Welcome everyone to the MediaTek 2021 Fourth Quarter Investors Conference Call. Financial results and presentations for today's conference call are available for download on the investor section of company website at www.mediatek.com. Now I would like to turn the call over to Ms. 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 fourth quarter results, and then Dr. Tsai will provide our prepared 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 materially different from the statements. The presentation material supplements Non-GAAP financial measures. Earnings distribution will be made in accordance with financial statements based on GAAP. For details, please refer to the Safe Harbor Statement in our presentation slides. In addition, all content provided in this teleconference is for your reference only, not intended for investment advice. Neither MediaTek nor any of independent providers is responsible for any actions taken in reliance on content provided in today's call.
Now, I would like to turn the call to our CFO, Mr. David Ku, for fourth quarter financial results.
Thank you, Jessie. Good afternoon, everyone. Now let's start with the 2021 fourth quarter financial results. The currency here is in NT dollar. Revenue for the quarter was TWD 128.7 billion, down 1.8% sequentially and up 33.5% year-over-year. Annual revenue totaled around TWD 493.4 billion, up 53.2% year-over-year. Gross margin for the quarter was 49.6%, up 2.9 percentage points sequentially and up 5.1 percentage points year-over-year. Gross margin for the year was 46.9%, up 3 percentage points from the previous year.
Operating expense for the quarter was TWD 34.1 billion, compared with TWD 31.9 billion in the previous quarter and TWD 27.5 billion in the same period last year. Full year 2021 operating expense was TWD 123.6 billion, compared with TWD 98.3 billion in 2020. Operating income for the quarter was TWD 29.7 billion, up 1.5% sequentially and up 93.3% year-over-year. Non-GAAP operating income for the quarter was TWD 30.9 billion. 2021 full year operating income was TWD 108 billion, up 150% year-over-year. Non-GAAP operating income for the year was TWD 110.4 billion.
Operating margin for the quarter was 23.1%, increased 0.08% from the previous quarter and increased 7.2 percentage points from the year-ago quarter. Non-GAAP operating margin for the quarter was 24%. Operating margin for the year was 21.9%, up 8.5 percentage points from 2020. Non-GAAP operating margin for the year was 22.4%. Net income for the quarter was TWD 30.1 billion, up 6.3% sequentially and up 101.6% year-over-year. Non-GAAP net income for the quarter was TWD 31.2 billion. Net income for the year was TWD 111.9 billion, up 170% year-over-year. Non-GAAP net income for the year was TWD 113.9 billion.
Net profit margin for the quarter was 23.4%, increased 1.8 percentage points from the previous quarter and increased 7.9 percentage points from the year-ago quarter. Non-GAAP net profit margin for the quarter was 24.2%. Net profit margin for the year was 22.7%, up 9.8 percentage points year-over-year. Non-GAAP net profit margin for the year was 23.1%. EPS for the quarter was TWD 18.99, up from TWD 17.92 in the previous quarter and up from TWD 9.35 in the same quarter last year. Non-GAAP EPS for the quarter was TWD 19.63. 2021 full year EPS was TWD 70.56, compared with TWD 26.01 in 2020.
Non-GAAP EPS for the year was TWD 71.81. In addition, a reconciliation table for our GAAP and non-GAAP financial measures 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. 2021 was a great year for MediaTek. Following a successful year of 2020. We again set several financial records in 2021. We achieved a record revenue of TWD 493 billion or $17.6 billion. We more than doubled our earnings per share to TWD 70.56. In addition, both gross margin and operating margin increased for four consecutive years. Gross margin increased more than 11 percentage points from 35.6% in 2017 to 46.9% in 2021. Operating margin increased more than 17 percentage points from 4.1% in 2017 to 21.9% in 2021.
These results reflect our successful implementation of strategies to have early readiness in 5G and Wi-Fi 6 to capture the entire product cycle, as well as industry-leading low power computing technology, supported by disciplined operation. Meanwhile, thanks to our enhanced competitiveness in technologies, we are better able to expand our addressable markets and provide more values to our customers. With strong business fundamentals, we are confident in sustaining a strong cash flow going forward. We therefore in last April raised our cash dividend payout ratio to 80%-85% on regular basis and launched a four-year special cash dividend program of TWD 16 per share per year.
Based on our 2021 EPS of TWD 70.56, we expect our cash dividend payment in 2022 to be in the range of TWD 72-TWD 76, subject to board of directors approval. On the business side, all revenue groups delivered strong annual growth rates in 2021. Altogether, more than 2 billion electronic devices sold in 2021 were enabled by MediaTek solutions, ranging from smartphones, smart TVs, to routers, broadband, notebooks, tablets, and a large variety of devices. These billions of small Smart Edge devices are complementary to the fast-growing cloud computing and play a critical role in enriching everyone's cloud experiences.
