Welcome everyone to the MediaTek 2020 First Quarter Investors Conference Call. Financial Results and Presentations for today's conference call are available on the Investors section of the company web site at www.mediatech.com. And now I would like to turn the call over to Ms. Jesse Wang, Executive Director of Investor Relations. Ms.
Wang, please go ahead.
Good afternoon, everyone. Joining us today are Doctor. Rick Tai, Mediatek CEO and Mr. David Guido, Mediatek's CFO. Mr.
Guido will report our first quarter with and then Doctor. Sai will provide our prepared remarks. After that, we will open for Q And A. As a reminder, today's presentation will provide looking statements based on our current expectations. These statements are subject to various risks and factors which may cause actual results to materially different from these statements.
The presentation materials are presented on preferred financial measures. Earnings distribution will be made in accordance with statements based on our papers. For details, please refer to the Safe Harbor statement in our presentation slides. In addition, all contents provided in this teleconference offer to our information only. Now intended for investment device, neither mediatek nor any of independent providers is responsible for any actions taking reliance on content provided in today's call.
Now I would like to turn the call to our CFO, Mr. David Du for 1st quarter financial results.
Thank you, Jesse. Good afternoon, everyone. Now let's start with the 2020 first quarter financial results. The currency here is the OE and D dollar. Revenue for the quarter was $50,900,000,000, down 5 point 9% sequentially and up 15.4% year over year.
Gross margin of the quarter was 43.1%, up 0.6 percentage points sequentially and up to point 4 percentage points year over year. Operating expenses for the quarter were RMB20.4 billion dollars compared with $21,300,000,000 in the previous quarter and $18,300,000,000 in the same period last year. Operating income for the quarter was $5,800,000,000, down 6.8% sequentially and up 83.1% year over year. Operating margin for the quarter was 9.5%, slightly decreased by 0.1 percentage points from the previous quarter and increased 3.5 percentage points from year ago. Net income for the quarter was 5,800,000,000, down 9.1% craterially and up 59.9 percent year over year.
Net profit margin for the quarter was 9.5 percent, decreased 0.4 percentage points from the previous quarter and increased 3 percentage points from the year ago. EPS for the quarter was C3.64 dollars compared with C4.03 dollars in previous quarter and $2.17 in the same quarter last year. We opt in addition to above financial updates we also provide non Taiwan IFS financial measures, which is excluding share based compensation, amortization of merger and acquisition related and also tax effect. Please refer to earning press release and presentation for details. That concludes my comments.
Thank you.
Thank you, David. And now I'd like to turn the call over to CEO, Doctor. Gustavo, for your remarks.
Thank you. Good afternoon, everyone. Before we start our business review, I would like to talk about some in precautionary measures, we are taking immediate tax to ensure employee safety and minimize operational risk. We implemented preventive actions such as temperature check and health screenings in certain office as early as mid January this year. With employees around the world, we're operating in full compliant with local regulatory requirements and take strict control of office entry.
At this stage, we keep our product development on track. Thanks to all our employee efforts. We will continue to make our best efforts to adjust to a rapidly changing situation. Also, we wish you and your family health and safety during this challenging time. Now let's start today's business review.
MediaTek delivered solid first quarter results, bolstered by our balanced revenue mix and diversified regional exposure. Revenue came in above guidance range with 15% year over year growth. Gross margin continued to improve to 43.1%. Now let me further elaborate on our 3 business groups. Mobile computing, which includes smartphone and tablet accounted for 37% to 42% of revenue in the first quarter.
Mobile Computing had a very strong year over year revenue growth, mainly driven by our 4G share gains as well as the initial 5G revenue. 5G contribution will continue to rise and drive growth in the second quarter. Aside from smartphone, traveler demand is picking up recently due to remote learning needs. Our view for 2020 Global And Mainland China 5G smartphone shipments remains unchanged. We expect 170,000,000 to 200,000,000 global 5G Smartphones, out of which 100 to 1 120,000,000 will be Mainland China.
Mainland China's 5G rollout plan is a schedule and MediaTAP's competitive 5G SLO3 product portfolio is ready across multiple segments. Dramatically 1000 series are making successful inroads into the high end smartphones. The first model powered by Diamend 50 1000 series started ramping in the first quarter. Providing multi mode 5G and Wi Fi strips connected. Premium module media performance, there will be more models adopting our dimensionally 1000 series in the second quarter and beyond.
