Welcome everyone to the MediaTek 2022 first quarter investors conference call. Financial results and presentations for today's call are available on the investor section of the company website at www.mediatek.com. Now I would like to turn the call over to Miss Jessie Wang, the Deputy Director of Investor Relations. Ms. Wang, please go ahead.
Good afternoon, everyone. Joining us today are Dr. Rick Tsai, MediaTek CEO, and Mr. David Ku, MediaTek CFO. Mr. Ku will report our first quarter results, and then Dr. Tsai will provide opening remarks. After that, we will open for Q&A. As a reminder, today's presentation will provide forward-looking statements based on our current expectations. The statements are subject to various risks and factors, which may cause actual results to be materially different from the statements. The presentation materials supplemental non-GAAP financial measures. Earnings distribution will remain in accordance with financial statements based on TIFRS. For details, please refer to the safe harbor statement in our presentation slide. In addition, all content provided in this teleconference are for your reference only, not intended for investment advice. Neither MediaTek nor any of the independent providers is responsible for any actions taken in reliance on content provided in today's call.
Now, I like to turn the call to our CFO, Mr. David Ku, for first quarter financial results.
Thank you, Jesse, and good afternoon, everyone. Now let's start with the 2022 first quarter financial results. The currency here is all in NT dollar. Revenue for the quarter was TWD 142.7 billion, up 10.9% sequentially, and up 32.1% year-over-year. Gross margin for the quarter was 50.3%, up 0.7 percentage points sequentially, and up 5.4 percentage points year-over-year. Operating expense for the quarter were TWD 35.3 billion, compared with TWD 34.1 billion in the previous quarter, and TWD 28.3 billion in the same period last year. Operating income for the quarter was TWD 36.5 billion, up 22.7% sequentially, and up 18.5% year-over-year. Non-TIFRS operating income for the quarter was TWD 37.8 billion.
Operating margin for the quarter was 25.6%, increased 2.5 percentage points from the previous quarter, and increased 6.9 percentage points from the year ago quarter. Non-TIFRS operating margin for the quarter was 26.5%. Net income for the quarter was TWD 33.4 billion, up 10.8% sequentially, and up 29.6% year-over-year. Non-TIFRS net income for the quarter was TWD 34.5 billion. Net profit margin for the quarter was 23.4%, same as previous quarter and slightly decreased 0.5 percentage point from the year ago quarter. Non-TIFRS net profit margin for the quarter was 24.2%. EPS for the quarter was TWD 21.02, up from TWD 18.99 in the previous quarter and up from TWD 16.21 in the same quarter last year.
Non-TIFRS EPS for the quarter was TWD 21.71. A reconciliation table for our TIFRS and non-TIFRS financial measure is attached in our press release for your information. That concludes my comments. Thank you.
Thank you, David. Now, I would like to turn the call to our CEO, Dr. Rick Tsai, for prepared remarks.
Good afternoon, everyone. MediaTek delivers very solid first quarter results. Quarterly revenues exceeded guidance range at TWD 142.7 billion, growing 10.9% sequentially and 32.1% year-over-year, with growth coming from all three major revenue groups. Now let me share our views for market demand and then comment on our three revenue groups business. In recent months, we have seen global macroeconomic challenges, including inflation and geopolitical conflicts. These challenges inevitably impact the supply and demand of our industry. However, MediaTek is expected to grow in this environment with our leading product portfolio, technology migrations, and market expansion across products. With that, let me comment more specifically on our three revenue groups for this year. First, mobile phone accounts for 53% of total revenue in the first quarter.
It grew 28% year-over-year and 13% quarter-over-quarter, mainly driven by higher 5G shipments and our flagship entry. With some softening of demand for global smartphone shipments. We now believe 2022 global smartphone unit growth to be flattish year-over-year at approximately 1.35 billion units. Compared with our prior view of low single-digit percentage increase. However, our view of 50% global 5G smartphone penetration for this year remains unchanged, which now represents approximately 660-680 million units. A bit lower than our prior estimates of 700 million units. Nevertheless, it still represents approximately 30% increase from last year. For MediaTek, we expect our 5G shipments to regions outside mainland China to double from last year, driven by new 5G model launches and share gains in the global market.