Motivated by the convergence of smart devices, edge devices, we recently made some changes in business organizations to consolidate our resources and invest heavily on the fast-growing computing connectivity and Smart Edge platform businesses. We will also align revenue disclosure with these changes starting from 2022 with three groups: M obile Phones, Smart Edge Platforms, and Power IC. Along with this trend and our continuous expansions in addressable market, we foresee our total addressable market to grow to $140 billion in 2024 from $80 billion in 2021. For MediaTek, with such a growth prospect, as well as strong and matching technologies, we believe we will enjoy revenue CAGR of mid-teens percent for the next three years, with all revenue groups growing robustly. MediaTek possesses all the key technologies and capabilities for Smart Edge devices.
We offer high performance, low power CPU, GPU, and APU. Our comprehensive and synergistic portfolio of short, long range wireless wireline technologies, that is 5G modem, Wi-Fi 6, Wi-Fi 7, Bluetooth, 10G PON, are industry leading. In addition, the high quality camera, video, audio IP using our superior edge AI techniques provide highly differentiated value to our key customers. All these technologies, IPs, and capabilities are integrated into various products, serving multiple and complementary platforms in a most efficient manner. Power IC, being broad-based in nature, provides not only values to MediaTek products, but also steadily growing revenue. Still, we continue to invest aggressively in technologies for the future growth beyond three years.
We are extending our core capabilities into higher power computing. High performance, low power graphics IPs, 5G modems with low latency, massive distribution applications, next generation Wi-Fi, security IPs, all of which will be integrated into advanced system architectures for different platforms and ecosystems. Underneath them all are the leading-edge process, as well as 3D chiplet technologies in collaboration with our foundry partners. Lastly but importantly, we collaborate closely with our key customers and ecosystem partners at the early IP product development stage in order to optimize the system performance and greatly enhance the user experiences. MediaTek strives to be a reliable and trustworthy partner to our customers as we become more relevant in the industry. The business momentum that we have built in the last couple of years, our broad-based product offerings and the continuous technology migration within our competitive portfolio will make 2022 a resilient year for MediaTek.
Despite the potential uncertainties in the end market, we expect in 2022 our revenue growth to exceed 20%, with a gross margin target of 48%-50%, thanks to better product mix and strong technology migration. With that, let me comment on 2022 growth drivers for each revenue group. For Mobile Phone, as the largest smartphone SoC maker, we aim to sustain our leading position in 2022. Our main growth drivers this year will be continuous 5G migration in more regions and expansion into flagship segment. We expect global 5G smartphone penetration rate to grow from high 30% to exceed 50% this year, which represents approximately 700 million units. Overall 5G penetration rate in China stays high at 80%, where we aim to sustain our leading position. We expect 5G unit growth to mainly come from other regions.
We expect our 5G shipments to regions outside of China to double in 2022 due to our strong 5G design pipelines with global customers with extensive market position in North America, Europe, India, and other emerging regions. In addition to our strong sub-6 GHz portfolio, our millimeter wave SoC has also been certified by a global major operator with mass production starting in the second half of 2022 for global markets. We are also very excited about our expansion into flagship. The technical capability and user experience of our first flagship SoC, Dimensity 9000, is highly recognized by the market. Major benchmark data shows that Dimensity 9000 has a powerful CPU with the best power performance. All major China brands have adopted Dimensity 9000, and the first model is scheduled to launch in March.
We are also working closely with key customers to market the Dimensity 9000 as a leading 5G SoC brand. With our strong technology investments, we will continue delivering future generations of flagship products. For Smart Edge platforms, we are still at the early stage of technology migration in Wi-Fi 6, Wi-Fi 6E, 5G, Bluetooth 5.0, and we expect multiple year growth opportunities ahead of us. In addition to technology upgrade on existing platforms, which contributes most of the growth for this group this year, I'd like to point out that our ability in expanding into new platforms and capturing emerging opportunities through leveraging our leading technologies will begin to pay off this year. First, with our early readiness of 5G modem and Wi-Fi 6E, we have been able to penetrate the Chromebook market successfully.
Our partnership with Intel and AMD helps us build a strong design pipeline with all major global OEMs. As more notebook models start mass production this year, we expect revenues from this platform to grow meaningfully. Furthermore, we are seeing other revenue-generating opportunities starting to bear fruit. One example is customer premises equipment or CPE. For global operators where we ship multiple products including the main chip, 5G modem and Wi-Fi 6. Another example is AR gaming device, where we provide the critical multimedia SoC. These developments will provide future growth in this area in years to come. For Power IC, the structurally higher demand, driven by accelerated technology migration, continues into 2022. We offer Power IC solutions in diverse industries, including computing, communication, consumer, automotive, and industrial.
Product sales through MediaTek group platforms, such as smartphone and Smart Edge devices, will continue to grow robustly this year and to account for about 30% of our higher Power IC revenue. Non-group associate businesses, including fast charging adapter, Type- C, and memory-related Power IC products, will grow even faster. Among which automotive and industrial applications are showing the highest growth rate and will account for more than 10% of our power revenue this year. For the first quarter of 2022, we expect revenue coming from higher 5G adoption and flagship Dimensity 9000 shipment to offset lower seasonal demand for certain consumer products. We also expect mix shift towards higher value-added products across all revenue groups and bring benefits to gross margin.
