Welcome to the MediaTek 2020 second quarter investors conference call. Financial results and presentations for today's calls are available on the investor section of company website at www.mediatek.com. 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 second 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 risk and factors which may cause actual results materially different from the statements.
The presentation material supplement non-TIFRS financial measures. Earnings distribution will be made in accordance with financial statements based on TIFRS. 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 for investment advice. Neither MediaTek nor any of independent providers is responsible for any actions taken in reliance on contents provided in today's call. I would like to turn the call to our CFO, Mr. David Ku, for the second quarter financial results.
Thank you, Jessie, good afternoon, everyone. Let's start with the 2020 second quarter financial results. The currency here is in NT dollar. Revenue for the quarter was TWD 67.6 billion, up 11.1% sequentially and up 9.8% year-over-year. Gross margin of the quarter was 43.5%, up 0.4 percentage points sequentially, up 1.6 percentage points year-over-year. Operating expense for the quarter was TWD 22 billion, compared with TWD 20.4 billion in the previous quarter and TWD 19.6 billion in the same period last year. Operating income for the quarter was TWD 7.4 billion, up 27.8% sequentially and up 20.7% year-over-year. Non-TIFRS operating income for the quarter was TWD 8 billion.
Operating margin for the quarter was 11%, increased 1.5 percentage point from the previous quarter and increased 1 percentage point from the year-ago quarter. Non-TIFRS operating margin for the quarter was 11.9%. Net income for the quarter was TWD 7.3 billion, up 25.9% sequentially and up 12.4% year-over-year. Non-TIFRS net income for the quarter was TWD 6.8 billion. Net margin for the quarter was 10.8%, increased 1.3 percentage point from the previous quarter and increased 0.2 percentage points from the year-ago quarter. Non-TIFRS net profit margin for the quarter was 11.6%. EPS for the quarter was TWD 4.58, up from TWD 3.64 in the previous quarter, and up from TWD 4.11 in the same quarter last year. Non-TIFRS EPS for the quarter was TWD 4.92.
A reconciliation table for our TIFRS and non-TIFRS financial measure is attached in our press release for your information. That concludes my comments. Thank you.
Thank you, David. Now I would like to turn the call to CEO, Dr. Rick Tsai for prepared remarks.
Good afternoon, everyone. Today, I'm pleased to report our solid second quarter results. Revenue came in above expectations and operating profit margin increased to 11%, the highest level since the fourth quarter of 2015. In addition, our operating income in the first half of the year grew more than 40% year-over-year, delivering significant operating leverage. On the business side, we saw healthy demand across multiple markets during the second quarter, especially growth in our growth area. Let me elaborate on our three businesses for our second quarter results. Starting with growth area today, which consists of AIoT, PMIC, and ASIC, accounted for 28%-33% of second quarter revenue. With our exposure to multiple growing trends, growth area remains robust during this challenging time. Revenues for this group were better than expected in the second quarter, especially Wi-Fi and Power IC.
First of all, increasing bandwidth demand in this new environment demands a new era of ultra-fast connectivity. This is driving our Wi-Fi business upward. MediaTek is one of the few industry leaders shipping Wi-Fi 6 chips with large volume in the first year of the market takeoff. By now, MediaTek Wi-Fi 6 solutions are already in a wide range of applications across broadband, router, and consumer electronics. We believe this is just the beginning of a multi-year connectivity upgrade cycle. Work from home and remote learning trends create near-term momentum for router upgrades. Mainland China's tangible infrastructure investment further accelerates Wi-Fi 6 adoption in broadband. We target to ship several millions of Wi-Fi 6 chipsets this year and believe its contribution will continue to increase in coming years. Power management ICs was another product with robust growth in the second quarter, driven by notebooks, Chromebooks, and 5G base stations.
