Welcome to the MediaTek 2021 third quarter investors conference call. Financial results and presentations for today's call are available on 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. Miss Wang, please proceed.
Good afternoon, everyone. Joining today are Dr. Rick Tsai, MediaTek Chief Executive Officer, and Mr. David Ku, MediaTek Chief Financial Officer. Mr. Ku will report our third 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. These statements are subject to various risks and factors which may cause actual results materially different from the statements. The presentation supplements non-GAAP financial measures. Earnings distribution will be made in accordance with financial statements based on the group. For details, please refer to the safe harbor statement in our presentation slides. In addition, all content provided in this teleconference are for your reference only, not intended as investment advice.
Neither MediaTek nor any of its independent providers is responsible for any action taken in reliance on the content provided in today's call. Now I would like to turn the call to our Chief Financial Officer, Mr. David Ku, for the third quarter financial results.
Thank you, Jessie. Good afternoon, everyone. Now let's start with the 2021 third quarter financial results. The currency here is in NT dollar. Revenue for the quarter was TWD 131.1 billion, up 4.3% sequentially and up 34.7% year-over-year. Gross margin for the quarter was 46.7%, up 0.5 percentage points sequentially and up 2.5 percentage points year-over-year. Operating expense for the quarter was TWD 31.9 billion compared with TWD 29.2 billion in previous quarters, and TWD 28.4 billion in the same period last year. Operating income for the quarter was TWD 29.3 billion, up 1.6% sequentially and up 100.2% year-over-year. non-GAAP operating income for the quarter was TWD 29.9 billion.
Operating margin for the quarter was 22.3%, decreased 0.6 percentage points from the previous quarter and increased 7.3 percentage points from the year ago quarter. Non-GAAP operating margin for the quarter was 22.8%. Net income for the quarter was TWD 28.4 billion, up 2.8% sequentially and up 112.2% year-over-year. Non-GAAP net income for the quarter was TWD 28.9 billion. Net profit margin for the quarter was 21.6%, decreased 0.4 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 22%.
Earnings per share for the quarter was TWD 17.92, up from TWD 17.44 in the previous quarter, and up from TWD 8.42 in the same quarter last year. Non-GAAP earnings per share for the quarter was TWD 18.23. 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 Chief Executive Officer, Dr. Rick Tsai, for his remarks.
Thank you, Jessie. Good afternoon, everyone. Third quarter was another solid quarter for MediaTek. Quarterly revenue came in at the upper end of our guidance with a slightly higher growth margin, mainly driven by healthy demand across our four revenue groups. Today, I would like to start with our fourth quarter guidance and provide some color on our near-term growth drivers. For the fourth quarter, we expect revenue to be in the range of NT 120.6 billion-NT 131.1 billion. Flat to down 8% sequentially and up 25%-36% year-over-year at a forecasted exchange rate of NT 28.0 dollars to $1 , f ourth quarter growth margin is forecasted at 47.5%, ± 1.5 percentage points.
Quarterly operating expense ratio to be at 25%, ±2 percentage points. Based on the midpoint of fourth quarter guidance, MediaTek full year 2021 revenue growth is expected to be 52% and gross margin rate to be 46.4%. Both of which are better than what we guided three months ago, which was revenue growth greater than 45% and gross margin rate of 46%. The strong performance in both revenue growth rate and gross margin improvement are not limited to 2021 only. Since 2018, MediaTek has grown our revenue by 106% and our gross margin rate has improved by 7.4 percentage points based on current 2021 full year guidance midpoint. This was the result of our continuous investment in technologies as well as competitive and synergistic product portfolio.
Our track record have demonstrated MediaTek's competitiveness in an intensely competitive global environment, and we are now more resilient against regional volatility. In fact, we are now the largest smartphone SoC maker globally, and we continue to gain shares across all regions of the world. In addition to our leading shares in several emerging markets, our Android smartphone market share in North America will also exceed 35% in 2021. As we continue to make investments in our technologies, we believe MediaTek will become even stronger facing any global competition. We also believe the same strength during the past few years will carry us through 2022. We see 2022 as another year of solid revenue growth with healthy profitability. With that, I'd like to share some trends we are seeing.