Our flagship and high-end products, including Dimensity 9000, 8100, and 8000, demonstrate industry-leading performance in computing, multimedia, and power consumption. Numerous smartphones using Dimensity 9000, 8100, and 8000 hit the market in the first quarter, which were highly recognized by consumers, and some of the models are among the best-selling products. There will be more Dimensity 9000 flagship models coming in the second quarter and available in more regions starting second half of this year. Furthermore, we expect more models adopting high-end Dimensity 8000 series to ship in regions including mainland China, Europe, India, and Southeast Asia in the second quarter and beyond. In addition, our mmWave SoC is on schedule to ship in the second half of 2022 and pave the way for MediaTek further expansion in the global market.
As for 4G market, we have expanded market share in the global higher end models, which enables us to further expand market share globally and 4G revenue. Thanks to our 5G and 4G global share gains, we are quite confident in continuing to grow our mobile revenue this year. Now let me comment on revenue group of Smart Edge Platforms, which accounted for 39% of revenue in the first quarter. It grew 35% from last year and 7% from last quarter, mainly driven by Wi-Fi 6 migration and mix shift towards higher-end solutions across products such as TV and tablets. We see similar technology migration trends in Smart Edge Platforms revenue group, which lead to higher blended ASPs and revenue growth in spite of the recent market softening.
We expect revenues from Wi-Fi 6, 5G SoC modem, 5G tablets, 10G PON, and 4K smart TV to grow strongly in 2022. Moreover, we continue to expand market shares globally through global telecom operators, PC OEMs, automotive, and ASIC customers this year. With technology migrations and market share expansions, we expect Smart Edge Platforms to grow strongly and contribute the largest revenue growth for us this year. Now moving on to power ICs. It accounted for 8% of total revenue in the first quarter and grew 52% from last year and 21% sequentially. Revenue grew across multiple usages in the first quarter. For this year, we expect demand for power IC solutions from 5G and Wi-Fi 6 migrations, as well as our growing businesses in fast charging, automotive, and industrial-related applications to keep our business robust.
Looking into the second quarter, we expect all three revenue groups to grow sequentially, with mobile phone growing the strongest. Thanks to the ramp of our flagship and high-end Dimensity 9000, 8100, and 8000 product. Robust 4G demand and growing Wi-Fi business also support company growth. We expect our second quarter revenue to be in the range of TWD 147 billion to TWD 157 billion , up 3%-10% sequentially and up 17%-25% year-over-year.
At a forecasted exchange rate of TWD 28.5 to $1. Gross margin is forecasted at 49%, ±1.5 percentage points. Quarterly operating expense ratio to be at 24%, ±2 percentage points. In summary, MediaTek is now in a very strong global market position, backed by our leading and broad product portfolio, which enables us to better deal with competition and market uncertainties. Our strategies of 5G, Wi-Fi 6, 10G PON, and 4K smart TV product migrations, geographic expansion with global customers, and penetration into high-end and flagship segments lead us to ample growth opportunities. We believe we are on the right track towards our 2022 revenue growth target of 20%, gross margin target of 48%-50%, and three-year revenue CAGR target of mid-teens percent.
Finally, let me add a comment on our cash dividend. Our board has approved a proposal for cash dividend of TWD 73 per share, which represents a total amount of TWD 117 billion returned to shareholders. With our solid business outlook and cash dividend program, we remain committed to create value to shareholders. This concludes my prepared remarks. Thank you.
Thank you, Rick. We are now ready for Q&A session. May we please have the first question, operator?
Yes. Ladies and gentlemen, we are now in Q&A session. If you would like to ask questions, please press zero one on your keypad. Please ask your questions after your name is announced. Please limit your questions to two at a time to allow more participants to join the discussion. After two questions, we will move on to the next caller. Should you have more questions, please press zero one again to come back to the queue. In order to cancel your question, please press zero two. As a reminder, it is greatly appreciated that you turn off the speakerphone mode of your device to prevent possible echo effect. We thank you for your cooperation. Now please press zero one if you would like to ask questions. Thank you. The first to ask questions, Randy Abrams from Credit Suisse. Go ahead, please.