Looking into the second half of 2020, apart from healthy PC and 5G base station demand, we are seeing growing contribution from 5G smartphones, fast charging solutions, and gaming consoles. For ASIC, consumer ASIC chips for gaming consoles have started multi-year product cycles. Demand is strong in third quarter ahead of the year-end holiday season. On the enterprise side, our cloud AI project is on track to commence volume production in the second half of 2020. We recently announced our first retimer PHY product, a companion chip to our switch ASIC for data center and 5G infrastructure. The product expansion would add our platform competitiveness in enterprise market. Smart home and others. Primarily TV and other traditional consumer electronics accounted for 20%-25% of revenue in the second quarter.
After a slowdown in the second quarter, global TV demand rebounds rapidly in the third quarter, mainly led by North American and European markets. As the main home entertainment device, TV, especially smaller sized ones for bedrooms, are becoming popular during the longer staying at home periods. Other traditional consumer electronics also recovers gradually. Now onto mobile computing, which includes smartphone and tablet, accounted for 43%-48% of the second quarter revenue. Mobile computing grows strongly in the second quarter, driven by numerous 5G smartphone launches and demand surge in tablets and Chromebooks for remote learning. We expect those momentum to carry on into third quarter. The 5G market is tracking well. We continue to believe the global 5G smartphone shipment in 2020 will be 170 million-200 million, more likely towards the high end. It will likely to be more than double in 2021.
MediaTek is well positioned in global 5G cycle. With the recent introduction of Dimensity 720 for the mass market, MediaTek has covered all smartphone segments in just three quarters, including high-end Dimensity 1000 in the fourth quarter of 2019, and mid-range Dimensity 800 series in the second quarter this year. Dimensity series SoCs are highly valued by our customers. All major Chinese smartphone brands are shipping MediaTek powered 5G smartphones by now. There is a strong design in pipeline for models in second half of 2020. Very importantly, our 5G smartphone shipments to regions beyond Mainland China will start in the third quarter. Besides, our 5G single modem business is progressing well. First project for Intel platform notebook PC is on schedule to mass produce in the first half of 2021.
On the technology side, MediaTek leads the industry in supporting 5G dual SIM, dual standby, and two carrier aggregation with excellent power performance for mid-to-high-end smartphones. Those features further enhance MediaTek's already highly competitive position in the increasingly popular sub-6 GHz market. Apart from sub-6 GHz, MediaTek's millimeter wave product development is on schedule. We expect millimeter wave technology to be ready by the end of the year and customer samples to be available in 2021. For 4G, market demand stays stable lately. With market share gains, we believe we are able to outperform the market this year. In the first half of 2020, our total revenue grew more than 12% with good operating leverage. This growth momentum will be considerably stronger in the second half in most of our businesses.
With our diversified product portfolio and continuous investment in technologies, 2020 not only provides healthy top-line and bottom-line growth, but also lays out a solid foundation for our midterm growth. In particular, technology investment efforts we made in the past few years are starting to bear fruit, evidenced by our early participation and stronger market position in both global 5G and Wi-Fi 6 markets. We are seeing great opportunities ahead, with business progressing well on multiple fronts. As always, we will continue to execute and explore future market potentials. Now I turn to third quarter outlook. Consumer electronics demand is picking up across the board. Work-from-home related demands and several customer product launches, such as 5G smartphones and game consoles, add sales momentum into the third quarter. We expect all major product lines to grow strongly.
5G smartphones, in particular, will benefit from mass-market models, launches, and ramp throughout the year. Gross margin is expected to be stable at the current range. We expect third quarter revenue to be in the range of TWD 82.5 billion-TWD 87.9 billion, up 22%-30% sequentially, and up 23%-31% year-over-year at a forecasted exchange rate of 29.2 TWD to one U.S. dollar. We are forecasting gross margin at 43% ±1.5 percentage points, and quarterly operating expense ratio to be at 29% ±2 percentage points. We expect to see another quarter of healthy operating leverage in the third quarter. That concludes my prepared remarks. Thank you.
Thank you, Rick. We are now ready for Q&A. May we please have the first question, operator?
Yes. Thank you. We are now in question and answer 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. To cancel your questions, just press zero two. As a reminder, it is greatly appreciated that you turn off the speakerphone mode of your device to prevent possible echo effect. We thank you for your cooperation. Now, please press zero one if you would like to ask questions. Thank you. The first to ask questions, Randy Abrams, Credit Suisse. Please ask your questions.