As we all know, global digital transformation has sped up technology migration and resulted in higher demand for semiconductors and higher semiconductor content. We have been seeing great benefits across all product lines from accelerating technology migration, such as 5G, Wi-Fi 6 and Wi-Fi 6E, Bluetooth Low Energy, and 10G-PON . Our technology and product portfolio also give us strong competitive edges in flagship segment. Now let me explain in detail. On mobile phone side, with our flagship entry and our strong position in global 5G expansion, we expect to see continuing strong growth in our 5G shipments and increases in blended ASP next year. Flagship is the new segment for MediaTek, and we are very confident in our ability to grow our share in this important segment.
With MediaTek's proprietary design architecture, expertise in low power design, and best-in-class TSMC 4 nm process technology, our first flagship product delivers premium performance and superior power consumption. We are excited that our products are being highly recognized by customers. Today, all major China brands have adopted our 5G flagship SoC. Revenue of the flagship product will begin at end of this year and ramp from first quarter next year. There will be more flagship products in the pipeline for further expansion. Furthermore, with 5G rollout entering its third year, 5G solutions have been more widely adopted around the world. This year, global 5G penetration rate is at high 30%, and we expect it to exceed 50% next year.
We believe our global leading market share in mobile phone will give us a huge base to enjoy 5G migration in the coming years, supported by our competitive sub-6 GHz and millimeter wave solutions. In addition to our strong 5G presence in mainland China, we are also seeing strong design-in activities in America, Europe, India, and other emerging regions with global brands. In summary, our world-class technology and product portfolios have led and will continue to enable MediaTek to enjoy the benefits of early participation in new product cycles as well as flagship and global expansion in all revenue groups. That said, let me update you on our current business progress by each group. First, mobile phone. Mobile phone was 56% of third quarter revenue and grew strongly at 72% from last year. Driven by continuous 5G migration and share gain.
However, due to seasonality and the short-term smartphone mix shift towards mid-range phone in the fourth quarter, we expect revenue from this group to decline sequentially, but still represent a strong growth from last year. We expect mobile phone business will be back to its growth track in the first quarter of next year when we ramp flagship SoCs. For IoT computing and ASIC, it contributed 23% of revenue in the third quarter, while growing 22% year-over-year. Mainly driven by accelerating 5G and Wi-Fi 6 penetration, as well as customer new product launches in smart devices, true wireless stereo Bluetooth headphone and tablet. We expect the momentum to continue in the fourth quarter and start shipping Wi-Fi 6E products to high-end notebook. For smart home, this group accounted for 14% of revenue in the second quarter and grew 13% year-over-year.
Global digital TV demand has been steady. Demand in other TV related products also stays healthy. Power IC. This group accounted for 7% of the third quarter revenue, growing 26% from last year, mainly driven by higher demand in power IC amidst the 5G and Wi-Fi 6 upgrade trend. To sum up, we have demonstrated our capability to deliver strong revenue growth with improving profitability under intense global competition and macro economy uncertainties in the last several years. With our continuous investment in technology and the ability to capture growth opportunities under global digital transformation trend, we are confident that MediaTek will continue our profitable growth in the foreseeable future.
Together with our new cash dividend policy, in which we raise the payout ratio to 80%-85%, and then additional TWD 15 special cash dividend for four years, we believe MediaTek shareholders will enjoy a strong return. That concludes my comments today. Thank you.
Thank you, Rick Tsai. Operator, we are now ready for Q&A. May you please have the first question? Thank you.
Yes, thank you. 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 on to the next caller. Should you have more questions, please press zero one again to come back to the queue. During the Q&A session, if you would like to cancel your question, please press zero two. As a reminder, it is greatly appreciated that you turn off the speaker phone mode of your device to prevent possible echo effect.