We therefore forecast our first quarter revenue to be in the range of TWD 131.2 billion-TWD 141.5 billion, up 2%-10% sequentially and up 21%-31% year-over-year at a forecasted exchange rate of TWD 27.7 to one U.S. dollar. Gross margin is forecasted at 49%, ±1.5 percentage points. Quarterly operating expense ratio to be at 25%, ±2 percentage points. To summarize, we are making very good progress toward 2022 based upon our 20%+ revenue growth target this year. $20 billion revenue is around the corner, and this will be the beginning of a new chapter for MediaTek.
With our business realignments to invest heavily in computing, connectivity and Smart Edge platforms, we believe we are on the right track to capture future growth opportunities along with healthy smartphone growth. We are confident to achieve our three-year mid-teens revenue CAGR target and to create shareholders value. This concludes my prepared comments. I wish everyone stay safe and have a happy Chinese New Year. Thank you.
Thank you, Rick. Operator, we are now waiting for Q&A session. May we please have the first question? Thank you.
Yes. Thank you, Jessie. Ladies and gentlemen, we are now in Q&A session. If you would like to ask questions, please press zero one on your telephone 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 to the next caller. Should you have more questions, please press zero one again to come back to the queue. In case you would like to cancel your questions, 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 one to ask questions, Randy Abrams from Credit Suisse.
Please go ahead.
Yes, thank you and congratulations on the result and also, looks like a good outlook. First question, wanted to ask on the business segments. A two-part question. I think first, just the motivation to combine. It looks like you're combining the compute IoT networking with what used to be the smart home, more mature products, which originally had much different growth rates. Wanted to understand, the motivation, to combine. The second part, if you could give the fourth quarter, by segment, either the revenue or the growth and also a rough view on the split for 2022 of growth by segment.
Okay. Randy, I'll take the first part and give you to the second part. The consolidation of our two business groups has actually multiple objectives. First and the most important is to create scale. Well, these two businesses comprise about TWD 6 billion revenue last year. Within which there are many synergies where they were kind of artificially separated before. Like, I mean, like TVs, we have strong, smart and AI-enhanced display capability, where they will be utilized easily to our, you know, smart vision product lines and also to our OTT businesses. All the Wi-Fi products that we have are almost being utilized in TVs and all the other products. There's strong synergy among different product lines.
With the consolidation, all the R&D resources will be combined also. We will be more productive in our R&D resource utilization. Those R&D resource will be asked to deliver the new business opportunities. That's mainly why, Randy.
Okay, great. Thank you.
Okay. Randy, for your second question, maybe I'll talk about the growth rate last year for the three business group and also talking about the revenue breakdown roughly. I think for last year, basically it's overall, all business group grow more than 30%, probably with the strongest from the Mobile Phone sector. I think the key point is all groups grow more than 30%. That's point number one. Point number two, in terms of revenue breakdown for fourth quarter last year, for the three business group, I think Mobile Phone account for roughly 52%, and so Power IC account for roughly 7%, and the rest go to the Smart Edge platform.
For this year, given the fact, like the CEO talked about earlier, I think this year we're looking for another strong growth year. More importantly, all three business groups have a pretty robust growth rate. I would say the revenue percentage or revenue contribution to be pretty much in line with what we had in the fourth quarter last year. I don't see there's any big movement or change over there.
Okay. To clarify then, all three groups probably pretty similar near that 20% average?
Yes.
Okay.
I think profitability, they are also very similar as well.
Actually, the second question I wanted to ask, more on the profitability side, margins have seen a good expansion. I feel like it's two things. It's mix, improving competitiveness, but also you've had the industry tight supply environment, which has been a good seller's market. I'm curious about your view factoring in you have the vector of competitiveness, but also if supply environment starts to shift, how you're looking at the base case for margin, if this is the new level where we should start looking at 50+ or just be mindful it's a good environment and could come down. Curious about your view on gross margin. For OpEx, there's been a lot of talk about hiring and getting more aggressive after keeping headcount pretty stable the last few years after buying MStar.
If you have a view on OpEx and hiring for this year.
Okay, Randy. As we said in our opening remarks, we're looking at a 48%-50% gross margin target, and we're also looking at the resilient year 2022, despite what we believe will be more uncertainty in the macro environment, China, U.S., etc. In that sense, the supply and demand imbalance, which we have seen and all the industry has seen last year and a large part of 2020, I think will be a bit more moderate in 2022. Because of our technology migration capability and our mix improvement, we still believe we can improve our margin to what we now forecast. Whether we're going to do better, will.
I mean, I think this year, the supply and demand being more moderate, we will, you know, have to work with our customers and also with our suppliers to optimize our margin, going forward. The second question?
I think that's it.
Oh, sure.
Yes.
Okay. Thank you.
Okay. Oh, just quick on the OpEx outlook, and then I'll catch up.
Oh. Oh, yes. CapEx, OpEx.