Okay. Yes. Thank you, and congratulations on the good result and outlook. Actually, the first question on the outlook, with the 22% - 30% growth, could you outline it by segment, the relative momentum? Could you also indicate if you're seeing any incremental benefit already from some of the restrictions where you have opportunity to support that customer if they can't get their own silicon?
For the third quarter, actually, all the businesses are growing well. As actually I explained during in the remarks. In all our business, we see a good, robust growth, and we are very pleased with that. This is despite really, shall we say, outside impact. These results, actually, we have been forecasting internally through the past quarter already. Thank you.
Yeah. If I could follow, maybe just beyond that, if you see potential looking past, because it's well above seasonal third quarter. The initial view looking past, if you could start to see some benefit and also 5G ramping up, if even though we're seeing a better seasonal, the growth could actually continue into year-end, just factoring 5G ramp and maybe potential new customer, new projects from the restriction.
Randy, it's David here. I think 5G, as the CEO explained, is definitely one of the growth drivers. I think the key is for our third quarter revenue is really just, we see a pretty even and all pretty strong growth across all three sectors, which is basically mobile computing, the growth sector, and also the small home as well. Yeah. As we explained earlier, 5G is definitely one of the growth drivers.
Okay. I guess what I was asking is more of the follow on fourth quarter. It's well above seasonal and good strong growth. That's even before probably much benefit from incremental, so if the system company can't get their own silicon. I was just curious if you have potential, it looks like the strength continues into year-end, factoring you could have further share gain and further 5G ramp.
I think for the fourth quarter, we need to wait until maybe for next quarter. In general, I guess to answer your question, we do see a pretty even demand coming out from all three major business sectors. For mobile computing especially, I guess, both for 5G and 4G, we see 5G definitely is very strong. As we explained earlier, we now further expand our product segmentation into the mainstream and also the entry-level as well. That certainly helps. By saying that, I think, toward the year-end, we also will have the new high-end product coming out as well. It's really the best way to think about that is really just a comprehensive product segmentation expansion, not just on the mainstream.
For 4G, this year, even though overall the global market is actually coming down, but many thanks to the market share again, we see a pretty decent growth as well for this year.
Okay. The last question, if I could ask on the data center business. If you could give an updated profile between the AI, the data center switch, and now this new product you've announced. How has these ramp up? You could see the revenue contribution, as it goes toward low single, or if it could get to be mid-single. Maybe just the outlook for this segment if you're kind of sizing up the TAM again, how you see the potential in data center.
Well, you are asking data center in particular. I think data center ASIC, TAM is about half a billion. We are working in what we call enterprise ASIC area, which comprise of data center, network, and 5G infrastructure. Altogether, about TWD 2 billion in TAM. Right now, we have a good design, and we have tape out. We have engineering samples. The production is beginning to ramp up this year. This business model takes time to develop into a major revenue as a major revenue source. We're being patient, and we're putting in still the resources into the process technology, the key IPs, such as the high-speed SerDes. I believe we're going to win multiple designing, and it will provide a solid, stable revenue in the next couple of years. Thank you.
Okay. Thank you.
Next, we're having Gokul Hariharan from JP Morgan. Go ahead, please.
Yeah. Hi. Congrats on the great results. First question I had, could you talk a little bit about, I think you did revise up your 5G expectations. You're also expecting more than 2x growth in 2021. How should we think about MediaTek's 5G market share as we are now getting into mainstream as well as probably a little bit more entry-level kind of price points for 5G mass market phones? What are we thinking about market share situation for 5G? Secondly, how should we think about pricing for 5G now that we have a little bit more visibility? I think previously you had said until the end of this year, you're seeing that the roughly 2x or more premium that you have to 4G can be sustained. Could we talk a little bit longer term?
Is 5G pricing still going to remain on a like for like basis at a significant premium to 4G as we look into next year, more mass market models as well? Thank you.