We thank you for your cooperation. Now, please press zero one on your keypad if you would like to ask questions. Thank you. The first one to ask question, Gokul Hariharan, JP Morgan.
Thank you for taking my question and congratulations on the continued strong results, especially over the last four years. Maybe my first question is on more near-term dynamics. There's been a lot of concerns recently about demand weakness in China, especially for overall consumption, including technology products and smartphones. Could you talk a little bit about what MediaTek is seeing from a demand perspective, given MediaTek has reasonable exposure in China? I think also you talked about supply being a little bit limited in the last quarter. After some of these demand weakness, do you still feel supply is still tight or there has been some relaxation in terms of the supply? That's my first question. Thank you.
All right. The market. I know people are concerned. There may be some slowdown or inventory buildup. We are seeing, in general, still a healthy demand and also a healthy inventory with our customers. Of course, I think if you look at the inventory level compared to, say, three or four quarters ago, it has come up somewhat, but it's still healthy, especially compared to the demand picture. We are comfortable with our demand. That's why we said earlier in my remarks that we view 2022 still a year of strong solid growth and a healthy profitability.
From a supply point of view, I think we see. I wouldn't say a softening of the supply constraint, but we see supply to be uneven. With some products, well, like, a good example may be Wi-Fi. We are really way below. Our supply is still way below our demand. However, we are seeing adequate supply for things, for our mobile SoC niche. In general, I think our supply, we have managed our supply chain in such a way that we can meet our commitments earlier for 2022 visions, which is a solid growth and healthy profitability. Thank you.
Thanks, Rick. Maybe one more question on your flagship chip. Given that we are very close to the chip launch, what is the kind of feedback you're getting? You talked about every China OEM, major China OEM designing in. How do you benchmark with your primary competitor right now? What kind of market share do you feel that you could actually get in the first year? What is your expectation when we think about next two to three years in this segment? Like, what kind of market share would MediaTek be looking to secure, given that it's a completely new segment that MediaTek is entering into right now?
All right. Well, flagship chip, first, we of course understand this is the first year that we're entering this very important segment. We are confident we have a very competitive product in the market. We have shipped silicon to all our major customers, and that's why they have the confidence to design our product. Comparison to our competitors' products, I would advise you to check. I think there is quite a bit of reporting on the internet about some comparison. As I said earlier, we are very confident in our performance and also really a superior power consumption performance. The market share, we again, this is the first year we're moving to this segment.
We believe we will catch a reasonable market share. We're here. We're in this for the long haul as much as a one-year thing. We are already, you know, working on second generation, third generation, with the better and better IPs and better and better process technologies. We're here for the long haul. I'm not too worried about the first-year market share or not. I think we are. We have a really good product. We will have our share of the market. Even more importantly, it's critical that we build our foundations this year, and then we can have a better and improving market share going forward next year and the year after. Thank you.
Next one to ask questions, we have Randy Abrams from Credit Suisse. Go ahead, please.
Yes. Thank you on a good result. I wanted to ask the first question. It's two parts. On the 5G, first on the ASP increase. The last two quarters you mentioned expectation for blended pricing to continue to trend up into next year. Could you go through how much is from launch of flagship versus also new features on the mainstream, keeping up pricing on the mainstream tier relative to 4G when we saw more erosion on the same tier? Then the second part is on that mainstream, how do you see market share and pricing dynamics with your competitor getting better supply and more product out of TSMC?
Randy, I think for the 5G ASP next year, we believe actually with our product portfolio and also the mix, we focus on next year. Part of the reason, actually the big part of the reason is the flagship entry. We actually feel confident that the 5G ASP, blended ASP, will continue. Like I say, I think the big part that will be our 5G entry, strategy. I think that's your first question. I think the second question is actually regarding the mainstream, 5G smartphone. I think overall, we are seeing, I think our Chief Executive Officer talked about earlier, the smartphone competition, which including 4G and 5G, are always intensive, competition out there. We won't say it's not getting worse, but actually just have stabilized.
Stabilized doesn't mean it's actually the normal level of intensity, if you like. Overall, I would say it's actually stabilized right now in terms of competition.
