored. As a significant portion, though not all, of our operating expenses are paid in Taiwan Dollars, we strive for achieving a balance between the R&D investment and profitability. To mitigate currency risks, Realtek consistently practices natural hedging and does not expect significant changes on non-OP foreign exchange gains or losses.
The next question is from Chelsea Su, Master Link. Please provide the guidance for the tax rate for second half 2025 and 2026.
Realtek has followed a global minimum tax since the last quarter, though currently our tax rate stays at the current level of 15%.
The next question is from Sunny Lin, UBS. What is the current inventory level at Realtek and at Channel? What is your latest inventory management strategy, especially with U.S. tariffs soon taking effect?
Realtek's inventory turnover days increased to 92 days, up from 75 days in the first quarter. Despite this rise, our inventory levels remain healthy, especially given the current market uncertainty. Maintaining a slightly higher inventory allows us to respond quickly to rush orders when market visibility is limited. From what we observe, IC inventory levels throughout our channels are also in good shape, as our partners adhere to our policy of placing orders to Realtek only after securing orders from their own customers.
The next question is from Wai Lian Yong, JP Morgan. May we please share our foundry breakdown by Taiwan and non-Taiwan? Also, on the package and testing level, what % is from Taiwan and non-Taiwan now versus a year ago?
With approximately 20% of both wafer level and final testing performed in-house, Realtek continues to follow the proverbial 80/20 split for wafer foundry and packaging house usage, with the majority of work conducted in Taiwan. While this distribution has remained consistent for some time, we have expanded our roster of qualified wafer foundries and packaging houses compared to a year ago.
The next question is from Brad, Bank of America, on process node migration to more advanced nodes. Could you please help update on the development progress of your 4 nm and 5 nm products? Are there specific tape-out or mass production timelines you could share?
Realtek is currently developing a few projects using advanced semiconductor nodes at 4 nm , 5 nm . These initiatives focus on ultra-high-speed smart connectivity solutions capable of operating at 224 Gb ps per LAN. The target timeline for test chip tape-out is set for early 2026.
The next question is from Daniel, Morgan Stanley. Do you see the effects from China's existing stimulus policies diminishing into the second quarter? Do you expect the overall demand from China as an end-demand market to decline into the second half if there are no further stimulus policies?
China's current stimulus measures, including consumer goods trading programs and targeted monetary policies, have begun to lose their momentum in the second quarter of 2025. The initial surge in activity generated by these policies appears to be waning, as the primary benefits, particularly from trading subsidies, have largely been realized. Feedback from frontline sales suggests that markets and industries relied on Chinese domestic demand, especially those tied to consumer and real estate sectors, should anticipate a more difficult second half of the year unless new policy support unexpectedly materializes. While China remains an important market, Realtek has, in recent years, been broadening its sales presence in the non-China markets, both the developed countries and the emerging markets.
The next is a question related to Wi-Fi from Rick Hsu, Daiwa. Looking ahead to 2025 and 2026, how do you anticipate the penetration rate of Wi-Fi 7? How is Realtek performing in terms of Wi-Fi 7 market penetration?
Looking ahead for 2025 full year and 2026, the adoption of Wi-Fi 7 is poised for substantial growth as the technology becomes increasingly mainstream. Realtek continues to project that Wi-Fi 7 penetration could reach or exceed 10% for PC this year, with a similar 10% milestone anticipated for routers. As more networking equipment is upgraded to support both Multi-Gig wired and wireless connectivity, Wi-Fi 7 emerges as the optimal choice for next-generation performance. Realtek is exceptionally well positioned to capitalize on this momentum, expanding its market share in Wi-Fi 7, particularly within PCs, networking chipsets, and related devices.
Another question on Wi-Fi 7 from Sunny Lin, UBS. Can you update the competitive landscape for Wi-Fi, Ethernet, etc. in China in recent 6 to 9 months? Are Chinese competitors catching up on Wi-Fi 6 and 7 capabilities?