Yeah. I think, Randy, I think for the OpEx ratio, I think it's like the guidance we give out, it's around 25% ±2%. I think for this year compared to last year, I think our strategy is still invest heavily and aggressively for the growth for the next 3+ years . The goal is actually probably trying to maintain, probably slightly down a little bit. I think last year the OpEx ratio was around 25%-26%. This year I think the goal is actually keep it around 25%, so it'll be a similar level.
Overall, I guess given the fact if we can continue to grow the top line and also improve the profitability, and then lead actually the gross margin, I think overall we should be still looking for another year of operating margin improvement.
Great. Thanks a lot. Okay, thanks and good result.
Thank you.
Next one to ask questions, Gokul Hariharan from J.P. Morgan.
Thanks for taking my questions. Congrats on the good result. I just want to focus on the longer-term guidance, the mid-teens long-term growth and expansion of the addressable market opportunity. Could we talk a little bit about, as you see the addressable market grow from TWD 80 billion to TWD 140 billion, what is the main driver? Are we addressing new markets in the next three years, or is it just the addressable market growing at that rate? When we think about mid-teens growth for overall MediaTek in the next three years, which are the segments which are growing faster? If you think about Mobile, Smart Edge and Power IC, which are the segments which are growing faster, significantly faster than the mid-teens? Yeah, that's my first question.
Okay. We expect all three groups, of course, to grow pretty robustly. For the coming three-year, I think a lot of the growth will come from the technology upgrade and the much better product mix we have already put in place now in 2022. However, we see mobile growth rate compared to Smart Edge platforms growth rate. Smart Edge platform growth rate will be higher compared to Mobile Phones. The Power IC also is always very steady and very good. For the 2021-2024, we see our SAM moving from TWD 80 billion-TWD 140 billion.
We are not counting any very new market addressable market, which, by the way, with our heavy investment in our R&D, will come in after three years. I must point out. Thank you.
Understood. That's very helpful. Thanks, Dr. Tsai. Second question on 5G and mobile. Usually what happens when we reach 60%, 70% penetration in 5G, we start to see prices start to come down a little bit. How do you see this evolve, at least in 4G that happened, 3G also it happened. Do you see that happening in 5G as well? I think previously you had guided that ASPs for 5G should still be going up this year. As we look forward, do we see that prices start to come down for 5G beyond this year? Or do you think that 5G blended ASPs can actually stay around these levels?
I think at least for this year, for 2022, like we explained earlier, we still see, you know, flattish to slightly up on the blended 5G. More importantly, if you look at our business ratio, the mix between 4G and 5G continue to improve. On the blended ASP, which including on the old smartphone sector, is actually the healthily aggressive. But even you only look in the 5G, we believe it's still pretty flattish to slightly up, mainly due to the, like we talked about earlier, the business expansion, which including the smartphone segment expansion and also the global expansion. I think one thing I'm trying to highlight is actually when you say the global expansion, maybe people still have the impression talking about, you know, emerging market.
In reality, like we talked about last time, even for U.S. market last year alone, I think we shipped more than 30 million units of smartphone. This year, I think the numbers should be continued to grow. From the market share perspective, in U.S., Android market share last year, we believe our market share is north of 35%, and this year will continue to increase. The global expansion and also segmentation expansion really help, at least for this year. For next year, I guess, actually, again, it may be a little bit too mature, too early to talk about that. Overall, we do believe as long as we can continue to enjoy the technology migration and also expansion of our addressable market, we should be able to cope with the mix change nicely.
Thank you. Thanks very much. I'll go back to the queue.
Next one we have Roland Shu from Citigroup.
Hi, happy New Year and congratulations upon a very good result. First question is, David, you mentioned about the mix between 4G and the 5G SoC continued to increase. May we have the 4G and the 5G SoC revenue breakdown in last year? In this year, will you still continue to grow 4G SoC revenue in 2022? For the gross margins point of view, how about the 4G and the 5G SoC margins compared to corporate average now?
Roland, first of all, for 4G, 5G breakdown in revenue, we didn't really disclose that externally. I can share with you the 4G-5G revenue is more than 50% of the overall smartphone already, and it's continued to grow strongly this year. Given the fact, like we talked about earlier, the penetration rate will increase from last year, 30% to this year globally more than 50%. We enjoy the global expansion, again, not just in China, global expansion. I think that's that much we can disclose. In terms of growth margin, I think right now it's pretty much for all product line and also all our business segment. They are pretty much in line with the corporate average. Okay. I won't. There are some difference, but I won't say it's a big difference.
Some of the higher, some of the lower values, it actually is all within the nice range.
Okay. How about for 4G? 4G absolute revenue this year, are you going to continue to grow the 4G revenue this year?
No. I think for the absolute revenue, obviously it's probably more flattish, maybe even down a little bit because the volume-wise still coming down for the good reason, because a lot of 4G will become 5G.
Second question is, can you comment about your inventory. So, your inventory actually have been growing high. Among your product lines, what product carries the highest inventory level and what product is with the lowest inventory level? You know, are you expecting for any like the inventory correction anytime soon?