Okay, great. That goes to the second question. In regards to foundry pricing, it's been well-publicized about the leading foundry taking up pricing. If you could run through how you're seeing ability to pass it on, if you could see actually improving pricing across product category. Then for the implication on margin, where now you've lifted it to 47% for the outlook, how do you see margin if you factor in the input cost? Do you think this is the new level, could go higher or potential risk on the margin?
Oh, Randy, I think for the cost up or cost increase on the outside, which includes the foundry also packaging in some, to some extent, which also includes some material. It's actually I think that's an industry norm for everyone. Unfortunately, we need to work with our customer to resolve that. So long story short, I guess we do have a new pricing kicking in, I think starting from May, fourth quarter. That's I think part of the reason why you see the gross margin up a little bit. On top of that, I guess we're also trying to resolve the cost up issue through our optimization of the overall product portfolio, which means we need with the limited resource, limited capacity resource, but also with the higher cost, we need to optimize our product portfolio.
It's really a combination of the pricing and product optimization of the product portfolio. I think our goal is actually trying to stabilize and also see a stabilized and also better margin even in this in a favorable cost environment. I think that's our goal.
To clarify, first stable or better margin. Hey, is that the implication, just to clarify your remarks so far, pricing would take effect late fourth quarter. I think earlier you mentioned mobile would get back to growth. Was that sequential? At this early stage, we should think factoring pricing mobile up, if you could see above seasonally the growth in first quarter.
I think with the new pricing, actually, it's all product lines we see beginning in the fourth quarter. I think specifically for smartphone, I think what our Chief Executive Officer talked about earlier, I think it actually should be talking about based only on quarter-over-quarter basis. From a year-over-year perspective, we still see even for fourth quarter on smartphone side is still very strong on that growth. I would say probably the best way to think about from a year-over-year perspective rather than on a quarter basis. On quarter basis, I would say probably the best way to describe that is really just the seasonality, the normal seasonality.
Okay, great. You did say smartphone quarter-over-quarter and year-over-year.
Fourth quarter QoQ smartphone is going to come down a bit due to the seasonality. Fourth quarter year-over-year is still grow strongly.
First quarter Q over Q would grow.
Yes.
Okay.
With the new product beginning.
Okay, great. Okay, thank you. Thanks. Thanks, David and Rick.
Next in line, we have Bruce from Goldman Sachs. Go ahead, please.
Okay, thank you for taking my question, and thanks for the great results. I think one thing I want to ask is, what is the target of profitability right now? Most of the good companies are talking about that, you know, value their product with a better profitability. We already see the positive margin trend. What would be the, you know, historical MediaTek? We're talking about 45% plus or minus gross margin, but now we're already at 47%. Is that the new normalized, gross margin we can expect for the mid to longer term? Does that include like, you know, the foundry price hike or the, you know, all the cost hike, potentially in the coming years?
We will, of course, for next year's outlook, we will address in more detail in the January conference call. However, I can comment on overall profitability picture. As we are forecasting today, we guide 47% gross margin for fourth quarter. As I think David also addressed a bit earlier on when answering the question, I think we see a more stable gross margin going forward. We certainly would of course try to beat our records hopefully quarter to quarter and each year-over-year.
We guided 44%-46% gross margin earlier in this year, but we certainly have achieved that at the higher end and actually above the higher end of our guidance. We'll give you a guidance three months from now, but yeah, I think 47% is the beginning of our new guidance. Thank you.
It's the beginning of the upward trend. Is that what I should interpret?
Bruce, we will give you some next quarter. Let us stay with next quarter.
Understand that. Another thing is that we definitely see a mismatch in terms of the components. I think we have some components, for example, like 4G or Wi-Fi is in big shortage. However, some components are in like, you know, somehow, you know, some inventory. Can you help us to understand how, you know, how investors should view this kind of situation? Because for certain component they are like, they see some inventory, but for certain component they see that deep shortage. When do you think this kind of mismatch can be resolved?