We expect 5G to penetrate at a fast pace segments. Bringing faster connection, premium, AI and multimedia features, to more consumers. Dimensively 800 series smartphones from the mid range began shifting in the second quarter. Mass market models adopting our net price GSOB will be released in the third quarter of insurance will start, will start shipping media to power 5G phones by the end of 2nd quarter. International brands will also launch.
Media has 5g Insight Homes in the second half of the year. We are at an early stage in the 5G era with a strong pipeline Of the line projects from multiple customers, we expect 5G momentum to continue with shipments increasing quarter by quarter throughout the year. For 4G, thanks to a higher market share. 4G quarterly shipments in the 1st And Second Quarter of pretty stable. With the ability on the 2nd half and demand is still limited at this stage, but we are confident we will be able to outperform the market.
Now on to the growth area which principally consists of AIOD, PMIP and ASIC. Accounted for 30% to 35 percent of revenue in the first quarter. Impact from COVID 19 varied from product to product. Overall, product relating to work from home, remote learning, and 5g performs better. For AI IoT applications, demand for Wi Fi routes and media streaming box is strong.
People are seeking for faster connections in consumer electronics and it becomes a strong driver of our product mix. In addition to high end smartphones and routers, Our Wi Fi Six chip is also adopted by the world's first Wi Fi Six 8 K TV from SunPower, and we expect more 5.6 devices to come across various platforms. Our management products continue to grow nicely in the first half of the year. Demand from laptop, tablet, 5g base station, and smartphone remains healthy. For ASIC, 1st quarter was soft due to expected product transition, shipment of 86 chip for the next generation, gaming condos will start from the second quarter.
On the enterprise side, our cloud DI project will start mass production in the second half of twenty twenty Next, smartphone and others. Primarily TV and other traditional consumer Tronics accounted for 26 percent to 31 percent of revenue in the first quarter. Customer's holding TV component in the first quarter, but became more cautious entering the second quarter. Recent cancellations and postponement of global sporting events led to softer demand in the near term. We expect demand for to gradually improve from the second half of twenty twenty.
For 2020 in general, despite near term uncertainties due to COVID-nineteen, we continue to believe this is a year of reasonable growth for media attacks. As explained earlier, we think the potential business impact mainly due to our balanced and diversified business portfolios and the strong 5G product cycle. Looking forward, this unprecedented covinizing event made a profound changes in the way people live and interact. We anticipate those changes to increase demand for products relating to a fast speed connection and data transmission artificial intelligence features, multi functional displays as well as remote communication. With a broad and diversified technology portfolio, we firmly believe MediaTek is in a good positioned to capture those ongoing opportunities.
5G upgrade is one of the examples in the coming year. In addition to 5G, we believe there are great opportunities ahead of us to enable more innovative devices with our diversified business portfolio to enrich people's lives. Now moving to guidance for the second quarter of 2020. We expect new 5G product launches to drive revenue growth and fully offset near term weaknesses in Southern Consumer Electronics, and we expect gross margin to remain stable. We expect the 2nd quarter revenue to be in the range of NT621000000000 to $659,000,000, up 2% to 10% sequentially.
And up 1% to 9% year over year. Better forecasted exchange rate of $30 to USD 1. We are forecasting gross margin at 42.5 percent plusor-1.5 percentage points and quarterly operating ratio to be at 32.5percentplusor-2percentagepoints. In addition, our Board of Directors proposed a cash dividend of NT10.5 per share today, subject to approval at the shareholders meeting. That concludes my prepared remarks Thank you.
Thank you, Rick. We are now ready for Q And A session. When we have the first question or
Yes, of course. We are now in question and answer session. You. As a reminder, it is greatly appreciated that Thank you. The first one to ask questions, Bill Lu from UBS.
Go ahead please.
Yes, hi. Thank you very much. My First question is really, I'm hoping to compare, what you're seeing now versus a quarter ago, but quarter ago, I remember you guided pretty conservatively given that COVID 19 was just starting up and at the end, seems to be a little bit better than what you expect it looks like. If you look at these guidance for Q2, I'm wondering if you can compare sort of the level of conservatism and then 2 is, how are things now if you look at channel stabilizing of some of the other regions where you're having more issues for this quarter's role. Thanks very much.
No. The PO, because your voice is actually breaking out a little bit. Would you mind just repeat a question again, especially the first section of your question?