Okay. Yes, thank you. A good result and showing good resilience as well. My first question I wanted to ask on the outlook. First on the gross margin where you reported above 50%, so congratulations. For the guidance, back to 49% at the midpoint, is that just to reflect conservatism to keep it back to the range you've targeted for the year, or do you see a little bit of sequential margin coming down?
Randy, I think that actually is mainly reflect about the fact, you know, as you know, last year, especially starting from fourth quarters, a lot of our vendors started increasing their price, basically that will increase the cost to us. On the average side, I think gradually, those higher cost inventory were blending in into our inventory. You're gonna see our cost side will slightly increase basically due to the cost increase.
Okay.
That's it. That's actually it.
Okay. Yeah. It sounds like still confident on 48-50 for the year. When a little bit of the cost impact. Hey, I wanted to ask on the pricing on given you've factored a slower market demand for units. I think two sides to it, the inventory balance moved up again, just how you're feeling on your inventory levels. In a slower market, what's the expectation for pricing? Do you still see, with the flagship and improvement on different tiers, the ASPs on a blended holding up? Then how do you see like-for-like pricing over the next few quarters?
Randy, why don't I comment about the inventory first, and I'll have our Dr. Tsai to talk about the competition. Okay. I think long story short, I guess right now due to the disturbance and also lots of moving factors, for example, the COVID situation is still somehow impact the supply chain. Overall, I think from our customer side, we do see actually is they're trying to keep certain inventory reserved. Move back to our own end on the MediaTek side.
I think, if you're judging from the DOI, days of inventory, we do believe actually is the normal days, okay, quote-unquote, the normal day, maybe in the range of 90 days, plus minus. Consider the current supply chain situation, including COVID disruption I talked about earlier, and also the overall, the foundry OSAT capacity and also the cost consideration. I think strategically, starting from fourth quarter last year, we do build a little bit of inventory. Now you see our days of inventory is around 100 days. We do see that they will gradually coming down, slightly starting from Q2. We see the inventory level here is overall healthy. That's the, I think that's on the inventory side. I probably should have Dr. Tsai talk about the second part of the questions.
Randy, I think the pricing, especially associated with competition has been raised as a question for us. I'd like to make a few comments on that front. I have a few points to make. Number one, in principle, we do not believe a race to the bottom is a good or effective strategy. I think that's our principle. Our target, the management's target is to manage our profitability so that we can continue to invest heavily for our future growth. The management's job is to maintain our profitability, hopefully enhancing, to continue to invest. We will not kind of pull back from investing for the future.
Number three, I think the pricing strategy, well, in this market environment, that's not really generating much incremental demand. It's it is, I think that's usually the case. Given our, as David just mentioned, given the current semiconductor supply chain situation, we if anything, we will be more disciplined in product mix management and our pricing strategy to leverage our valuable capacity. We believe in, I guess, kind of in conclusion, we believe strongly that MediaTek now is in a very different global market position, especially compared to the past cycles against our competition. We will manage our profitability, as I said, so that we can continue investing. We will protect our company's value. Thank you.
Okay, great. Thank you. I'll get back in the queue.
Next one to ask questions is Sunny Lin from UBS.
Hi. Thank you for taking my questions. Congrats on the strong results and good guidance. My first question is on your market share for 5G. If we recall back in 4G, MediaTek had a 40% market share in your addressable market when the technology became more mature in later years. Now, any views on how much share you'll be able to get in 5G as your competitor supply start to normalize into second half of the year in 2023? Thank you.
I think overall the market share, as you guys can see from a lot of the public information, especially from the volume share perspective, I think we are doing pretty good, both in China and also in the global market. Based on our strong market position and more importantly, with our very strong product portfolio across all sector, which including the entry level, mid-tier, and also right now the flagship, we do have a strong confidence to maintain the current market share and maybe even to manage to create an increased market share for the flagship, because in the past we were in a very low market share situation.
Got it. My second question is on also on the pricing side. Now looking at 5G SoC pricing, although it's already in the third year of introduction, is still at a meaningful premium over 4G. That's probably being supported by the supply chain tightness. Now as the supply gradually improves, what's your expectation on how that price premium may evolve next two to three years?