I think first of all, before I comment about the details of the inventory, I would like to talk about the market inventory or the customer inventory. I think in general, we see both on the channel side and also on the customer side, I think the inventory level even though compared to last year, it has slightly increased. I guess mainly due to a lot of customers still trying to strategically build some inventory or slightly higher inventory level to manage the uncertainty for the supply chain. But overall, on the absolute level, we do see both from the channel side and also from the customer side, the inventory level is healthy and manageable. Come back to the MediaTek side. Well, our inventory again, compared to last quarter, Q4 versus Q3, it's actually increased.
I think mainly due to we need to cope with the current market situation. To make a long story short, we do believe that around 100 days of inventory is normal and actually probably the better way to manage given the overall situation. What do I mean by the overall situation? If I just detail it out, it's actually we need to consider about it's a longer lead time for the events note, and also the overall foundry and OSAT capacity and pricing consideration. It also is, of course, we need to take into consideration about the market competition situation and also lastly the customer requirement. Overall, I guess we do believe that it's manageable and also it's healthy, and actually the preparation for the future of revenue growth.
Okay. Thanks, Danny.
Now the line is open to Brett Simpson from Arete Research.
Yeah, thanks very much. I wanted to ask on pricing generally, but on mobile, on the smartphone business, we understand you've made material price increases in 4G and also price uplifts in 5G. Can you maybe just help us understand, is this fully reflected in Q1 guidance or do we see some of the price increases coming in Q2? And more broadly, and this goes for, you know, the broad portfolio you offer, with pricing going up, you know, reacting to the foundry cost increases, how do you think price rises impact consumer demand this year, or do you think it's relatively inelastic? Thanks.
Brett, I think for the pricing, let me be precise. I'm assuming you're talking about two elements. One is actually our cost, which is the foundry's pricing, another part actually is our pricing. I think all start happening in fourth quarter last year already. First quarter this year, the guidance does include the new pricing on the MediaTek side, which by the way starting from last quarter, and also the new pricing or new cost element for MediaTek, which is starting from fourth quarter last year. Short answer is yes, it's including the guidance already. The second question will be, will the new pricings have any impact on overall volume of market demand? I guess actually it's for any price increase, certainly will have some impact.
Overall, if we net it out, we still feel actually it's the overall, sort of impact or, the demand may be the better way to talk about that rather than saying impact. The demand still looks solid and healthy. That's what we see for the moment, even after the pricing.
Maybe just as a second question for Rick, you talked about a sort of slight shift in how you're addressing the Smart Edge, and you mentioned computing is one of the key growth drivers. Can you maybe talk a bit more broadly about the strategy here? Are you gonna address Windows 11, you know, with your platforms? And I guess on the GPU side, you use a lot of Mali today, and Mali doesn't support DirectX and things like ray tracing, which you're gonna need if you move into the computing market more broadly. How do you address or how do you think about graphics?
Because I guess when you look at the players in computing today, the NVIDIAs, the AMDs, the Intels, they have significant resources in graphics, which are very different architectures to what we see in smartphones. Just like to know your strategy here in GPUs. Thanks.
Okay. I understand the question. It is indeed the computing is indeed a well addressable market, a very large one for MediaTek, where we have a I would say quite small exposure. We have built-
Strong capabilities in computing, CPU, GPU, APU. We also understand those are mostly based on the mobile flagship mobile applications. Well, we have some way to go both from a technology point of view and from the ecosystem point of view. We understand that. That's why I said earlier in one of my response that some of those large addressable market is not now in our three-year forecast or addressable markets, really. Maybe a small portion. You can tell our horizon is beyond three years. It's more like four years and beyond. We certainly.
That's also a big reason why we're investing resources in our R&D and for developing those future addressable markets. They are not easy, we understand. Certainly GPU being a very challenging, well, very challenging technology for that kind of a market. We are. I cannot really disclose our strategy, but, yeah, we are looking at, yeah, not just the certain IP, as you just mentioned. We must, well, you know, we don't exclude any possibilities within the industry.
The important thing is I think, I believe, with the revenue we have, with the revenue growth that we have going forward, with the margin that we have been improving, we have well, a pretty good capability from financial point of view for sure, and our capability to recruit now much better high caliber people to move forward. Thank you.
Maybe just a follow-up to that, Rick. I guess there's a lot of hype around metaverse. You know, we're seeing a lot of new products being introduced at some point this year. When would you expect MediaTek to have a platform to address this market?
We understand. Actually, this is a major part of our, again, our addressable market. We have been working with some of our key customers with certain VR or AR specific applications. We have built, I think one of, not one, but some of our MediaTek's really core competencies are low power technology capability and low latency capability, which, you know, with all the very good performance from computing point of view, not to mention all the connectivity modems, the Wi-Fi, the Bluetooth. So we have all the elements. I'm sure you understand. Of course, the metaverse thing is still, I don't know whether it's young or not. It's fairly young. We know it's gonna be big.
We are working with, or shall we say, key system companies to work with them in making our technology into the devices for those applications. There's no doubt in my mind that MediaTek will be a major player in the metaverse universe, shall we say. There's no doubt in my mind. It's just, but I'm not so sure that will happen in one year or two years. It will take a little while. That's fine with us because we have, I think, as I said, a very strong already fundamentals that will give us the competing capability and advantages. Thank you.