Chinese companies have long participated in the Wi-Fi market, though their primary successes to date have been within the budget-sensitive segments of Wi-Fi applications. However, with China's strong commitment to developing its domestic semiconductor industry, competitors like HiSilicon are rapidly progressing in Wi-Fi 6 and Wi-Fi 7 technologies. Realtek addresses these competitive pressures by leveraging its proven field interoperability, a broad product portfolio, advanced integration, low power consumption, and AI integration where sensible. Similar dynamics exist in the Ethernet space, where Realtek employs comparable strategies to continue its service to the Chinese market.
The next question is from NC, Brilliant. The Chinese competitor Espressif adopts aggressive pricing strategy for Wi-Fi 6 and 6E and plans to ship Wi-Fi 7 in 2027. How will it impact Realtek's revenue and gross margin in second half 2025 and in longer term? Are Wi-Fi 6 and 6E and Wi-Fi 7 combined accounts for 20% or above of Realtek's total revenue?
Today, we have not reached that level. Wi-Fi 6 today is the mainstream, so Wi-Fi 6 contributes a major portion of Realtek's Wi-Fi revenue. Regarding the competition from local Chinese competitors such as Espressif, our strategy is pretty much what we outlined before. Currently, we believe we still have a lead against the local competition.
The next question is from Lucas Liu, KGI, regarding tender projects. What is the status of the China tender project for 2025 and 2026? How should we think about the 2026 outlook? Can management share the tender project revenue breakdown and momentum by country or region?
China's network infrastructure tender projects are active, with the government and industry focused on building a national network that connects thousands of data centers across the country. As of 2025, China likely leads the world in both the number and the budget of network infrastructure tenders, a trend that is expected to persist throughout 2026 and beyond. However, given China's strong commitment to advancing its domestic semiconductor industry, there is a clear and growing preference for Chinese native silicon solutions in these projects. While Realtek continues to participate and compete within China's tender landscape, we have notably expanded our reach in the telecommunications sector outside of China. Today, our revenue from non-China tender projects has surpassed those from China, with our success in non-China tenders accelerating at an even faster rate.
Next question is from Rick Hsu, Daiwa . What impact does China's semiconductor localization have on Realtek? What strategies will we adopt to respond?
Yes. Non-China semiconductor companies such as Realtek face reduced assets, increased competition, and supply chain disruption due to China's localization drive. Realtek responds to such challenges in several ways, including supply chain diversification, market realignment, and collaborative innovation with add-alike partners to sustain competitiveness in a geographically fragmented semiconductor landscape.
The next question is related to automotive Ethernet business from Kevin Wang, Mizuho. What is Realtek's market share for automotive Ethernet buy and switch? What is the adoption rate and content per car for Ethernet buy and switch in 2025 and 2026? Also, what is your feeling or feeling for automotive market demand outlook and penetration of ADAS and autonomous driving in second half 2025 and 2026?
As a matter of policy, Realtek does not comment on market share. However, we are confident that our automotive Ethernet products rank among the most widely adopted solutions available. The growing demand for automotive Ethernet is largely propelled by advancements in ADAS and autonomous driving technology, which require high data throughput and low latency connections. Based on our best estimates, more than half of all new vehicles now incorporate automotive Ethernet, often utilizing one or two high-performance Ethernet switches. Looking ahead, we anticipate adoption of Ethernet will continue to grow steadily over the next three to five years, likely resulting in double-digit annual growth.
Next is a follow-up question by Kevin. What are other new IC products for Realtek in the automotive market other than automotive Ethernet and managed switches? Where do we see these new products and sales contribution?
In addition to its established presence in automotive Ethernet, Realtek has several other products making inroads into the automotive sector, leading this expansion to a solution such as ASA Motion Link, developed by the Automotive Service Alliance, and also Wi-Fi, Bluetooth, audio DSP, and audio codecs.
Another question on auto from Bruce Lu, Goldman Sachs. Does Realtek expect tariffs to impact the global automotive chip market in second half 2025, and how might this affect Realtek's automotive Ethernet and switch business growth outlook? What is Realtek's expectation for the revenue contribution of automotive Ethernet and switch in 2025 and 2026?