Yes, sorry about that. I am wondering if you can compare the guidance now, versus a quarter ago, because it sounds like a quarter ago, you were fairly conservative in terms of providing guidance. It at the end, maybe the covenant impact wasn't as drastic as what you expected. I'm wondering what you're seeing now versus that?
Okay, Bill. Right. I think a quarter ago, when covid nineteen really just started it, it was, we, we really, struggle to, estimate the potential impact on our businesses, knowing very little. Now know that the second, the first quarter passed and the, the situation in China, certainly seems more stable. The supply chain situation thereby, still not great, but much more predictable also.
So we have, along all the time, we have kept really very close contact with our key customers, the upper management. So we feel pretty recently comfortable with where we are. I think our first quarter results kind of demonstrated what we believe during that conference call and the, all the, we really have kind of a scrub. Our business assumptions. We look at all possible downsize from a mobile, from a PV to about larger verticals and other, AIOG business.
We believe we are sufficiently cautious in our business assumptions to give our today's guidance.
Paul. My second question is, for David on a gross margin, It looks like for Q2, you're guiding for 5G shipments to be up. And, of course, margin, I guess roughly flattish. And you talk a little bit more about that now that we are the quarter into the 5G shipments? Can you talk about maybe detail, 5g Pricing and margin and the flat guidance.
Can you maybe talk a little bit more about the the margin maybe in the mobile computing business at the end of it? Thank you.
Okay. 1st of all, we probably would not be able to break down provide a detailed 5G shipment. So we will probably going to skip that. But, overall, I guess, the first quarter is, we will the first quarter, we started to shift 5G. The overall revenue contribution is relatively small.
2nd quarter, we see a much strong size 3 shipment, both around the shipment also from the revenue perspective. Gross margin perspective, I mean, the key were starting from Q1, also including the CEO Rick was talking about when we give our guidance, it's actually stabilized. Maybe within the range of right now, you could just from fourth quarter 1st quarter and also including our guidance. Roughly speaking within 42% to 33% within this range, I think we see the stabilize within this range, but listen for near term. For the longer term, it will depends on the overall loss of a situation we probably would not be able to provide a comment right now.
But, overall, recorded earlier statements, from CEO is actually 5G, when we start to ramp more 5G, overall, we still believe 5G will be overall accredited. To absorb this growth margin. I think that's a key word.
Yes. So I guess I'm just wondering if 5G is done to ship into Q2 and it's favorable for margins, why the lodging guidance isn't going to be even better Q2 versus Q3 months?
Well, it depends on you're looking on the higher end or the mid range. I think when we give out, we just give out the range. And also there are other parts of the business
as well. Sorry, if I can ask one more question on the ASIC business. One is, you talked about a AI project in the second half of the year. Can you give a little more details in terms of, what kind of customers how big this could be? And secondly, what is the expectation for, gaming consoles in the second half of the year, but typically when we have new consoles, I think typically a little bit bigger into year 2, right?
So is that more than 2 2020? Thank you.
Okay, Bill. AI part of the ASIC. Cannot give you the customer's name. It's the large very large company. It's, I would say, good volume for ASIC type of chips.
It's a very high value chip We, project is going very well. I think both our customers fees. And we are also very happy to have the opportunity to move into into a more data center cloud, regime of business. On the game console, you hear the question well.
No, actually, Bill, I didn't really hear your question well, about the game console.
I'm sorry, I'm just wondering, if you think about volume So, is the bigger volume really coming in 2021, or do you think you might see some of that this year? To, well,
maybe I'll take this. Okay. For borrowing wise, for the game console, this year, we really upgrade this year, but the volume probably will come out later. So to answer your question, probably, we're gearing toward later this year or beginning of fiscal year for the volume perspective.
Great. Thank you very much. I'm sorry about the bad line.
Next, we're having Randy Abrams from Credit Suisse. Go ahead and ask your questions.
Okay. Yes. Thank you. Good afternoon. Yeah, first question I want to ask on 5G and then 4G.
You mentioned an encouraging comment about design and I believe you said all the China smartphone OEMs toward the end of first half. Could you discuss, a bit more in terms of market share, what point you think you start approaching the 4G market share. And then the second part, there's more discussion. There could be more restrictions on Huawei. Inability to fabricate their own ships.
I'm curious at least from your ability to ramp up, how quickly you could support them into new designs to ramp their business, if they need to rely anymore.
Okay, Randy. As we said to our 5GSOs are now being, We, we have, I think we have We believe we have a pretty good demand Smith. I don't think we are ready to give you a market share, kind of a answer yet especially 4G or 4G phone actually, it's really having a pretty, very, very strong market share gain. This year. But what I can say is the market, the share in the 5G, our 5G those fees, especially considering the same.