That's great. Thank you.
Next one to ask questions, Sunny Lin, UBS.
Hi, good afternoon. Thank you for taking my questions. My first question is on the supply chain tightness. I want to get your thought on how long this foundry supply constraint may sustain, and would you anticipate for the margin impact from the foundry cost increase for next couple of quarters?
Well, I think for the supply chain situation, just like the CEO talked about earlier, compared to last year, I think it's actually certainly eased up a little bit, but it doesn't mean actually there's ample supplies out there. I think probably the best way to think about that is actually still tight but manageable and given our overall operation and also given, especially given the size we have, I think relatively speaking, it's actually we got ample support for what we need for this year. In terms of pricings, I think our, I'm talking about the supply chain pricing. I think overall, given the market uncertainty and also given the overall demand situation, I guess our views are probably it's not a good time from the supply chains perspective to think about increase of price.
That's our view.
Got it. Thank you. That's very helpful. Second question on the SAM market size that you mentioned. For $80 billion-$140 billion, would you be able to provide the breakdown by key markets?
Yeah, certainly. I think for the 80 billion in 2021, roughly 40 billion is on Smart Edge platform, and 10 billion in Power IC, and the rest go to, you know, Mobile Phone. By 2024, our view is actually on the Smart Edge will grow from 40 billion to roughly 80 billion. Power IC will grow from 10 billion to 14 billion-15 billion. Mobile Phone will grow to 50 billion. I think that's our view.
Got it. A few years ago, you mentioned that your plan for automotive. Is that still ongoing? Is that part of the Smart Edge for your business?
Yeah, it is. We actually have built a pretty good and competitive product in the infotainment applications, smart cockpit, and of course, the modem, 5G modem modules. We have won some. I would say critical win with the OEM. We have not made a big noise out of it because the revenue so far is not huge. The automotive business is, you know, a very time-consuming go-to-market kind of a business. MediaTek certainly is in this very important segment. As we move on, we will.
I mean, there are some, like, new but very significant EV startup that we will work with to develop products for them, I think, in the future.
Got it. Thank you. That's all I have. Happy Chinese New Year.
Thank you. You too.
Next, we have Bruce from Goldman Sachs. The line is open to you now.
Thank you for taking my question. Congrats for the great result, and thanks for the detail update for the additional market. I try to ask question about the profitability and the sustainability. We understand that the foundry raised the wafer price, and you guys did a very good job in terms of pass through the cost, which delivered good margins in the first quarter. So what's your customers' feedback, and how does that look for the margin profile throughout the year? I mean, I do remember that Rick was mentioning that the first quarter is a new chapter of your profitability. Do we expect the margin will continue to trend up throughout the year?
Bruce, I think during the opening remark by our CEO, Dr. Rick Tsai, I think we talked about from year-over-year perspective. I think we do basically add up. I think if you recall earlier last year, the guidance for the full year we gave out was 44%-46%, and we end up actually probably slightly on the higher end, actually exceeding the high end of our guidance. This year, I think the overall guidance is 48%-50%. Of course, as you can assume, we are working toward the mid to high end, if not exceeding it a little bit. I think that's the goal.
Given the fact actually is, there's still a lot of uncertainty and also, you know, now we're only talking about, like, you know, not even end of January yet. We probably won't be able to provide more detail. Overall, I think if by looking at the fourth quarter gross margin and also by looking at the guidance we give out for the first quarter, which is 49% ± 1.5%, to answer your question directly, I think both from profitability and also from sustainability perspective, we do have a certain level of confidence. I think mainly due to, again, two factor, the continued migration for technologies and also the expansion not just on the fraction side but also on the global expansion.
I think that two factors together do give us a certain level of confidence to continue to improve the profitability as we indicated earlier.
Okay. Thank you. The next question is more for your, you know, M&A strategy. I mean, you know, I saw a very different phenomena between MediaTek versus global peers like, you know, Qualcomm or NVIDIA, who are usually trying to acquire a big company, trying to use M&A to expand their product portfolio. But from MediaTek perspective, you know, the company acquire Etek and sell it out, the SigmaStar, Airoha. You know, all these companies, you know, when you invest them, you at the end of the day you sell them and, makes, you know, very good money out of it, but you don't really, include them into your product portfolio to enlarge your product offering.
Why is that, you know? There is a big difference between MediaTek strategy versus the global other fabless companies?
Bruce, I think what you talked about probably is only the partial picture rather than the full picture. For example, for most of the sort of the target or company we acquire, actually, we keep this in-house and grow nicely. Just to name a few, for example, for MStar, right now it's actually one of the foundations or key pillar for the Smart Edge AI business. Also for Richtek, right now it's actually last year we talked about the revenue growth. By the time we're acquiring the revenue, it's up about TWD 500 million. But now we grow the revenue last year to be more than TWD 1 billion.