Well, first of all, I probably need to clarify that, you know, the 5G carry a much higher ASP is actually mainly due to the technology migration, not due to the supply chain tightness. Because you can judge from the gross margin. If it's due to the supply chain tightness, maybe you're gonna see the gross margins increase substantially. In the last few years, we gradually increased our gross margin, mainly due to the product mix increase rather than the supply tightness. Also, I think in the last few quarters, we're kind of talking about our pricing in general is strategic rather than is optimistic. We didn't really just increase price, you know, spontaneously due to the supply chain situation. I want to clarify that.
Again, because of that, I think 5G ASP versus the 4G ASP is still a huge difference. I won't say premium, because after all, we're using more wafer, okay? Because the circuit and also the technology is just very different. We do still believe the gap between, the ASP gap between 5G and 4G probably gonna stay there, you know, unless someone can have come out totally different design. In the near term, I guess no one can against the physics.
Got it. Thank you. That's very helpful. Maybe a quick follow-up. So in terms of supply, are you seeing any improvement on the foundry side, for next couple quarters and any expectation for the foundry cost increase?
We believe foundry, especially leading-edge process foundry capacity, remains tight, especially our main or actually our only main foundry source. As they reported, they are also facing supply chain constraints. Saying all that, but it's also important to point out that despite the tightness of the leading-edge process capacity, we are getting, I think, I would say the right amount of supplies that we can meet our customer requirements in general. As to the mature technology capacity, I think the situation is probably somewhat different from the leading edge. We feel also relatively or reasonably comfortable with the mature technology supply also. Thank you.
Thank you very much.
Right now we're having Laura Chen from KGI Securities. Please ask your questions.
Hi. Good afternoon. Can you hear me?
Yes, we can hear you, Laura.
Yes. Hi. Thank you for taking my question. My first question is about that we've seen that MediaTek already have very great progress, not only in 5G but also in the smartphone, non-smartphone business such as the networking and the connectivity. I'm just wondering that if there is any plan for MediaTek in computing or PC business or even like a PC peripheral, like a interface, can you help us to have more color on MediaTek plan in the PC or peripheral space? That's my first question. Thanks.
First, MediaTek is now in the PC business, mostly through the Chromebook sector. We do have, we believe, a very strong technology capability from CPU, GPU, as well as the multimedia, et cetera, to play a significant role in the computing area. Saying all that, we are not a big player right now in that space. It is our intention to move into that space, as we have greatly improved, enhanced our computing capability over the past several years. Yes, indeed, we are progressing into that space. As to the peripherals, we are still looking at it. The size of the market is quite different from the mainstream PC.
We are first looking at the sizable market first.
So what-
Thank you.
What kind of the product we may expect to come out from MediaTek in the following, like, or one or two years, aside from those, like, application processor for Chromebook? I'm also wondering that if we are planning have like combo solution for like, Wi-Fi plus some interface connectivity for PC peripheral? Or can you give us some more color on, like, what kind of products are we aiming for?
Laura, I think first of all, I think it's in addition to what else you talked about. I think for the peripheral, I think right now at least for Wi-Fi 5 and Wi-Fi 6, and also for PMIC, we already actually have quite a good exposure on the PC side already. If your question is specifically talking about, say, high-speed interface, right now it's actually not our focus yet.
Okay, very clear. Actually, my second question is also about the power management IC. I think we already mentioned that we see very strong 22% year-on-year growth in Q1. I'm just wondering, could you give us more details on the application breakdown? Given we see some recent macro uncertainties, do you also see more softness in the power management IC order flow? Thanks.
Our business actually covers, as you can imagine, covers a really wide range of applications. The base of course is in the area of PC, in the displays, you know, monitor displays and also smartphones. Those are our obvious largest area. As time goes on, I think as we reported before last time, and this time also, we are also moving into automotive and industrial applications, which already comprise about 10% of our IoT's revenue. Going forward, the objective is to move upward into higher computing intensive applications, so that we can have even better growth and better margin. I think you also asked demand. Demand, it is, we are seeing also some impact.
I think during the last two years, our power IC business has done a very good job in upgrading their capability and their customer mix. We are seeing the first quarter results demonstrated the progress they have made, and we believe this progress will continue throughout the year in 2022. Thank you.
Thank you.
Next one to ask questions, Charlie Chan from Morgan Stanley.