And then we we're looking at a, well, a significant market share for the year of 2020. We cannot comment on specific customers. However, we have been working from a supply point of view. We have been working with a bar because with, with sufficient lead time, And even during this, difficult time, very, we cannot go to our customer slide and they cannot come to our Taiwan we still managed to, I believe, keep all the projects moving according to plan. And from the supply point of view, we are working well with our foundry partner and the OFAT.
I think we are able we will be able to provide our customers pretty much what they need.
Yes, thank you. If I can follow-up on the inventory, your own inventory increased a bit. Could you talk, where the build up on your own levels? And then if you could take a look at the customer activity, it's been relatively on despite some, shut down, downstream. If you could give a view on how you feel, customer channel inventory levels are.
Well, Randy, first of all, let me
just comment about our own inventory. For Q1, if you measure it in terms days of inventory. I've been overall to Q1, our days of inventory was 81 days. For Q2, based on our current revenue forecast, we're expecting our inventory days to be around 80 to 90 days. I mean, that's how we view our inventory.
I think in terms of the channel inventory so far, especially after Q1 coming out, I think Q1, as you know, a lot of activity is fixed. So we really see right now it's actually restocking of the channel inventory right now. So so far it looks stable and actually recovering from the staffing inventory perspective, general inventory perspective.
I'm just wondering, Randy, are you still with us? Okay. Randy, are you still with us? Okay. We are now moving on to the next questions.
Next question is coming from go to Hani Haran, JP Morgan. Go ahead please.
Yes, hi. Congrats on the good results and thanks for taking My first question is on 5G. I think you had mentioned that 5G starting off at multiples of the price points that we have for 4G products at Equivalent price segments. Could we talk a little bit about how that price premium versus 4G will hold as we move down to more mainstream and even lower end products through the course of this year and early next year. Do we think that the price premium compared to 4G is still going to be substantial, like multiples compared to what we have for the high end segment.
The second thing, there is a lot of noise about price competition. And obviously, a lot of comments about price cuts from your competition. Could we talk a little bit about, how we see the competition evolve in 5G, compared to what we have seen in the early days of 4G, when obviously MediaTech had a slight in terms of product specifications, etcetera? And could we also talk about 5G margins versus 4G margins? Are we still sticking to the view that 5G should be better or higher on gross margin compared to 4G?
And I have a follow-up as well.
Yes. Let me try to answer that one by first of all, I think for 5G, as the CEO explained, we have a dimensionally 1000 series, which is high end phone, And also we have that that means that the Aon G Series, which the B range is formed. I think we also told you about, for the second half of this year, but it also has mass market form. To make a long story short, I think for all segments, if you come back, champions, what I call the apple to apple, the like for like comparison compared to the 4G, average selling price. We still see a pretty decent premium for 5 to see the average price and selling price 5G workforce even until end of this year.
For that year, again, we don't have the visibility yet, but at least for this year, all three segments, again, high end, rent and mass market on the like of like comparison, we all see pretty decent price premiums between 5g and 4g. I think that's the first question The second question will be regarding the gross margin. I think Bill kind of asking a similar question, but let me try to answer that from a slightly different perspective. I think from the gross margins, the overall keyword from our perspective is A stabilized B5-1s, which 1000 and 5G overall, we still see a stable and also slightly increase at the overall corporate gross margin. But more important this year, especially like the rates I talked about earlier, this year would be a reasonable growth.
This year, while we folks right now in addition to gross margin, also the operating leverage actually is going to be much more significant this year, if we can just somehow pull together. As you can see, for 2019, it was last year compared to a year ago, the gross margin, both the gross margin operating margin dollar and also ratio improved substantially. I think if every single will, we are also looking for another year of much stronger growth operating margin line on top of a stabilizing slightly used base gross margin line. So maybe there's another way when we think about the profitability, we can think about, again, just focus on the gross margin, but also focus on the operating margin. I mean, that's the feedback.
I think you also asked about the price competition. I'd like to comment somewhat. We, we actually right from the start, we, never expected the pricing to be easy for 5G I think for what we are, we're now in the first wave in 5G, compared to 4g era, we were something like 2 to 3 years. Behind. So the fact that we are in the first wave increase competition and change the landscape.