More importantly, we also talked about, for power PMIC, I see more than 10% of the revenue come from multi and also from industrial. One other example is actually Ralink. That's actually maybe two months ago, people forget about that. We acquired Ralink, and right now more into the fabless revenue is actually coming out from Ralink. Basically, it's the IMD or the connectivity. We do actually have a pretty solid M&A track record. What are you talking about if the audience, from the dollar side wise or from the revenue side, actually is much smaller. With that, actually probably get back to your question. The short answer is, MediaTek is actually also considered about M&A in the past and also going forward. I think that will be one of our growth strategy here.
Well, I do understand the Ralink, you know, Bridge Tech, but that was like more than five years ago. What I'm trying to say is that for the last, like, three, four years, the industry is in the, you know, a serious consolidation. For the last three, four years, you know, we just don't see that coming from MediaTek. Is there any particular reason behind that, or?
Bruce, sometimes M&A to take two parties and make a deal, and it's actually, it's not like we wanna do a deal, the deal will happen. I think the only thing I can say is actually we see this as one of the possible option, and we've done that so many times. Whether or not it's the right timing or right target comes out, it's actually sometimes out of our control. It's out of our control.
It is definitely in our picture. It's just if you look at MediaTek during the last four or five years, we actually just had to basically turn around our business first and invest in the technology. Without which, I mean, there's really no good base to make any major M&A and successful M&A. I think MediaTek is now in a much stronger foundation that we can be more aggressive. However, David said that well, too. It takes two to make a deal, but we are going to. We are looking at all options.
If I may, maybe I can add one thing. I mean, since all analysts on the line, actually it's another issue actually on the Taiwan accounting system. I think during M&A, most of the U.S. company can be reporting for GAAP, and people focus on non-GAAP. When you look at our financial announcement, we actually disclose in Taiwan what we call non-TIFRS. Unfortunately, I think most of street analysts, basically people on the buy, probably only focus on the GAAP. I think that actually is another issue, somehow limits Taiwanese company to go out and buy a sizable company. Because once you go out and buy a sizable company, you will incur sizable depreciation. We need to focus on non-GAAP. I think it's a good time for me to also bring this out as well.
That's why we start to disclose the non-GAAP, which is the non-TIFRS number three years ago. But when I do the research report, to be honest, actually not many people bought that. Maybe that's a good point, Bruce. Maybe you can help us.
I mean, well, definitely if you guys did a good, you know, big acquisition, I would definitely start to learn more about the Non-GAAP and report to the investor. Investor as well as analyst might maybe need to be educated a bit more. I don't disagree. The reason I ask this question is that, you know, MediaTek is highly consumer centric business nature with higher exposure in China. If you want to get a faster track to get into the enterprise business, non-China business, you know, MA might be a fast track from a lot of investor perspective.
We are just trying to see if the management is aggressive in terms of doing that because that's the underlying rationale for me to ask the questions.
Bruce, I'll probably just make a final closing, and then we move on to the next question. Well, first of all, like the CEO said, MA is our strategy. The second point, when you talk about MediaTek has a lot of revenue come from China, I would say there's, again, a wrong impression. When you compare the revenue contribution from China between MediaTek, Qualcomm, Intel, I think we are on the same level. That's one, just one clarification on that. Okay.
Okay. Thank you.
Okay.
Ladies and gentlemen, with the interest of time, we are going to take the last two callers for questions. The first one is Charlie Chan from Morgan Stanley.
Thanks. Hi, Rick, David and Jessie. Happy Chinese New Year ahead. My first question is easier. It's about the Windows on Arm opportunity. Is that in your $140 billion TAM opportunity? And therefore, WoA or the PC platform market, what is the TAM that you are looking at? And the starting point of the revenue contribution. That's my first question on WoA. Thank you.
I answered that question earlier. It is not in our $140 billion addressable market.
Oh, sorry about that.
Yeah, it is not. I mean, it doesn't mean we're not pursuing that. It's just gonna be, you know, four years and beyond. We need some time.
Okay. Any reason that, you know, it takes a longer time? Because, I mean, in terms of hardware design, you already have a big success in the Chromebook processor, whereas your major competitor, Qualcomm, seems to overcome those ecosystem issues. I'm just a little bit surprised why it takes much longer for MediaTek.
Well, Chromebook, yeah, we have been doing well, and we certainly will continue to invest in that segment, for sure. That segment actually has a very high synergy with our current investment in the flagship chips. I guess what I'm talking about is really a much larger addressable market, including Chromebook, and which takes you know, higher power computing capability, ecosystem synergies. If you look at our competitor, the years they have taken to be where they are, of course, I don't know really well how much their revenue is. It is a market that we recognize to be very large, but also with different kinds of barriers. We must address those barriers you know, very robust manner.
I think again, we are in a good position that we don't have to rush. That's quite important. I want to do the right things. I want to set the right strategy and execute them well. Thank you.
Sure. Thanks, Rick. I think sometimes it's a good strategy to bide your time, you know, patient. I also noticed that you are kind of ahead, no matter Wi-Fi 7, which for a market I think should be two years later, and even your 6G vision white paper. I think that's a great paper. In the paper you mentioned that the timeline should be 2030, right? What would company want to kind of take a lead of those kind of very, you know, leading edge of, you know, kind of from thinking about future technology. Do you think MediaTek can really kind of lead the world?