Thanks. Hi, Rick, David and also Jesse. Good afternoon. My first question is also about the pricing strategy. I understand, you know, company's strategy totally makes sense, right? Even you want to keep a discipline, but if your competitor does not, what would you react, right? For example, if your competitor start to compromise and what would be your reaction? I mean, now your customers could be suffering, I don't know. If your customers come to you that you know, we have a big pressure in terms of margin and profitability, et cetera, how are you going to communicate with your customers in this tough situation? Thank you.
Charlie, I think, for pricing, we will not be able to comment about any move from our competitor because after all, that's their strategy. But I think from our perspective, even though we center around about the pricing, to be honest, I think people kind of are trying to understand how do we respond, you know, on the competition. And from our perspective, most important part in the competition is really starting from our technology and product portfolio and overall the relative market position. Like I was still talking about earlier, this time around, compared to the previous few cycle, I understand when I talk to some analysts, you know, some investor, people kind of have a sour taste about in the past for the cycle or down cycle to be precise.
This time around when you think about MediaTek, you know, the product portfolio, the revenue, the size of the revenue, the timing of our long tail product, taking 5G for example, taking Wi-Fi 6 for example, even we announced about Wi-Fi 7 for example. I think overall we have a lot of tool in this competition. Pricing is only part of that, and arguably not gonna be a major part of that. We wanna make sure, we fully leverage up our our advantage, which is the product and technology and product portfolio, rather than only focus on one single tool. I think that's probably the better way to look at this.
I see. Thank you. Yeah. I think the product portfolio is also very important. Instead of cutting the price, why not just introduce a kind of a lower cost new 5G entry product, so that your customers and probably the company can also both benefit from this introduction. Any plan for the like a low-end or a new entry 5G SoC?
That's a very good point. We do have, as we said earlier and many times, we have a complete portfolio for 5G SoC, which covers from all the way from flagship high-end, mid-range entry. We are going to have also, I would say, well, low entry level, SoC, as we believe the penetration of the 5G into the smartphone will continue to increase. All different markets, different regions, each different segment of products, MediaTek is there and will be there to support all those different demand. We are working on that end year, we will announce that at the right time. Yeah.
Okay. Sorry, Rick, did you say at the end of the year?
No, no. At the right time.
How to judge the right time. One way I kind of think about this question is really 5G SoC in terms of costs, right? For example, I think TWD 100 5G SoC probably is good for TWD 500 5G phones, right? If the price points need to go to like TWD 200 or even TWD 150, maybe this time you have to do this. Do you have any kind of you know plan that the price point of 5G you know when will that get to like for example TWD 150?
Uh-
What kind of chip price will be required to address the demand of a TWD 150 5G smartphone?
I think, Charlie , you're trying to pin down smartphone price solely on the SoC chip cost. I would agree it is maybe even a significant factor but definitely not the only factor. There are many factors. If you look at the BOM of the phone or other display or the memory, all those things. What I can say is we are working on. I just don't remember the date, but I don't think. We're not talking about very far away future, in the future. We are talking about something that we can announce, not in too far future. We will be able to provide a good quality, good performance, but reasonably priced SoC to our customers. It's really up to them to put together a cost effective and beneficial to the maybe a certain market segment and certain users.
I really cannot answer your question about at what price point, because it is not in our control.
I see. Just one clarification. It's another full question. It's clarification. You mentioned about a 20% revenue targets. Last time you talked about more than 20%. Is there any tone change or just digging into too much detail?
Well, I think, Charlie, last time and this time around, I think we talked about the same. We say +20% . I think that's the same. Yeah, we didn't really change.
Okay.
We also kind of talking about the overall uncertainties out there. We understand that.
I see. Okay. Sounds good. Understood. Thank you.
Next one to ask questions, Gokul Hariharan from JP Morgan. Go ahead, please.
Yeah. Hi. Thanks for taking my question. I want to first start with the Smart Edge area, and Wi-Fi 6 seems to be the primary growth driver in the last 12-18 months. Could we talk a little bit about what you see on Wi-Fi replacement cycles? Because historically, if we think about past Wi-Fi replacement cycles, we've seen about four-five years before a new Wi-Fi generation kind of comes online and becomes mainstream. Obviously Wi-Fi 6 has been a pretty quick adoption curve. But we are also, I think industry is also talking about Wi-Fi 7. MediaTek has also started to talk about it. Could you talk a little bit about what do you think about Wi-Fi replacement cycle?