It's a long question. Let me see if I get your point. First, I think our 5G performance in market up to now is pretty good. I think all our three SoCs in three different segments are being designed well with our various customers. I think you asked the market share. Let me see. We believe we probably, quantity-wise, above 40% by the end of the year. Above 40% of the market share, quantity-wise. What else?
Yes. Major question.
I hope I'm answering your question.
Yeah. I think that's good. Do we think that the 40%+ market share sustains into next year also? Maybe could you talk a little bit about 5G pricing versus 4G on the same segment? Are we going to sustain the price premium that we currently enjoy? How long can we sustain the price premium?
I think into 2021, of course, we still quite a bit of time to see, but we should be able to hold on to our market share. Hopefully, we can do better. Pricing-wise, I think we have elaborated before, 5G SOCs being quite a bit more complicated than 4G SOCs, does command, how much?
We're talking about multiple times.
Multiple times of 4G SoC price. That trend definitely is continuing. Thank you.
Okay. Thank you.
Now, we're taking questions from Sebastian Hou, CLSA.
Hi, good afternoon. Thank you, gentlemen, for taking my questions. My first question is on the product roadmap for next year. I know that we already have Dimensity 1000. It is for the high-end 5G SoC and high-end model for your customers. Can you give us some update on your plan about the next year? Whether or not we will have more high-end one for the ultra-premium flagship model for our customers. When do you expect that to come? What kind of the process node technology would you utilize? Thank you.
We announced Dimensity 1000 chip near the end of last year. I think one year is about the time that we will take to make our announcement for our next high-end SoC. The name to be decided. Of course, as we said, at almost the very beginning of the 5G era, we said we definitely want to be in all segments, from high-end to mid-end to the mass volume segment. We continue to abide by that statement. I'm sure we will have more high-end SoCs after the announcement at the end of this year. For the high-end chips, we were using TSMC's leading-edge processes. I think we use 7 nm for the 1000. We'll continue to use 7 nm and 6 nm, for the next couple of chips. We will move into 5 nm as soon as we can. Thank you.
Got it. That's clear. My second question is, maybe this is for David. I think we have heard you guys talk about emphasizing the operating leverage for a long time, and you have done a good job to direct investors view, focus not on gross margin, but on OP margin. Since now we are in the very good position in the up cycle and the 5G still profit accretive and the growth business also very profitable. When do you expect that we could return to 20% OP margin again? Is that a dream or is that achievable target in the next three years? Thank you.
For the longer term forecast, we probably will not be able to commenting right now. As you can see, Sebastian, starting from Q1 this year, I think the Q1 operating margin was 9.5%, and Q2 was 11%. Q3, definitely we're going to continue to see that improving. As we explained to the community, operating leverage is something that we're driving pretty seriously. I think trend-wise, I think we feel comfortable. In terms of pace and also magnitude, I think that would be, still need to watch lots of different pieces putting together. I guess we probably will not be able to commenting on that. We don't have the visibility, to make a long story short. I think trend-wise, direction-wise, I think that's the direction we're working on diligently.
Got it. Last from me, really quick one is, I think that we continue to accumulated a lot of the cash in hand. I know that we continue to do a lot of strategic and venture investment, but what about cash return to shareholder strategies. Would you consider potentially increase the dividend or any other sort of cash return policy? Thank you.
Well, I think in the past few years, the overall dividends or cash dividend payout ratio is roughly close to 70%. I think that was defined by the board. I think every year we will definitely discuss with our board and decide the dividend policy. For the time being, the overall policy is still trying to maintain a balanced and stable payout ratio. Basically, if EPS, the earning increase, I think the absolute dollar will increase. In terms of the payout ratio, I think we need to discuss with our board later this year or early next year, in order to think back to your question. Overall, I guess if you look at the dollar side we pay out every year to the shareholder, I think it's actually pretty sizable.
Got it. Thank you.
Next to ask questions, Roland Shu from Citigroup. Go ahead, please.
Hi, good afternoon. Congrats for very good result. Look at your mobile revenue have been increased meaningfully YOY in first half. I would like to know how much did this 5G contribute to your mobile revenue in first half?