That's a good question. I think investors should look at MediaTek as a whole. MediaTek is, of course, in today's remarks, we really spent most of our effort and time on 5G because, you know, our market position and our flagship chip. However, you must not overlook the other, I think, 43% or 44% of our revenue, which is also very good profitability. MediaTek, as a company, I think we can continue to deliver a solid revenue growth and a healthy profitability next year because, to a large degree, we have this very balanced portfolio, and they balance each other.
Sometimes we're a little low here, but we are somewhat up at the other places. In general, I would say again, for the smartphone, which of course is our largest segment, we have, I think, good supply. We ship. How do we say that, We ship, you know, not only the SoC, but all the matching components. We have the capacity to ship all our 5G and 4G solutions, shall we say, to our customers next year. Some segments, as we all know, for instance, the Chromebook shipment has slowed down somewhat, but that is more than compensated by our still very strong Wi-Fi chips demand. Overall, I think we have concerns about supply-demand, but in general, we are doing, I think, quite well. Thank you.
Thank you. I think the more for me is like, of course, MediaTek is doing a lot better than most of the companies. At the end of the day, if you have more capacity, you actually can generate more revenues. When do you think this kind of situation or mismatch for your wafer supply can be resolved?
I think that will take. If you know, if everyone wants to have all the capacity they want, I think that will take another year or somewhat longer. The mature technology capacity is now being built by multiple foundries. As you know, the fab building and the process up will take two to three years. We're looking at sometime in 2023. By that time, I'm sure other picture will change, too. That's the best we can see.
Thank you.
Next one, we are having Roland Shu from Citigroup. Go ahead, please.
Hi. Good afternoon. Correct me please if I heard you wrong. Rick said, did you say now you are seeing some extra supply of the mobile SoC? Yeah. My question is that, you know, do you mean, you know, this is extra supplies are mainly for 5G or 4G SoC or for both? This is my first question. Yeah.
Okay. Let me be clear. I'm saying we have a good supply for our 5G and 4G shipment next year. We have that. Well, we can use some more, but especially at the 4G side. We have, I think, a good supply.
Okay. Good supply, not actual supply. Okay. How about, you know, now the capacity, since, you know, earlier this year, you said that you already secure enough capacity, 100% capacity to achieve 40% or 45% of growth this year. How much revenue you can grow next year from the foundry capacity you have secured so far?
Roland, actually, as we say, currently, it is still early. It still has some time to go till next year. Right now, probably the best guidance we can provide is a solid growth next year. The actual range or guidance, please bear with us and wait until first quarter next year.
Understood. Okay. Thanks. Okay. My second question is that, you know, last quarter, you said that you already started a few new switch ASIC volume production from last quarter. How was the revenue contribution of the switch ASIC last quarter? And how will the revenue in 4Q? And also, how big will the switch ASIC account for the total revenue next year?
Well, I'm assuming you're referring to our enterprise segment as explained in switch ASIC actually more in switch to the enterprise segment. I think the revenue is greatly due to them. The overall product cycle, especially the ramping up schedule on the enterprise segment side in general is much slower compared to normal consumer products. The absolute revenue contribution right now is still mild, especially if you only focus on fourth quarter this year.
Okay. For fourth quarter this year, we are going to see some revenue contribution, right?
Oh, yes, we will have some revenue. Yes, small revenue.
How about next year?
I think it will continue to ramp. It will not just stop, you know, one quarter or the other. Once we get into designing and suddenly start to ramp, normally just multiple quarters, if not years of ramping up. Sometimes very slow, you know, sometimes the speed may be very, but in general, one project will go for, I would say, eight quarters plus, yeah, in terms of ramping up.
Understood. Okay. Thank you.
Next in line for questions, Nicolas from UBS. Go ahead, please.
Yes. Good afternoon. Thanks for taking my questions. Just going back to the question on the foundry and with that price increases, how much of that is already factored in your guidance for Q4 2021, and how much more could we see in 2022? How do we think about the net impact on your gross margin, if any? I know you're offsetting that through mix shift, pricing, etc. That's the first question.
