Welcome everyone to the MediaTek's 2019 4th Quarter Investors Conference Call. Financial Results and Presentations for today's conference call are available on the Investors section of the company's website at www.mediatech.com. And now I would like to turn the call over to Ms. Jesse Huang, Deputy Director of Investor Relations. Ms.
Wang, please go ahead.
Good afternoon, everyone. Joining us today are Doctor. Rick Tai, Mediatek's CEO and Mr. David Guo, Mediatek's CEO Mr. Gu will report 4th quarter results.
And then our Doctor. Tai will provide our prepared remarks. After that, we will open for and A. As a reminder, today's presentation will provide forward looking statements based on our current expectations. The statements are subject to various risks and factors, which may cause actual results materially different from these statements.
The presentation materials supplement non preferred financial measures. Earnings distribution will be made in accordance with financial statements based on tippers. For details, please refer to the Safe Harbor statement in our presentation slide. In addition, all contents provided in this teleconference are for your information only, not intended for investment advice. Neither mediatek nor any of independent providers is responsible for any actions taken in reliance on content provided in today's call.
Now I would like to turn the call to CFO, Mr. David Griib, for the 4th quarter financial results.
Thank you, Jessie. Good afternoon. Now I will start with a quick update for our 2019 fourth quarter financial results. All the currency followings will be, representing NT Dollars. Start from the revenue.
Revenue for the quarter was $64,700,000,000, down 3.7% sequentially and up 6.3% year over year. For 2019, the annual revenue of the total around 246,200,000,000, up 3.4% year over year, For gross margin ratio, gross margin of the quarter was 42.5%, up 0.4 percentage points sequentially and up 3.6 percent points year over year. Gross margin of the year was 41 0.9%, up 3.4 percentage points from the previous year. For the operating expense, Operating expense for the quarter were $21,300,000,000
compared with
$21,300,000,000 in the previous quarter, and $19,900,000,000 in the same period last year. Full year 2019 operating expense was $80,500,000,000 increased 6.5 percent year over year. For operating margin, operating income for the quarter was 6.2 sequentially and up 61.7% year over year. Operating income for the year was $22,600,000,000, up 39.5% year over year. For operating margin ratio, the ratio for the quarter was 9.6% compared with 10.5% in the previous quarter and 6.3% in the same period last year.
For the full year, operating margin of the year was 9.2% up 2.4 percentage points from 2018. For net income, net income for the quarter was $6,400,000,000 compared with $6,900,000,000 in the previous quarter and $4,100,000,000 quarter last year. Net income for the full year was $23,200,000,000, up 11.7% year over year. For net income profit margin for the fourth quarter last year was 9.9% compared with 10.3% in the pre the year, previous quarter, and 6.7% in the years, same quarter years ago. Net profit margin of the year was 9 point 4 percent, up 0.7 percentage point year over year.
For earnings per share of 4th quarter last year, was $4.03 NT dollar compared with $4.38 in the previous quarter and two point $83 in the same quarter last year. The total earnings per share for 2019 was 14.69 compared with 13.26 in 2018. That concludes my comments. In addition to TIFI's financial report, we all will provide non T1st financial measure, which, excluding share based compensation, amortization of acquisition related assets and tax effects, Please refer to the earnings press release and presentation for details.
Thank you, David. And now I'd like to turn the call to CEO, Doctor. Rick Treich, for prepared remarks.
Thank you. Good afternoon, everyone. In today's call, I will summarize MediaTek 2019 performance, and then we talk about 2020 outlook. 2019 was a solid year for MediaTech. We executed our business strategy farewell to achieve a very balanced portfolio and delivered 4 percentage points year over year, and operating profit dollars increased nearly 40% compared to 2018.
Mediatek's R&D investments to date have strengthened our competitive position in global market. In 2019, we increased market share in smartphone, A IoT, ASIC and other consumer electronics. Our technology investment in AI, 5G YX-six Enterprise A6 and Automotive also gained good traction. Moreover, the recent Corona virus situation adds uncertainty to the global economy. With lower new term visibility, we believe our achievements in 2019 are clear indicator of our overall competitiveness and will translate into mid to long term growth.
Now let me further elaborate on our 3 business groups: Mobile Computing, which includes smartphone and tablets, accounted for 37% to 42% of revenue in the 4th quarter. Which commenced more quantity 5G FOC shipments in December last year. And are expecting a gradual ramp throughout 2020. In 2019, our highly competitive 4G smartphone lineup not only succeeded in growing market share but also improving profitability. We believe 4G is a long tail market where mediatek maintained a strong position and continued to gain share.
Our 4G footprint both in mainland China and other regions as a strong foothold to build out in 2020. Then for 2020 with 5G rollout around the world, we expect 170,000,000 to 200,000,000 units 5g Smartphones globally and 100 to 120,000,000 units in Mainland China. MediaTek has worked closely with major global operators for IG inter operative- operability, testing and expect to enable 5G smartphones in mainland China, South Korea, Europe and the U. S. In 2020.
On the product side, MediaHealth has put forth competitive 5G single chip solutions for all segments. Diamensity 1000 series for flagship models integrated high performance ARM A77 CPU and supports 2 carrier aggregation. Delivering the world's fastest throughput with 4.7 gigabytes per second downlink over each cloud, you know, substance device network diamond 3800 service projects. The new premium segment bringing premium AI and multimedia features to the mid tier market. Dynamic the 1800 series design project, which multiple customers are tracking smoothly.