So the competition comes with it, the change of the landscape. I think, but if you look at our the portfolio or as the that we just mentioned, the 3 different products this year, in 3 different price segments. And if you look at our specs, the technical specs, and the level of execution, the time to market, we are quite confident of the competitiveness of our portfolio. Pricing, we always face in particular, we saw a very strong competitor, but we just firmly believe for the 5G products that we have, we have really a strong competitive portfolio we will deliver the results.
So one quick follow-up question. Given that we are seeing more emerging market demand weakness with the India and Southeast Asia, some parts of Europe being shut down in Q2. How do we be how should we think about 4g Chipset demand, are you seeing some already some correction on 4g Chipset demand in Q2 or we should expect some of that happening in second half of the year. Or as you mentioned earlier, meaning for like the market share gain will kind of mostly offset some of this demand weakness on the 4G Chipsets?
Actually, you pretty much answered the question. Yes, the 4th see, at the end of last year and even, well, pretty much into the first quarter, the 4G inventory from our point of view was quite low. And we were really rushing to feel the demand from our all big customers. Of course, what's happening in India and other emerging markets are having impacts on the demand of the 4G product. However, our demand, I would say it's still quite good, still quite good.
We, as I said also earlier, we scrubbed the overall meant of the 4G also down, was severely, that should be from the total, from the 10 point of view. Now with that and with our designing, we believe our Fuji shipment, will be somewhat flat compared to last year's, considering the severity of the end demand. I think in many different markets, I think the company has done really a good job in the 4G segment.
Next, we're having you for Pastor Hao, CLSA. Go ahead please.
Great. Thank you for taking my questions. The first one is I wanted to follow-up on the, the doctor's highest comment your 5G product competitiveness. I
understand from the performance, but I would
like to follow-up on in terms of the timing and the further roadmap. The timing means that it compared to timing of your, next 2 generations of the products launch? Where do you see that compared to your major competitors. Are you, Ampara or somebody that hit? And my second question is this one is that, what's your 5G product back?
Can you elaborate a little more young,
2020?
Let me first address a few questions on the, our product portfolio this year. I mean, for the year, that must be 1000, see what we know. Everybody knows quite well. For the 800 utilities right now, right now, actually, the first part the phone, the first phone, which is, I mentioned the 800 is already available in the market. We have, there are quite a few in the pipeline in second quarter and the early the quarter.
The 3rd product is also, as I said, right on right on schedule. And then from time to market point of view, our execution is, really excellent our people have done a great job together with our customers. I think that's also a major reason that we, I think we are, we can have, a 5 step certificate share of the 5G facs this year. For next year's, I guess, we will, I mean, we will keep you posted. I see another order also.
Thank you.
Really giving a lot of impact of the orders.
Is this sound better?
Okay.
All right. Next caller is Rolandxi from Citigroup. Go ahead, please.
Hi, good afternoon. First question is for the your 5 g smartphone shipment, expectation. Are you still maintain your number at 175,000,000 to 200,000,000. However, if you look at the overall smartphone number, I didn't hear on this from the market consensus or from third party's forecast actually didn't decline a lot compared to 3 months ago. So, with your same number, I think because this denominator has been significantly smaller.
That means the penetration for 5G, according to your number, it's a much higher than 3 months ago. Is that what you mean now or you just don't change your number? It's my first question. Thank you.
Robert and David here, probably let me just get back to you. 1st of all, talking about sort of the market expectation. If you recall, roughly two quarters ago, that was the first time we kind of gave you now what's our view about the 5G global market, also including the China market, we break it out. Back to when most people, I think we are somewhat conservative compared to the sort of the street consensus or street view. But in the last quarter or so, if you just collect all those data, because we did the similar exercise, we figured out most people somehow, sort of the core revised number or reduced numbers is similar to ours, overall estimation.
So first of all, your assumption about just for markets getting done, which too, but just from our perspective, starting from earlier last quarter, so that's the similar view in release change, which is devices down. As CF101. So based on that, I guess, from a market share perspective, at least internally, we didn't really see that a huge change. But by saying that I think just like the CEO, Rick talked about earlier, we do see a pretty promising, you know, so positive feedback from the customer side, we translate into a decent market share, but doesn't mean that should we see a huge jump or assumption change from our that.
Understood. So how about your own market share for 5G? Compared to 3 months ago, how do you think your this year for 5G this year will be. Is it getting better or is still the same? Thank you.