The second question is beyond what you commented upon on smartphones where you've effectively shifted to a higher end next year. Could you give us other examples where you think you have still the ability to shift mix to the higher end over the next two to three years, also in that way offsetting some of these input cost increases we're seeing? Thank you.
Okay. I think the first question first, in terms of pricing, as we explained earlier, our new pricing starts kicking in fourth quarters. We probably will not be able to separate that, you know, the net impact to our gross margin as I explained. The overall gross margin is a combination of the new pricing and also the product mix, and sometimes actually the fluctuation in the FX, they are interrelated, so probably we're not able to separate it out. Probably the best way to think about that is actually we kind of talk about the gross margin trend, although is even in the environment of post-COVID environment, we try to stabilize and also benefit the gross margin a bit through pricing and also product mix. I think that's point number one. Your question on two is really the product mix.
I think we kind of explained one of the key point next year is really just the flagship entry. Flagship, the higher, much higher ASP profitability is in general better. Also then we have the ripple effect to help us both on the mainstream and also on the entry-level as well. Once we can get into the flagship, I think overall the product mix will continue to. We do have some capability, especially given the fact the overall capacity is still very tight, even though the end capacity. It will mean actually we can tweak or we can allocate capacity to the product portfolio we think probably is the most reasonable. I think this is how we get into a better product mix. By and large, I think one of the key major factor is still the flagship entry.
Great. Thank you.
Next one to ask questions, Brett Simpson from Arete Research.
Yeah. Thanks very much. Rick, I had a question for you on the captive chip efforts we're seeing in the industry. I think we've, this is not something that's new, but, you know, we've seen OPPO more recently build, you know, a sizable semiconductor team. A lot of ex MTK guys have joined that team. We've also seen Google launch their own application processor, in the Google Pixel 6. Can you just share with us your perspective on this? You know, how do you assess these captive efforts? You know, to what extent might this negatively impact your Android growth opportunity over the next, two to three years? Thank you.
Well, Brett, yeah, that's a good question. I agree with you that this is a trend going on in the industry, the OEMs and maybe sometimes OEM and chip suppliers. I view this as, I would say, net neutral. Of course, some internet company or OEM are designing their own chips, which we may have access if they don't. On the other hand, we also work with many of them to supply our IP and our design expertise so that become other kind of a business opportunity for us. Actually, we are actively engaging in that kind of a business already.
In many ways, we get because of our superior and the key IP that many of them are coming to us so that they can use our key IPs and our integration chip design, integration capability to build competitive products for them and business opportunities for us. It's very difficult, you know, to say exactly the net impact or part of it. I don't really view it that way. I just view them as, yeah, a different kind of opportunity and we just continuously invest in our capability so that we become the most important. We become technology-wise much more relevant, so we will get our share of the business. Thank you.
Okay. That's very helpful. Maybe just as a follow-up, I was keen to get your perspective on 5G adjacency. You know, what's MediaTek's strategy to leverage what you've done in smartphones into new markets? We hear a lot about 5G fixed wireless access and, you know, automotive, car industry going 5G. I think Qualcomm's talked about a $10 billion order backlog in their automotive business. We hear a lot about industrial modules going 5G. Can you maybe just share with us how does MediaTek sort of leverage all this 5G know-how into these adjacency markets? How should we think about the timing here for you to build businesses, sizable businesses, outside of smartphones with 5G?
Well, we're very keen on this part of the business. 5G modem capability is one of the more rare, I would say, assets in the market, and will become even more so going forward. If you look at the modem applications up to now, it's mostly in a smartphone or high-speed application. There are other applications of low latency parts. The massive connected device part of the 5G technology is still remain to be mined, shall we say. We are certainly developing you know modem IPs extending into different operating regimes so that we can capture the applications some of which you just mentioned yourself.
Well, I hope that we can say we don't leave any stone unturned, you know. Yeah. This is one, you know, some of the CPE business that we are working with the major operators, just the beginning of our endeavor in this part. Thank you.