Roland, I think for the first half, the 5G contribute, I would say less than 10% of the overall revenue, if you consider the Q1 and Q2 for the whole company perspective.
Okay. Less than 10% for the whole company.
Yeah. I would say close to 10%.
The whole company for the whole mobile revenue?
Whole company.
Okay. Less than 10% for the whole company. Also for your 4G, you said that you continue to grow 4G market share. For what kind of the product or segment are you are growing your market share? Is this from the Helio P80, 90 or G90, or at least your market share gain is coming from a lower-end product?
Roland, I would say, we're doing well across the board from G90 all the way to Excuse me, I forgot the numbers. Basically across the board, I think we're getting good design. Those designs will continue into 2021 also. We remain, I would say, comfortable with our 4G business this year, and we expect still a 4G. As we said also before, has a long-lasting tail. We believe in the next couple of three years. We intend to continue our market share performance and that will also provide us with really good revenue and the operating profits.
Understood.
Thank you.
Yeah. Last time you said your 4G total shipment this year will be similar as last year. I think you are right.
Yes, we do.
[audio distortion]
[audio distortion] Still, with 1.3 billion roughly units a year, even with 5G's penetration, we still see a strong demand for 4G, especially outside of Mainland China. I think this trend will be somewhat different from the 3G era. Thank you.
Thank you. Yeah. For your 5G shipment, the whole year, your number, TWD 170 million-TWD 200 million are still unchanged. How about for the shipment in China? I think the last time you talked about TWD 100 million-TWD 120 million. I think in your opening remark today, you did not mention this. What's your view for the shipment in China this year?
We maintain that view. TWD 100 million-TWD 120 million.
TWD 100 million-TWD 120 million.
In China. Yeah.
When we look at the China 5G penetration, in second quarter had reached close to 50%. Even in June, it was more than 60%. Is this a high penetration in China in your numbers of 100 million-120 million shipment this year? Your number actually is looking for even higher penetration in China this year?
If I remember correctly, the first half, China's 5G smartphone shipment sell-through was 40 million +. I forgot exact number, 42 million something.
Yeah, 13.5. Yeah.
No, that's for second quarter. I'm talking about first half.
Yeah. Oh, okay. Yeah. Mm-hmm.
Yeah, first half. We're looking at, so for TWD 100 million-TWD 120 million, which will represent TWD 60 million-TWD 80 million, up to double the first half numbers. We feel that's a reasonable forecast from our view.
Okay. Yeah. Still stick with your view. By the way, actually, I believe, in second quarter, China 5G smartphone shipment is close to 50 million. Yeah, plus first quarter, I think that probably first half is already above 50 million. Yeah.
I think, Roland, you need to look at, there's a sell-in and sell-out.
Okay. Understood.
Sell-in number, there's about TWD 10 million difference between sell-in and sell-out.
Okay, your number is a sell-out number, right?
Sell-out.
Contribution.
Yes.
Probably because to the high-end?
Roland, I think first half is high-end and also the mainstream as well.
Okay. Understood. Okay. Thank you. My last question is, now you are seeing increasing demand on both 5G and the 4G SoC. Do you get enough support from your foundry and also partners to make all of these products to meet this increasing demand? Thank you.
Let me put it this way. We work very hard, but also very closely with our foundry supplier. We're getting support from leading-edge processes to 8-inch mature processes and fabs. All that, I don't see major issues. It's taking a lot of effort, but we're making our commitment to our customers.
Okay, how do you think about the foundry's pricing chain? Will it be a headwind to your gross margin going forward?
We don't see issues for this year. We figure out next year. Thank you.
Okay. Thank you, and congrats. Thank you.
Thank you.
Next, we're taking questions from Charlie Chan from Morgan Stanley.
Thanks. Hi, Rick. Hi, David. My first question is about your gross margin trend, because I remember you talked about 5G margin should be better than 4G, and that your TV SoC you mentioned seems to be increasing. Why you think gross margin third quarter is only flat? Do you see any upside there?