Again, I'm not going to
say you already talked about earlier, probably we're not ready to comment about specific 5G market share, but, Roland, let me just answer a question from paper perspective. I think from the momentum perspective, I think we do feel comfortable, and that will pick up by the Q1 and the following Q1 numbers. And also a pretty solid Q2 number, especially if you're joining from year over year. On top of that, I think it would feel fairly comfortable for the whole five product portfolio, ranging from the high end, near end, all the way to mass market goes from the competitiveness and more importantly, on the overall performance and
I think from, Tim, point of view. You probably, at least for 2020 for media attack, the size of the 5G market in China matters the most. And that's because this is where we have the most of our shipment this year. That's a number that I agree to us.
Okay. Yes. Thank you. I read all those that, for your 4G, you think even though the total market decline. However, you think your 4 g shipment will be somewhat flat compared to 2019.
And then you have this new 5G shipment. So does that means that your total 4G and 5G shipment this year will be bigger than the total Smartbox LLC shipment last year.
That's correct.
Okay. Thank you. My second question is, Rick, I use repeatedly say your keyword, today's data is stable as a gross margin And also, last quarter, you also said, your 20.30 goal is to reach top line growth with a gross margin stable line and also with our controlled operating expense. So, have you changed your goal for now, or this goal actually is still the same?
No, we have not changed. As you can hear from the comments earlier in the day it's a denture. We believe that we will have have, what do we call that, reasonable growth into 2020. Our gross margin will be between 42% to 43%. And a very good operating leverage, income leverage.
This is what we're striking for We, of course, we hope to do better, but the, this is what the company is really striving for. Thank you.
Okay. Thank you. I'm interested in a reasonable growth. I think in 2018, your revenue was flat. And 2019, your revenue grew up by 3% year on year So when you said about reasonable growth, it's a 0% to 3% reasonable number or you think that will be bigger than that?
Actually, we're probably due to the Taiwan FFC requirement, we will not be able to provide concrete numbers, but plugging the good reference actually, you can judge from Q1 actual numbers and also Q2, the guidance numbers. I think that should be because again, for the second half, they still have found some relief, in the old boards, like you say, in the last few years, the revenue have been be flat to be quite built. So relatively speaking, we feel comfortable this year. We see some reasonable growth over the year.
Okay. Thank you. And also, for the your 3 segments, 3 products, 2nd point of view, looks like your smartphone and mobile revenue is going to grow this year. And how about the growing segment and also the smartphone and the others segment?
I think for, 2nd quarters, I think both, smartphone and also growth sectors are growing. I think for the small, for the small home sector, actually, is that we see a quarter over quarter's decline in second quarter.
Okay. How about the whole year?
We didn't really disclose the full year numbers right now.
Next, I'll ask questions. Charlie Chan from Morgan Stanley. Go ahead please.
Thanks. Good afternoon and hope you all stay safe and healthy. So I have 2 parts of your questions. First, always more color around the emerging market smartphone demand. And second part will be on the China semi coagulation trend impact to your company.
So first of all, may I ask that the company see or within is any demand improvement for China Domestic market? And also for emerging markets, Have you seen stabilization, or you see that the NDS deal is secured? Thanks.
China market, the certainly, we all know the first quarter was really down. Down quarter. But even with that, I think the numbers came out of about 50,000,000 smartphone sales through in first quarter compared to 70,000,000 last year, same time. It's a big down, but it's something I think, people can manage, and a quarter's past, that's past. 2nd quarter number that we we checked with our customers earlier.
I think the child's 2nd quarter, what we believe the China as a smartphone market will kind of grow back to a similar level maybe a little lower compared to second quarter 2019. We certainly, and if you look at the 5G phone sales in China, in the first quarter, it's, it's, I think, that's the official, that's the number from the official source It's about $13,500,000, I believe. It's also we believe a good sales tool number. So in China, I guess, we are reasonably comfortable that the market is coming back to a more normal pattern after the first quarter. Emerging market, of course, is a different story because the, the lockdown also occurred in late March, April time, and we do not know when I will be back.
It also differs if you look at India and the Southeast Asia, I think in the market, impact can be quite different between India and Southeast Asia. We believe that India impact is probably greater compared to Southeast Asia So again, if we combine all those things together, 4G end market demand is going to be down quite a bit. But we, as I said earlier, so with our position, we expect to manage about the flattish shipment for us this year.
That's a great color. And before I move on to the China semi location, May I ask about the impact of the 5G demand? Meaning, I think that the impairment demand should be more than just shipment, but also the product portfolio. Any Do you see the consumer or smartphone brands? They want to reduce those that meet your high end 5G projects?