Is it a once-in five-six-year kind of cycle? Or you think that this is accelerating to an extent that we get consistent product upgrade and ASP upgrade every two-three years for your Wi-Fi product portfolio?
We are also watching this trend. I think, qualitatively at least, we believe the cycle, well, I should say, the cycle actually lasts now shorter than the previous generations of Wi-Fi. That is from Wi-Fi 4 to 5, 5 to 6, and 6 to 7, probably. It's getting sooner for the users to move to the next generation Wi-Fis. We cannot say. I think you mentioned two to three years. I think that's probably too short. It is, we are seeing the migration to Wi-Fi 6 from Wi-Fi 5 is definitely sooner than what we have seen from four to five.
As you know, we have announced our Wi-Fi 7 capability, you know, back in early this year. The response we have received from the customers and the different applications, frankly, is stronger than we expected. Of course, in many ways it also reflects MediaTek's progress, the effort in upgrading our Wi-Fi technology capability, at a much faster rate compared to our, you know, a few years ago. We also move into almost all applications from high-end to notebook to our traditional router centers, consumer devices. So for MediaTek, what I can say is, yes, the cycle moves faster from 4G, from 4 to 5 to 6, hopefully to 7 also. Thank you.
Understood. Yeah. Thank you very much. My second question is on the 5G. I think thanks, Dr. Tsai, for outlining your pricing approach, pricing strategy. Could you talk a little bit about, I think your competitor has talked about gaining share over the next three years in the Android addressable market, which is essentially the market that you both compete in. If they become more aggressive, do you plan on responding on price or you're happy to cede some share to keep margins intact? Given, as you mentioned, there is not much incremental demand enough to drop prices. I think previously, a couple of quarters back, we had indicated that 5G ASPs in 2022 will be largely flattish compared to 2021.
Is that a statement that still holds given the current market environment?
Yeah. Well, Gokul, first of all, I think for the 5G pricing, I think the same as you hope those are for 2022 based on what we see. I think that's still, in line. When you talk about again, I think earlier several questions asking the same question. I think people still kind of worry or concerned or trying to wondering is how to respond on the competition. You know, it just come out maybe from different format. I mean, you come out find a way say the competitor may be more aggressive. Some other analysts may talking about now they don't have, like, the supply constraint situation. Overall, regardless what's the rationale, basically you guys are all talking about competition.
We're also trying to highlight that in the last product cycle, which is the 4G, there's no competition, there's no constraint on the supply, there's no shortage of aggressiveness, but we still managed to do a pretty good job on the 4G gaining market share and more importantly, grow the profitability. We know how to compete basically. We don't have a crystal ball to tell you three years what happens right now, but we can reassure you the portfolio we have right now is actually much, much better and stronger compared to our last 4G cycle. You know, again, you know, every one of you or some of you, actually many of you two years ago, still worried about whether or not we're behind on the 5G product portfolio. If you still recall the last two years question.
You know, after two years, we're actually in the first wave of 5G. We get a pretty good market share of all product segments. Right now, once we get into the flagship, there's a holy grail of the 5G smartphone. We actually, even though the market share wise actually is, we are still small, but the market perception and also market feedback is all public information you can get on the internet to check the comparisons, the Dimensity 9000, they are all very positive. Again, when we're facing competition, the bottom line to the technology and product portfolio, and we have certain confidence, very strong confidence, I should say.
Got it. Thanks. Thanks very much, David. One last question is any impact to your Q2 guidance due to the China lockdowns and factory and logistics issues? Like, is there anything that you had to discount in your Q2 guidance because of that?
Well, I think you all know our exposure, like the smartphone. We have taken into account China market, domestic market, I should say, China domestic market, to the mobile phone, 4G and 5G impact. On the other hand, we believe the outside of the China market will grow quite well this year in the 5G. I think our product portfolio works really well with just about every major Android phone makers. You can see, for instance, our market expansion results in, for instance, North America, that demonstrates our capability, our product portfolio's capability. Thank you.
Okay.
Right now we have Bruce from Goldman Sachs to ask questions.