Especially MediaTek was very successful in China or emerging market feature phones, and now 6G seems to be kind of a leader for the world. Can you explain kind of the rationale behind why you want to do this so early? Thank you.
I'm just trying to make sure I'm answering your questions. First, I think Wi-Fi 7 or 6G, I'm very proud that we have made tremendous progress. If you look at where we were four years ago with Wi-Fi 6, for instance, our market position vis-à-vis our major large U.S. competitors, we were behind. Now we are kind of at least shoulder to shoulder. 6G, we have done a tremendous job with 5G modem and we have invested in high caliber people so that we have 6G blueprint. These are the things that are very difficult, very challenging, but on the other hand, MediaTek does have a handle.
Computing market is, I mean, it's an existing market for a long, long, long time. However, it's not a big existing market for MediaTek, at least yet. You know, the pace from our end, it's not whether we want to invest or not. We do. We're putting resources. Well, I just don't want to put undue expectations on the. I want to make sure that, yeah, for the next three years, we can keep our forecast of mid-teen% growth baseline, what we know, what we are doing, and while we work on the three- to five-year horizon that, yeah, we can also deliver a good growth target for that. It's not that we are not being aggressive.
You know, we are. Yeah, I don't want to put in undue expectations.
Rick, if I may. Actually, Charlie, I think one thing I want to be clear, because by listening to your question, I think maybe there's some miscommunication. I think from an investment perspective on WoA, I think what Rick's talking about, we've actually been aggressive. Okay? For investment, we've been aggressive. Just about expectation management and also when we talk about the mid-teens growth, we didn't really factor in a huge number. I think that's. That doesn't mean we won't invest until three years later. Actually, we talk about we wanna invest right now for three years latest market, I think during the opening remark by CEO Rick.
Okay. Thank you. Yeah, look forward to seeing you in person, maybe after the pandemic calms down, and then we can have some discussion regarding your kind of long-term vision. Thank you.
Sure.
Thank you.
Next one to ask questions, Frank Lee from HSBC.
Okay. Thank you. I just wanted to have, I guess, a follow-up question on the long-term growth of mid-teens. You know, I think the last year or two, we've seen the tightness in semiconductors leading to price increases. As you look forward as part of your long-term growth, is there any assumption of ASP improvements going forward as part of this longer term growth target?
Well, I think the answer is probably yes and no. Yes means actually through the product mix and also getting to the higher end, we do expect the growth, the ASP will continue to improve. No price actually is currently we didn't really factor in sort of a price, simple price adjustment, for that mid-teen growth.
Okay. Basically what you're saying is that ASP increases is really just a function of content growth going forward.
Content and technology and content, yes.
Okay. Just sort of like a follow-up to this, because I know you gave a good breakdown of, you know, your $80 billion target in 2021 getting to $140 billion, and the different areas are growing. The Smart Edge looks like it's growing the strongest from $40 billion to $80 billion, but other areas also growing. Is it safe to assume. If we could. I know it's difficult, but is there a way you can just give us an idea of, you know, from a content growth perspective, you know, the percentage increases, should we expect the biggest to come from Smart Edge? Or is it more about the content growth?
It's actually from all three business segments. For example, for Mobile Phone, like we talked about, from 4G to 5G, and also into the flagship, that's actually what I mean by content growth. For the Smart Edge, which including Wi-Fi 6, Wi-Fi 6E, Wi-Fi 7, that's actually another example of a content growth. Another example is actually, for example, for the wireline communication, the GPON getting into the 10G PON. I think really just on all segments for PMIC Power IC, for example, we get into the industrial, get into automotive. Actually, that's also in the form of a content growth. It's actually happening.
Okay.
In all three sectors. If I want to add any more, it's actually on the Smart Edge platform. Due to the variety of products over there, we also have the elements of a volume growth as well.
Okay. Thank you. I guess my last question is just on the auto. I know you guys addressed this a bit as well, but I guess, as far as, because it seems to be a major growth area for a lot of people in the industry, is there any more specificity you can share as far as like from a product point of view within autos that you are targeting more to break through? I know you talked about infotainment, but is there any other areas within autos that you think, you know, would be the biggest opportunity for MediaTek in the next couple of years?
I think with automotive, we also look at our competencies. Our competencies lying in computing, in connectivity. The new products that we will be developing certainly probably will be with our major competencies and then maybe expand some. We certainly have the Power IC capability. Whether we will go to a very high voltage Power IC, that remains to be seen, Frank.
Okay. Great. Thank you.
Thank you.
Thank you, ladies and gentlemen, for all your questions. Now I will hand it over to Miss Jessie Wang for closing comment. Miss Wang, please proceed.
Ladies and gentlemen, this concludes MediaTek 2021 fourth quarter conference call. I'd like to thank you for your participation, and you may now disconnect. Thank you.
Yes. Thank you, Jessie. Ladies and gentlemen, we thank you for your participation in today's conference.