And more focused on those mid market 5G phones into second half. And if that happens, would that impact your kind of assumption for blended ASP and the margin? Do you think there's kind of a fair argument, meaning that's kind of a feedback or kind of shifting to a more affordable 5G phone?
Charlie, first of all, from the overall market perspective, I was talking about 5G market only here. I think our assumption is, it stayed 10 in the last two quarters. So that one didn't really change. In terms of the end market products competition mix, if I use the terminology, think it's similar as well. Probably the only feature in the U.
S. Annie, we see the customer trying to move into the V range in the mass market. At a fast pace, faster pace, okay. But in terms of the because when we get into the 5G product cycle, we're trying to have a view about what the segmentation makes. I think that is somewhat similar because just based on our 2s on 4g, basically price is still going to be a major caters or major catalysts decide how much volume you can have on each segment.
So from that perspective, that will be changed that much, didn't really change it that much, but we do see the customer trying to move into at a faster pace because obviously, in the first quarters and also forward for the last year, all the 5G smartphone you can get right now, it was like pretty high end or high priced for And the overall shipment is just okay, not great. But all major customer right now, they're trying to get into the mass market, the mid range market in the second quarter and also being aggressive of the mass market. So I think the volumes is similar and but the pace is actually faster right now.
Thanks, Dave. Just clear. So if I may very quick on the, kind of the China Semi Organization, I guess, First of all, market is catering if TSMC were to be banned to secure the Huawei and maybe, other smartphone for the party vendors like the MediaTech and benefit to feel the gap of Huawei Smart Owning chip demand. So can management give us some color about the immediate position here. And also given this kind of U.
S. Dollar China to attention, do you think your 4G share gain is largely because the D American trend of the China branch. So if you can answer, it's a 2 part of the question, that would be great. Thank you.
Okay. Charlie, Number 1, we do not talk about specific customers. I think you end number 2, as we also said, we have how do we say that? Or major Chinese brands will start shipping media tech powered by G Phones by the end of 2nd quarter If you want to ship funds by the end of the second quarter, you must we must work together 3 to 5 months before that time, especially way ahead of whatever will happen, the rumor says might happen or may happen. So I think our deligning, I guess what I want to say is the deligning of our chip with or major Chinese brands, we earn them.
It's not by whatever localization. That's, I just want to make that point. For 4G, all the major design wins actually were 1 last year, even earlier. So As I said, we have really, and by the way, 4G we have not just the Chinese brand, we have also a global brand, international brand, a So that's where we go. Thank you.
So in your opinion, do you think media has considered as a local vendor? I mean, in the long term, if China want to continue to localize, do you see any potential competition or replacement on the current China local suppliers?
And then there's more for long term? I really don't think this is questions for us to answer we're doing all we can to provide strong competitive product all our customers, we are business at this point.
Thank you.
I would really appreciate it that it will be really appreciated that you turn off the speaker phone lines of your device to bypass Thank you. Next, we're having Bruce Lou from Goldman Sachs. Go ahead please.
Hi, thank you for taking my question. My question is that, for the 5G age, agreement. I mean, we understand that there's a meaningful ISP agreement at this moment. I mean, when Can we ever expect that ASP for the 5G will be similar to 4G at any time in the future or not to put a shorter time frame for like, given like 18 to 24 months of a design cycle time frame, do we expect see the ASP premium shrink to a minimal level in the foreseeable, in accounting that hedging 24 months?
Growth, I guess, choice is probably not, but given the fact we need to squeeze in so many circuits over there and build the 5G speed that we retained entire 4G, it's just hard to against the physics. So probably the near term is not going to be a feasible plus right now, due to the new phone, they'll all require, so with the higher end processing, and which what we know is actually to call us all. So based on what we know right now, it is unlikely you're going to see 5G costs will be equal to 4G cost is just physically probably not possible in the near term.
I see. Do we expect that mobile platform to be more than 50% any quarter this year?
Not in this won't be able to comment right now. This year, for the full year, I don't think it will be more than 50%.
For the single quarter?
We, again, we can only provide information, obviously, in the second quarter right now.
Understand. I want to follow-up with the 4G profitability I understand that you know, management mentioned that before 40 smartphone gross margin is still below corporate average and given the strong growth or the meaningful market year addition, do we expect 4G of profitability to be similar or higher than corporate average?
I would say similar. Of the similar.