Charlie, David here. I think for the gross margin, basically every quarter, we really need to see the mix between the business units and also the product mix, and also the customer mix. Probably the better way to think about the gross margin is really just, like we say earlier this year, the gross margin will stabilize within a range. Basically, back when the range we provide was 42%-43%. Now as you know, consider everything for Q2, it was 43.5%, and for Q3, the guidance we give out was 43% ±1.5%. I guess, we still believe while we trying to ramp our 5G and also basically the also 4G as well, the overall smartphone revenue contribution will be higher in Q3 and Q4. At least, we still believe we can stabilize the gross margins within that range.
Okay. Thank you. My next question is about how you are going to manage this U.S. policy risk. It is great to see Mr. Patrick Wilson join the management team. What's the intelligence from the gentleman or from your team about whether your competitor will get a license or, HiSilicon or to get approval to sell their merchant chips to Huawei? I think that is important assumption for your 5G SoC market share in 2021. Can you give us some color? Thank you.
We did announce having Patrick as our VP of Government Affairs in the U.S. Mainly, because MediaTek being, I would say, a very important and also a global semiconductor company, we need to be able to participate, and if needed, influence in the dialogue and the discussion among major semiconductor companies. Mr. Wilson will, being stationed in Washington, D.C., will lead the effort locally. I'm sure you understand how that works.
So far, even just within a week, we have good experience with Patrick. The question you asked, I think it's beyond his job description. Our main purpose is really, again, to help MediaTek participate in the discussion and to influence, if necessary, for a big part of the industry. I'm sure Patrick will also establish MediaTek's presence in a very positive way. Thank you.
Got it. With those kind of assumption, are you confident that your market share in China can exceed 50% in 2021?
Charlie probably will not be able to comment for next year's market share right now.
Okay.
It's still some time to go.
Okay. Quick one is about the end demand. Company said that consumer demand is recovering, but if you look at pandemic outside of China, I think it's still pretty tough. I said the companies are strong performers. What's your observation about smartphone demand outside of China, especially India or Africa markets, and whether that could be a potential risk for your second half outlook. Thank you.
Well, I think, Charlie, as to the smartphones, I don't think we're being naïve about the overall demand picture. We have said, and we remain that way, that the global smartphone unit shipment will decline by 10%-15%.
Most of which, of course, will fall on 4G smartphones. However, and we also said, we have gained market share in a significant way. Our shipment in the 4G remains about the same, hopefully a little better than last year's. In 5G, it's at the beginning, you know that. We are participating. The critical thing really is all of our investment and our determination in our technology and product portfolio, and our execution. We have demonstrated that to most of our key customers, that we can provide them with the portfolio products with the right technologies content that can make them successful in the market. We're getting the design in, and we're getting our share of the business. That's how it works. We're not overlooking the potential adverse impact from the pandemic at all.
Okay, thanks. Thank you. Next one we are having Bruce Lu from Goldman Sachs. Go ahead, please.
Hi. Thank you for taking my question. A very good result and guidance. I want to dig in more a little bit about that 4G penetration where it will remain high for multiple years. I think as mentioned that 5G estimate will be more than double next year, i.e., the penetration where we will be close to 40%. If 4G is going to be high penetration even in 2022, 2023, which means that the growth rate for 5G will be much slower in 2022 onwards. Is that the right way to think about it? Hello?
Hey, Bruce. I think maybe we were not clear about that. For going forward for next year, like the CEO explained, the overall demand on 5G, our view next year, the 5G demand should be double, which means the 4G overall shipment from just the market perspective will come down. Overall, just from the ASP profile perspective, as long as we can remain the meaningful market for 5G, that actually is a change for good. We call the market product migration for relevant standardization. We talk about 4G fully for this year. For next year, it really depends on the 4G, 5G product mix. We didn't really referring to 4G next year. The shipment will continue to grow on the MediaTek side. That's not what we're referring to.
No, I'm not talking about MediaTek's 4G smartphone shipment next year. I thought that [inaudible] was talking about 4G penetration or 4G overall market will remain at higher or relative high penetration rate in multi years.