Okay. Thank you for taking my question. I think the investor concern is definitely for the China smartphone end demand, given the recent lockdown and the deterioration in demand. What is your assumption for the overall China smartphone shipment? We also understand that you have a very good progress outside of China. Can you share your revenue exposure from China, but within the smartphone business? Also, do you expect the US smartphone shipment to grow in 2022? Will your 5G smartphone shipment more than 4G anytime this any quarter in this year? Something like that will be very helpful to relieve or to ease investors' concerns. Thank you.
Bruce, why don't I start with our view about the China smartphone market. I think, so, our view remain the same. Earlier this year when we gave you our the 20% growth target, we kind of expect China will be either flattish or maybe even coming down a little bit when we're talking about the Chinese domestic smartphone market. Right now we share the same view, but maybe the decline trend is slightly larger than our earlier expectation. I think that's our assumption. Also this time around, we also revised our assumption about the global smartphone shipment. Like the CEO explained earlier our assumption will be global flattish to up a little bit. Now actually it's flattish or down a little bit. We...
Something we didn't change is our view about the 5G penetration rate ratio. I think this year we believe it's going to be 50%. If you do the math, basically the overall 5G addressable market coming down slightly. Originally, we're looking for globally 700 million 5G smartphones, but now we're talking about maybe 660-680. If you apply to our shipment market share, which is in line with what we talked about earlier, actually the impact is actually manageable. Plus, very much we also, in our earlier statement, we're also talking about one very important message. I think for the Smart Edge Platform is also having very strong growth.
We're even talking about we put a qualification statement earlier, say, Smart Edge smart platform provide the strongest growth among all other sector. I think this is actually all, if you piece it all together, that should give you why we still feel comfortable about growth target right now.
Let me dig a little bit about it. I'm sorry. Please.
You know, as a reminder, for the 5G, 4G breakdown. I mean, 5G right now is actually definitely the largest, basically especially from the revenue contribution perspective compared to 4G. Yeah.
How about the shipment wide? Can you surpass 4G shipment anytime this year?
We didn't really disclose the specific 4G, 5G shipment, unfortunately.
I see. I tried to dig in a little bit for your China overall smartphone shipment. You said that maybe the smartphone in China will decline more than low single digits. I would say that I think the investor expectation now is a lot bigger than that. Maybe that's the discrepancy between investors' expectation and the company's guidance. Can you share a bit more color on how you can have this? How can you be so confident that the smartphones in China will only decline by, you know, mid- to- high single digits?
Well, first of all, Bruce, we didn't talk about China will decline only mid- to- high single digit. That's not what we say. Okay?
I see. I understand. Okay. Let me move on to a longer term question. I mean, can you share more color about the multi-year revenue growth outlook, especially coming from the smartphone business? 5G smartphone penetration rate only will reach 50% based on company's guidance. It looks like the device penetration rate outgrows the infrastructure investment. Do you expect the 5G smartphone growth rate or penetration rate will slow down meaningfully moving forward? What is the assumption when you provide them like teens revenue growth for next two, three years?
I think 5G growth in the coming two years. I don't know, I cannot say for sure for three years, will remain as we are projected. Right now it's about 50% penetration. I think we believe 70% penetration of 5G is what we're looking at. We just had a review, for instance, the other day of different market. We understand China's domestic market very well. We know what they're doing, how they're doing. We also understand the difficulty the China domestic market is going through. However, you know, we had a look at the Indian market. If you look at the Indian market, 5G conversion rate is quite impressive.
We fully understand the situation of the 5G market in China domestically. That's why we're working very closely and very well with all Android phone makers so that we have the largest market share, not only in China but also in the global market outside of China. Thank you.
Can I double-check that? You just mentioned that the penetration for 5G will reach like 70% in two years. Based on this assumption, you can achieve, you know, teens growth in the coming two years. Is that the right assumption?
Well, some growth. Our growth going forward, of course, cannot be dependent on 5G only. That's why I think we have said many times, for instance, today also, smartphone occupies about 53% of our revenue, which means 47% revenue coming from a very different segment. Our 47% revenue comes from basically not related to mobile phone revenue. This 47% of the revenue, as we have also invested, and Wi-Fi is just a good example, will also provide our growth momentum going forward. That's why we also work on many different new segments that we need to go in so that we can generate meaningful CAGR for the next three-five years growth. Thank you.