I see. Okay. My second question is, can we talk a bit more about the TAM for the ASIC? I believe we discussed that, like, 2, 3 quarters ago, but we didn't talk much about the AI. Can we have an understanding about, like, what is total addressable market for the ASIC in the gap.
It's a very difficult question to answer because of for certain for the more consumer, we are we're strong in the consumer ASIC, I think that's fairly, it's easier to estimate for the enterprise, for the datacenter or AI kind of a reason, because really still early, in the age of AI data center and the early phase for the big datacenter players to to plan and to decide and to execute their ASIC strategy So it's, if I give you any number, I think it's really not going to be very accurate. But I just want you to know about here, but the front walk see. I think we I think we at least in our plan, in business plan, we will restart at least $1,000,000,000 as at least for us to, to strive for our part of the business.
I'm sorry. I need to make it clear that $1,000,000,000 addressable market as a business plan. It for the AI alone or the total ASIC you are targeting?
Total.
Total ASIC including like Network AI and Jim Hamzah.
Yes.
Understand. Thank you. Can we have some color about next year, given the loan product cycle, for this business, I think we have some visibility for next year in terms of adjustment market.
It was probably not, actually, because like you're saying, the design win, also the red bean upscheduler is actually dialing our hand. So many variables out there. So I think probably the best way is just reported when it becomes a more material.
Right now, we're having Brett Simpson from Erick Research. Go ahead, please. Yes. Thanks very much. Question for Rick, please.
It looks like you're growing your smartphone revenues in Q1, about 20% year on year, roughly. When the overall market is declining, I would say, take late double digits year on year, so quite a big imbalance. And I understand you can partly reconcile this with market share gains for MediaTek, but many of your large Chinese smartphone customers haven't yet cut orders. And they're indicating they will at some point because obviously we've had a significant impact from COVID etcetera. So I'm just wondering, what's the dynamic that you see near term with these customers?
And does your guidance reflect some order cuts. And if not, what gives you confidence that this won't happen?
As I said earlier, the customer, the demand is still very good for 2nd quarter. We obviously are concerned about the, rapid demand decline in the emerging market of, you guys asked several times Let me say again, we have scrubbed that numbers in August of the quarter. Which second quarter 3rd quarter, 4 g demand in the emerging markets, including India, I think these two quarters probably are the most severe quarters for 4G phone demand. We have placed those demand in our forecast, then we then with our we subscribe and we are giving you, estimate of a similar unit shipments in 2020 compared to 2019. That's how we did our thinking.
Scale with that and to your questions.
I'm just wondering whether in Q2, does your guidance for Q2 reflect an expectation that OEMs will cut orders?
You know, I cannot give you the details. What I would say is the, the band is still very good. I'm not saying, everyone is very strong, but overall demand for our 4G in second quarter. It's very good.
And maybe to David, I think last quarter's earnings call, you said about 15% of sales this year would be new product. And factoring in the ramp of new products, it's obviously going to be very second half weighted. So how should we think about second half seasonality this year factoring in the ramp of new products. Would you expect it to be much more pronounced than prior years or or not? Any perspective would be very helpful.
Unfortunately, we probably wouldn't not be able to provide the second half number right now. But again, take one step back. Probably the best way to think about that is actually what the CEO talked about earlier. From a full year perspective, were looking for a reasonable growth. Maybe you can factor that in, but in terms of the detail of Q3 and Q3, Cincinnati on 4 we will not put the full values right now.
Okay. Maybe just one last question for Rick. And it's really about M and A. I mean, we've all we've seen, valuations in semis get cheaper since the start of the year. And MediaTech has an attractive balance sheet, a large cash position.
So I'm just wondering what sort of appetite do you have, from an acquisition perspective And where do you think it makes the most sense to strengthen looking across your portfolio from an M and A perspective?
Yes. I understand your question. People are wondering about that. What we are doing is as we have done throughout the time that we have a dedicated group to look at the potential of opportunities continuously. I cannot really or good financial opportunities.
That's all I can comment.
Ladies and gentlemen, due to the time matters, we are closing the Q And A session right now. And thank you for all your questions. I'll hand it over to Ms. Jesse Wang for closing comments. Ms.
Wang, please proceed.
Ladies and gentlemen, this concludes Newtek's 20 21st Quarter Conference We would like to thank you for your participation, and you may now disconnect.
Okay. Thank you for your participation in today's conference, ladies and gentlemen. You may now disconnect. Thank you again.