Okay. Thank you.
Next one to ask questions, Charlie Chan from Morgan Stanley.
Hi. Good afternoon, Rick, David, and Jessie. Again, congratulations for your great results. My first question is to follow on this question about the innovation of customers semiconductor. Besides the Pixel phone using the internal processor, I think a recent news also indicated that one of your key customer, OPPO, tried to develop their own SoC. My question is that, you know, whether there is also a threat and whether you know that there is just for processor instead of using an SoC. Also in the Chromebook, I think Google also mentioned that they probably want to do their own processor.
It seems to be one of your long-term opportunity, as well, for those, the Chromebook processor. Can you further address those, the two issues? Thank you.
Yeah. I think this question is quite similar to what Brett just asked. Again, my position is the key is the technologies and the IPs that we must develop, that you know that very few people can do as well as we can. You know, you just have to outrun your potential competitors. Sometimes they are also our partners. It's all a matter of you know when you look at it, the IP's capability, the schedule of the availability and the integration. Because integration of those very highly sophisticated chips takes a lot of resources.
All those combined together, I think provide us opportunities and competition. I think up to now we have at least access to the opportunities. We cannot sometimes serve all the opportunities either because we have also limited resources for our own for our own products and for other partners' requirements. Hope I answered some of your questions.
Yep. I think that's helpful. My personal opinion is that the modem still very difficult and a key technology. Maybe there's still your key advantage here. Another question is more about your gross margin sustainability into next year. Great to hear that you can pass through some costs and stabilize your gross margin. If you look at the end market, there are some hard data, right? For example, the China smartphone sell through or sell in year-on-year is still like down year-on-year in recent months. Another key data from MIIT shows that the 5G mix in China continued to decline from 82% in July to 73% in September.
Instead of conjecture, it seems like the demand is not that strong, and also the mix of the 5G is actually kind of going down. What's your assumption for, you know, the 5G penetration for China, whether it can re-accelerate again? For the emerging markets outside of China, what would be your 5G penetration assumption? I ask this because it looks to me if 5G penetration need to go on next year, probably the price points for 5G SoC need to go down by one or two nodes. Not sure if that is also what company is seeing. Thank you.
Okay. Well, we all read China's MIIT data carefully. We all have equal access. We have that in our assumption, in our plan for 2022, 5G shipments. Of course, for us, we understand the China basic general smartphone sales has slowed down. 5G penetration probably also, while 80% is a very high ratio, a very high rate considering the short period of time they have achieved that. It's really amazing. It seems we're moderate somewhat. Important thing for us is to just say this at the time really to up our mix. It's both quality and the revenue mix.
On the other hand, we also look very carefully at the 5G demand outside of China. Especially, to our surprise, actually, the more emerging markets, the sales of the 5G phone in 2021, the growth has been surprisingly good. Actually, we just had a review actually just now today for India. We see really robust growth for those markets. Our chips are really well suited for those markets also. I believe I would expect a lot of our quantity will go to those markets outside of China. We also expect some of our high-end chips to also go to those markets outside of China too. We are still, as I said earlier, we still see a really healthy growth in our revenue in the 5G smartphone next year.
I see. Yep. In that case, do you think smartphone margin or 5G margin can be still similar to corporate average in next year, yeah, given some weak demand or customers their own kind of margin pressure?
Well, I think the short answer is yes. Like we explained earlier, I think overall the corporate gross margin growth stabilized and better under the sort of cost off situation. If you do the math, I mean, the smartphone gross margin need to be the same as that, given the fact smartphone in fourth quarter alone account for more around 55%, 56% of the overall revenue. It's in line with corporate average.
Got you. Thank you. Thank you, gentlemen.
In the interest of time, we are taking the last one to ask question. Last one to ask question is Luo Chen from TGI.
Hi, thank you for taking my question. Can you hear me?
Yes, Luo.