I see. Thank you.
Ladies and gentlemen, as we are running short of time, so we are going to take the last one for questions. The last one will be Brett Simpson from Arete Research.
Yeah, thanks very much. Rick, I wanted to maybe just dig in a little more on the China smartphone setup that you see in Q2 and particularly into the second half of this year. I guess we can all see there's been softness domestically with Chinese smartphone vendors. I think also the export business has been impacted because of their quarantining policies, et cetera, and they've lost share to Apple and particularly Samsung so far. I'm just, you know, given that backdrop, what makes you so confident that year is sort of playing out as you expected, there's nothing really changing? Do you think Chinese smartphone vendors are kinda building inventory, so they're not maybe cutting back, but they wanna have supply so they can react to any recovery post-lockdown?
Just any perspective you can share with us on how you see that side of the business, particularly going into the second half. Thank you.
All right, Brett. I guess I want to make sure I can clarify a few points. Number one, we recognize that the smartphone shipment is down compared to what we believe a quarter ago. We said that clearly in our opening statement. Of course, along with the 5G shipment, especially in China, but we didn't say specifically how much China domestic market demand is going down. Number two, we also said 5G shipment in 2022 should be, will be about 30% higher compared to 2021 5G smartphone shipment. I guess, you know, you guys have a lot of data. Just like we do, you can figure out how much from China domestic market, how much from overseas market.
Well, I shouldn't say overseas market, the global market outside of China. You also mentioned, I think the third point, you're dividing the suppliers, smartphone suppliers into three categories: Chinese suppliers, Apple, and Samsung. I think you also understand well the market positioning of the iPhones. They are very much in the high- end to very high-end. You can also, I'm sure, calculate their penetration in different, in the developed economies and in the developing economies. As to, I cannot comment on specifically on the other two categories you mentioned, but we just say we are expanding in our market share across the global markets, different regions. We are working closely, and we are working well with all Android phone makers.
We can say that very clearly. I think, I'm sure you can deduce from those statements why we are saying what we are saying. Thank you.
Yeah. Rick, that's very helpful. Maybe just a sort of macro question, just to get your perspective on the squeeze that's sort of underway in consumer disposable income. I mean, I guess with rate rises and food inflation, energy prices all going up, you know, many investors are now talking about downturn in consumer semis ahead. Maybe it's 2023, I don't know. What's your perspective? I mean, particularly given your high exposure, MediaTek's higher exposure to consumer and all the cycles you've been through in your career. How do you assess the landscape at the moment and the sort of cyclical risks around the business or semis more broadly?
Oh, you certainly are right, Brett, that the macro environment being severe. We recognize that fully. You know, when you run a business, you have to run on certain assumptions. You know, you try to read as much as you can about all the economists' forecasts about whether there will be a hard landing, soft landing, et cetera, et cetera, et cetera. We're basing our current forecast on, I think basically, there is no imminent recession in 2022, at least. I am not an economist, not to mention a macro economist, but going forward, whether there is a risk of recession, your guess is as good as mine.
You're also right, we have, at least I have gone through several cycles, especially in the semiconductor business. We do know how to manage the cycles, like, as painful as it can be. You know, in running a business, you have always absolute measure and a relative measure. In a very down cycle, if it happens, I stress if it happens, the relative performance is critical. I can assure you, MediaTek will be a resilient performer, despite your saying that we have high consumer exposure. Yes, we do. The other lesson we have learned over the years, nobody can escape a major cycle. Nobody, no matter which area you're in this industry.
It's important, the important thing is to be, to stay resilient to manage the cycle. I hope I'm useful.
Yeah.
Thank you.
I appreciate the perspective. Thank you very much.
Yes, ladies and gentlemen, we thank you for all your questions. Now I will hand it over to Miss Jessie Wang for a closing comment. Miss Wang, please proceed.
Ladies and gentlemen, this concludes MediaTek's 2022 first quarter conference call. We would like to thank you for your participation, and you may now disconnect. Thank you.
Yes. Thank you, Jessie. Thank you again for your participation in today's conference. You may now disconnect. We thank you, and goodbye.