Would you say it's a long tail business?
Yeah. I think, Bruce, it's a long tail business and also 4G, because as you can see, in the past, we still have a little bit of 2G and also even 3G smartphone. Now we see less and less 2G and 3G smartphone. We see a lot of 4G smartphone, and also starting from this year, we see 5G smartphone. When we talk about 4G as a long-term business, we do believe going forward, lots of people from the emerging market will stay at 4G. For a certain area, we're migrating to 5G. That's what we mean by the 4G penetration will continue to increase. Yeah.
Okay. I think.
Penetration doesn't really mean the shipment. Absolutely shipments, to be precise.
I think the key question I try to ask is that, MediaTek is going to reach about TWD 10 billion revenue pretty soon. Beyond that, what is the main growth driver for the investor? Where is the big enough addressable market or the key growth driver, which can move the whole market? The company has extremely high exposure to smartphone in the coming years. I think most likely once China 5G smartphone shipment penetration reach the saturation point, your smartphone revenue can be more than 60%-70% of its total revenue. Your revenue exposure to China is extremely high at that moment. What kind of product or what kind of customer revenue exposure, or the growth we can expect in a multi-year timeframe? What's your intention to do more aggressive M&A for different customer profile or different product line? I think that's something I try to ask.
This is Rick, Bruce. For people there, this is a very dynamic time. The 5G, certainly this thing will provide a strong growth outlook for several years to come. MediaTek, as you probably can tell, we're taking advantage of that growth by being early in the cycle. The other thing we have talked about multiple times is this time, at this cycle, we're not just focusing on 5G smartphone in China only. As I said in my remarks, that starting third quarter, we will start shipping 5G smartphone to markets outside of Mainland China. We are working very hard to have designing into the markets such as North America and Europe for later this year and next year and beyond. We also put a lot of work in the, what we call SIM modem business.
The first being the data card, with Intel chips powered notebook PCs. We also are working on the CPE, using our SIM modem capability. We believe this will provide definitely extra and stable business for our modem development effort and investment. Of course, we are not just sitting here working on 5G modem. Our business in our growth area has done well. Has been doing well, will continue doing well. This year, as we said, during our second quarter, our third quarter business, the growth area, from growth rate point of view, is doing very well. Our Wi-Fi business, our business into the tablets and the Chromebooks, really, we are very pleased with the advancement we're making over there. We definitely expect, because this new normal, I don't know what that is really.
One thing we're sure is people, either at home or in the office, will demand much better equipment from computing and from connectivity point of view. Not to mention the good display. These all fit into MediaTek's strength. We have been investing in these technologies all along, and we have the products to meet this surging demand. We believe we will continue to benefit because I think this trend is a continuing trend. It's not a one-time, short-term type of thing. Yeah. We understand the situation that we are growing well this year, moving into a good revenue, strong revenue this year. We're working hard so that we can continue, hopefully, our growth trend in the next couple or three years. Thank you.
Okay. Thank you.
Next, we'll take questions from Brett Simpson, Arete Research.
Yeah, thanks very much. A question for Rick. I think you touched on some of this earlier, but the foundry situation at the moment is incredibly tight, particularly at 7 nm or particularly for PMIC at the moment. Are you seeing any real challenges delivering upside in Q3 from a supply perspective? When you look out to Q4, will there be access to more supply? Will you be able to ramp up further, or are there going to be some challenges also in Q4 with tightness out there? Thank you.
It is tight. I said earlier, both from a leading-edge process and the 8-inch mature processes. We discussed this earlier, and since, I think, late last year, we started to work on the PMIC capacity, for instance. We move our products into different fabs from our various suppliers. I don't want to tell you how many fabs we're in. Quite a few. That's how we manage to meet the requirements of our 5G shipments, our 4G shipments, our tablet shipments, our Chromebook shipments. It's a very tough situation, but our supply chain guys have done a tremendous job in meeting the customers' demand. Leading edge, we worked really closely with our neighbor here, both from a technology point of view and the capacity support point of view. MediaTek, very different from several years ago.