Okay. To the best of our knowledge at present, leading automotive semiconductor companies, including Infineon, STMicro, Bosch, NXP, Renesas, and TI, anticipate modest growth in the second half of the year without taking trade tensions and tariffs into account. While proposals and discussions have surfaced regarding a possible 25% tariff on certain imported semiconductor chips affecting the automotive sector, there are, as of mid-2025, no finalized tariffs on automotive semiconductors. This is largely due to, as mentioned, the ongoing Section 232 national security investigation into chip imports in the U.S. Although it remains too early to evaluate the precise impact of potential semiconductor tariffs, the persistent threat of new tariffs, both broad-based and specific to semiconductors, coupled with heightened trade tensions, continue to create an atmosphere of uncertainty.
In anticipation, Realtek is working closely with customers and wafer manufacturing partners to help mitigate the potential effects of any tariffs. While Realtek does not discuss the revenue contribution of individual product lines, it is worth emphasizing that Realtek's automotive Ethernet continues to post growth rates that outpace overall corporate growth. This product line is becoming an increasingly significant part of Realtek's portfolio.
Still a question on auto by Sunny Lin, UBS. Would you expect any changes with Marvell selling the automotive Ethernet division to Infineon, who may be able to cross-sell with its strong auto MCU offerings?
Infineon's acquisition of Marvell's automotive Ethernet division presents an opportunity to integrate or cross-sell automotive Ethernet solutions alongside its own automotive microcontroller portfolio. However, the company's long-term success in this space will likely depend on its ability to independently drive advancements in automotive Ethernet technology. This means Infineon must prioritize retaining key talent, preserving technical expertise, and enhancing investments in the development of automotive Ethernet. While it remains to be seen how effectively Infineon can execute on these fronts, the current competitive landscape has not yet shifted. Realtek continues to hold a strong position in the automotive Ethernet market.
The next question is from Bruce, related to AI glasses. During COMPUTEX in May, Realtek showcased its high-performance, low-power chipset solution for AI smart glasses. Could you provide Realtek's perspective on the overall trend of AI smart glasses? For example, the potential market temp and ASP per device. Also, could you update us on any ongoing projects? Who are our major customers?
Okay. Global sales of AI smart glasses reached approximately 1.52 million units in 2024, with Ray-Ban Meta smart glasses accounting for the majority of these sales. Market reports estimate the total addressable market for AI glasses this year to be between 2.8 and 6.7 million units, with expectation of double-digit compound annual growth over the next three years. Currently, AI glasses are priced from just under $300 to over $1,000. Realtek recognizes that AI smart glasses are on an upward growth trajectory, though the pace of expansion may be more measured than some analysts predict. Our showcase chipset is well aligned with industry trends, prioritizing power efficiency and performance. We are actively collaborating with a range of customers, including prominent brands, to integrate Realtek's AI glasses chipset solutions.
Feedback from these partners consistently highlights that the success of AI glasses will depend on several critical factors: price, weight, design, heat, low power consumption, real-time performance, and most importantly, the tangible benefits they provide to users. Many share the perspective that AI glasses could serve as an ideal hands-free gateway to cloud services. By working in close partnership with our customers, Realtek is well positioned to enable the widespread adoption of AI glasses in the market.
A question from Daniel Yin, Morgan Stanley on PC. How is the outlook of PC shipment into second half 2025 in your view? How do you still see AI PC and Windows 10 end-of-life as replacement cycle drivers this year?
The outlook for PC shipments in the second half of 2025 is cautiously stable, though growth appears to be leveling off. According to IDC, overall PC shipments grew by about 6.4% in the first half of 2025 compared to the prior year, while Gartner reports a 3.4% increase. For the full year, IDC forecasts PC shipments to rise around only 4.1%, and Gartner projects a 2.4% increase. Based on these figures, the second half PC shipment growth is likely to range between 1.6% and 2.2%. From Realtek's perspective, we estimate year-over-year growth in the second half to be roughly 2%, driven both by the steady adoption of AI PCs and the end-of-support for Windows 10.