My first question is that we already see that MediaTek is the number one smartphone SoC maker globally. I'm just wondering that, aside from our cooperation with Android or Google in Chromebook, I'm not sure if MediaTek has any plan to work with Microsoft on Windows on laptops. We see that could be a sizable market for MediaTek to further leverage your current technology and advantage. That's my first question.
Good question, Luo. Short answer is, yes, we certainly intend to do that. It's just not going to be easy, of course. We have the capability from our technology, our IT, and I think it's also, well, the ARM architecture is also becoming more and more mainstream. We're not going to just leave that market untouched.
Yeah, that's good to know that. Yeah, but do you have any like near-term target or any time frames or, when we can see that more announcements about MediaTek progress on Microsoft?
No, I think, Luo, today's statement is probably more than quite enough. We will not, as usual, comment further. Thank you.
Oh, okay. Thank you. Also a follow-up question that, since we know that in the supply chain, the imbalance situation continues. I'm just wondering from MediaTek's perspective, how do you think that situation will persist? Since the inventory days in the past two quarters also gradually ticking up, how would you manage overall supply-demand situation? Thank you.
Again, we see supply. I wouldn't say really ample supply, but we are seeing we have a good enough supply to meet our 2022 business needs. We can do somewhat more, but we understand the supply situation also varies from different node to different node. There's a lot of also the supply chain. I must say, over the past, I would say 30 years or longer that I have been observing the supply chain situation is very, very complicated at this time, because not only do we have a physical supply deficiency, but also more complicated, shall we say, geopolitical effects.
It is in that sense it is much more difficult to manage the supply than before. Saying all that, we're still definitely optimistic about our capability in managing our supply. The overall supply constraint and the complication I think will last for another year, for sure. Thank you.
Okay, thank you very much.
Okay. I think we still got time for one more caller. The last one to ask questions is Frank Lee from HSBC. Go ahead, please.
Okay. Thank you, guys. I just have two questions. The first one is just in terms of, I think you talked a bit about your outlook for next year and then the end market and the focus on moving into the high-end for your 5G smartphone. On the other hand, you're also talking about, I guess, next year growth in emerging market as opportunity for 5G. I'm just trying to understand, I guess, the mix of shift of on a company level of moving your product mix to a high-end, but on the other hand, you have kind of an end market next year where higher growth might be more in the mid to low-end market. Just thinking about like how should we look at the combination of these two forces going into next year? That's my first question.
Frank, actually it's long story short, I think we kind of took the answer upfront. On a planning basis, if you put everything together, like I say, [uncertain] and also some of shipment, 5G shipment from the emerging market, I think we still see both the volumes increase and also the ASP increase. I think that's based on.
Okay.
What we talked about earlier. All those variables put in, that's our focus so far.
Okay. Thank you. The second one, just my question is, on the competition for next year. You mentioned that, you know, the supply chain is still quite complicated, but the SoC doesn't seem to be as tight as other components. As we go into next year, how do you see the environment? I know you talked about the chip being competitive, but we're also seeing potential. Do we see perhaps a bit more competition than we've seen in the last two years, especially as some of your competitors are able to get more capacity support for next year?
Frank, I think it's like our Chief Executive Officer said, currently we believe we got ample supply for next year growth target. Also we keep talking about we could certainly use more capacity even as a variable. Maybe another way to explain that is actually from industry perspective, right? I think it's still very tight. Otherwise, I'll say you're not gonna see all those vendors, those including foundry and also the backend are increasing their prices. Normally you won't see that unless the overall industry still sits on high consumption. Again, to answer the question directly, I think we have well secured enough support, enough capacity support for our growth target, but we could certainly use more. I think that's it.
All right. Thank you.
Thank you, ladies and gentlemen. This has been the Q&A session. We thank you for your questions. Now I'm going to hand it over to Ms. Jessie Wang for closing comments. Ms. Wang, please proceed.
Thank you. This concludes MediaTek's 2021 virtual conference call. We would like to thank you for your participation, and you may now disconnect. Thank you.
Yes. Ladies and gentlemen, we thank you again for your participation in today's conference. You may now disconnect. Thank you and goodbye.