We are now moving into leading-edge processes as fast as we can because we want to take advantage of the benefits from those processes for our leading high-end products. Thank you.
Thanks. Maybe just a follow-up. On 5G this year, you're not raising the market outlook, but it's clear that you're seeing a much bigger volume ramp in 5G than you initially expected. I'm just wondering, what sort of market share do you see this year for MediaTek in 5G, global 5G? Could you achieve a 25% 5G global share in 2020? Thank you.
Well, rough calculation, probably 20% and better, globally. Including all suppliers. Yeah.
Okay. Just one other point, you mentioned about millimeter wave and your plans to sample. I think Qualcomm said on their earnings call this week that they expect something like 120 operators to launch millimeter wave next year, and some coming around China as well. I'm wondering, when do you expect to have millimeter wave commercially shipping? Will the RF partners that you work with, will they be able to support your timeline? Thank you.
Our technology, we're working very hard on millimeter wave technology. We'll be able to announce some of our results by the end of the year, this year. We'll be able to supply samples to our customers sometime next year. I think if you look at the speed of the acceptance of the different spectrum sub-6 GHz or millimeter wave, we will be able to, I think, meet most of our customers' requirements in the next couple of years.
Okay, thanks. Maybe one sort of strategic question, Rick. Automotive. If I look at a lot of the IP that you've developed over the years, your A/V capability, the 5G IP, what you're doing with Android Auto, all the peripherals, Wi-Fi 6, et cetera. There is a lot of opportunity here for you to sell into the automotive market, and we haven't really seen much comment around the strategy here for MediaTek. Can you maybe talk about how you're thinking about an automotive opportunity for MediaTek? What sort of content per car when you start thinking about the capabilities that sit within MediaTek to up-sell into the auto industry. What sort of long-term opportunity do you think MediaTek's capable of doing? Is this a key part of your growth story long-term? Are you building a meaningful organization to attack this?
Have you started to get some meaningful backlog yet? Thank you.
Automotive is a big market, but also a difficult market because of the very special requirements for the entry. We started with the infotainment video products. We have been assessing the connectivity products. The cellular modem for 4G and for 5G, in addition, as well as the Wi-Fi modules. If you think what we have been through during the last couple of years, we really have a lot of work ahead to get where we are today and where we will be fourth quarter and next year. I would say automotive is not right now the top priority for our 5G, for our modem, and the Wi-Fi business. What we're doing is to develop the cellular modem and the 5G module capability so that we can, of course, with the right specs for the automotive requirements.
My feeling is it will come into play, but probably at the later stage of the cycle. Usually, it takes a longer time for the industry to move into 5G and Wi-Fi 6, for instance. I'm really confident that MediaTek, being one of the very few players with both 5G modem and the Wi-Fi 6 capability, we will be a key player in that segment later on. Thank you.
Okay, great. Maybe just one final question, if I may. On Huawei. You're shipping now to all OEMs in Mainland China, and I think Huawei has very high market share at the moment, something like over 70% in Mainland China for 5G, and your relationship is just really ramping up here with these guys. Can you give us any sort of color on whether you need a license to service Huawei or not? When you think about the planning challenges around managing a relationship with Huawei at the moment, how sustainable do you think the business is into next year and beyond, factoring in how volatile things are at the moment? How sustainable do you think that opportunity is for MediaTek? Thank you.
Brett, I think so first of all, we just comply with the global trade regulation and requirements. Basically, for the compliance, we take that very seriously, and that's point 1. Point 2, I guess it's our policy we will not be able to comment on particular or specific customer. I think that's all.
Okay. Thank you.
Thank you.
Ladies and gentlemen, I'm sorry we are running out of time. That concludes our Q&A session. I'll hand it over to Ms. Jessie Wang for a closing comment. Ms. Wang, please proceed.
Ladies and gentlemen, this concludes MediaTek's 2020 second quarter conference call. We would like to thank you for your participation, and now you may disconnect. Thank you.
Thank you, Jessie. We thank you for your participation in today's conference. You may now disconnect. Thank you and goodbye.