Next is a question on AI PC from Bruce Lu, Goldman Sachs. Could you provide Realtek's perspective on the progress of AI PC adoption? Is Realtek observing an increase in PC replacements driven by the rising AI PC adoption rate? How does this impact PC revenue contribution in second half 2025 and 2026?
As we previously noted, Realtek defines an AI PC as a PC equipped with advanced AI-driven features, such as AI-enabled cameras or voice processing, regardless of whether it incorporates a high-pops NPU within the CPU or supports Copilot AI. In line with this definition, we are witnessing growing adoption of Realtek's PC peripheral solutions that offer AI capabilities, including AI PC cameras, AI PC codec, DSP for voice processing, and AI fingerprint enhanced sign-in security. These innovations are contributing to Realtek's PC-related revenue, both by increasing market share and achieving higher average selling price.
The next question is from Sunny, UBS, about TV. What's your current forecast on TV shipment in 2025? With last year's high base, are you optimistic for growth this year? What about the forecast for 2026, if we take the Summer World Cup event into account?
According to a late-June update from Omdia, global TV shipments in 2025 are expected to remain virtually unchanged, reaching approximately 208.7 million units, reflecting a marginal year-over-year decline of about 0.1% from last year's elevated benchmark. Realtek echoed this sentiment, also forecasting a modest decrease in the worldwide TV market compared to the previous year. Looking ahead into 2026, the upcoming Summer World Cup is anticipated to influence TV demand as it stands as the world's most watched sporting event. Historically, the FIFA World Cup has driven greater television viewership and, by extension, a more pronounced impact on TV sales than even Summer Olympics. Major global sporting events are well known to boost TV purchases, as consumers seek to enhance their viewing experiences for live broadcasts, especially on larger screens.
The premium and large screen segments, which are already enjoying growth, are particularly well positioned to benefit from the surge of interest the World Cup is expected to generate.
Next is a question raised by Sunny Lin, UBS. Is the revenue contribution timeline for high-speed Ethernet products on track for revenue contribution in late 2026? How large is the TAM of 100 Gb optical transceivers and 1040 DSP? Who are the targeted customers and who are we competing with?
Okay. The 100 Gbps optical module market is projected to approach 50 million units, with an average selling price exceeding $100 per unit in 2025, according to a market research report. 100 Gb modules are expected to remain the mainstream choice for optical transceivers in the near future. Now, the total addressable market for 1040 DSPs is both substantial and experiencing strong growth, driven by escalating demand for high-speed optical communications in data centers, cloud networks, and telecommunications. Current market reports estimate the TAM to well exceed $1 billion today, with projections of double-digit CAGR over the coming years. Leading industry players of 100 Gb optical PHY and 1040 DSP include well-known companies such as Broadcom and Marvell. Realtek continues to make steady progress in both 100 Gb optical PHY transceiver and 1040 DSP technology.
We anticipate delivering engineering samples of our 100 Gb optical PHY transceiver later this year. Our 224 Gb per LAN 1040 series IP is currently in development. Moving forward, we plan to target data center enterprise and private cloud applications, while maintaining our dedication to the enterprise switch market and closely tracking the evolving requirements of server-grade data center and AI-optimized Ethernet switches.
The last question is from William, JP Morgan. May we please have an update on ASIC projects? When will this project go mass production? What technology node are we adopting?
Realtek has long been a proactive player in the so-called ASIC industry, consistently delivering tailored silicon solutions to meet the unique specifications of our customers. At present, as we speak, we have ongoing ASIC projects serving both gaming and IT sectors. Looking ahead, we are meticulously prepared to expand into ASIC services for server and related applications, progressing well in line with our strategic roadmap. Specifically, we are advancing our design flows for advanced project nodes, including 5 nm and 4 nm, and developing relevant IPs such as 1040 224 Gb per LAN service for targeted applications, including edge servers. Through this initiative, we remain committed to delivering innovative solutions that address the evolving needs of our customers.
Thank you, Yee-Wei. Due to the time constraint, 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 reply will be available on the IR page of the company website before 6:00 P.M. Thank you and have a good afternoon.