Smartphones powered by these two series are expected to be available in the market in the first quarter 2nd quarter this year. In addition, we will extend our 5G SOC range to serve the higher volume mass market starting from the third quarter of the year. Furthermore, we created the FING modem business line to address 5G business beyond smartphone, our announced partnership with Inco to serve the 5G P3 market marks our first steps in this direction. The goal is to increasingly expand our addressable market. In parallel with subsea vehicles, meter has meter wave solution will be ready this year for devices to be shipped in 2021.
Now on to the growth area, which, principally consists of AIoT PMIC ASIC. In the 4th quarter, growth area accounted 30% to 35% of revenue. Attributing healthy year on year growth across the board. Growth area has delivered double digit growth rate for the past few years in a row. In 2019, enabled numerous marketplace products globally and had a strong presence in Wi Fi well as Bluetooth through wireless earbuds.
PMID mainly benefited from cross platform adoption. And more significantly, we successfully made inroads in enterprise ASIC. With our first wire networking solution, commencing volume shipment and expect more to come in 2020. Looking forward, we see several of connected devices. These trends enable MediaTek to further expand total addressable market in the global space and present tremendous market year growth opportunities for us.
With the rich and strong IP portfolio we are confident that we are in a good market position to continue to grow our AI IoT PMIT86 and Automotive business globally in the mid to long term. Left, smartphone and others primarily TV and other traditional consuming electronics accounted for 26% to 31%. Of revenue in the fourth quarter. Product in this group are in relatively mature markets and declined seasonally in the fourth quarter. In digital TV, our comprehensive solutions support for price tiers in global markets and enable features such as AI, audio control, as well as wireless activity to make TVs a smart hub empowering AI smart phones.
We started shipping our AI 8 K flagship SLC S900 in late 2019 and expect our market leading positions to pursue. Before we discuss our first quarter guidance, let me share some thoughts for the year. Moving into 2020, despite near term macro on we still expect the solid revenue growth for the year, driven by the balanced business portfolio and revenue from new areas, including 5g, 87 and auto. Specifically revenues from the new areas in 2020 are expected to be over 15% of our total higher than the 10% we estimated a year ago. Meanwhile, we continue to 2 profitable growth.
We aim to improve both gross margin and profit margin as we expand our top line in the in the midterm. Our gross margin percentage in 2019 exceeded 40% target and should remain stable at current levels in the near term given product mix dynamics. Operating expenses we will invest prudently in new areas at a similar pace as last year. Through internal resource reallocation and disciplined investment, we expect to achieve healthy operating leverage. For the first quarter of 2020, FDI coronavirus situation continues to develop estimates provided today based on our best available knowledge at this stage.
Despite near term demand uncertainties, with our balanced and diversified business portfolio, we still see a solid year over year revenue and gross margin growth in first quarter. Based on current effects, our view is that is that the potential business impact on We expect revenue to be in the range of NT55,000,000,000 to $50,200,000,000, down 7% to 15% sequentially and up 4% to 14% year over year and a forecasted exchange rate of US13.00 dollars to US1 dollars. We are forecasting gross margin at 42% plus or minus 1.5 percentage points and quarterly operating expense ratio to be at 34.5percentplusor-2percentagepoints. In summary, we believe MediaTECH has the right set of technology and platforms to fulfill the demand of our global customers, which focus on value creation and execution. Despite near term macro uncertainties, we believe the multiyear opportunities across different sectors remain intact, and we are continuing to drive long term shareholder value.
That concludes my remarks. Thank you.
Thank you, operator. We are now Can we please have the first question?
Yes, of course. Ladies and gentlemen, we are now in Q And A session. You. And as a reminder, it is greatly appreciated that you turn off the speaker phone of your device to prevent possible echo effect. We thank you for your cooperation.
Now the first to ask questions Randy Abrams, Credit Suisse. Go ahead, please.
Okay. Thank you. And good afternoon. I wanted to ask the first question, maybe just to follow-up on the virus impact. And I'm curious, the outlook $170,000,000 to $200,000,000, if there was any adjustment, just seeing some of what you're seeing with the virus.
And from that side, I think too potential if you're seeing any change, both from a network or device rollout schedule, from one side. And then the second would be just whether it's, a potential demand or customer, driving to launch ahead?
Randy, if you look at our numbers, 100 1,000,000 to 200,000,000 total units globally. This, of course, is the up from our forecast 2 quarters ago, which was 140,000,000. We, we believe this is a reasonable cautious, estimate. We of course understand this Iowa's potential impact on China's domestic demand. However, we we've been working with our, key customers even I shouldn't say working.
We've been communicating with our key customers, over the past 2 weeks. Most of our 5G products launches, as you know, will be launched in second half of this year. And all those projects are basically moving forward. There are certain, of course, potential disruptions from the working, methodologies but our people are working closely with customers to ensure, there will be no major delay in the major projects loan. So I feel, reasonably confident the, for media attack, the 5G business, will have Well, will not have a major impact from the virus situation.
Mainly because our major volume will start in the late second quarter, extending into the second now.
Okay. And thanks for those details.
If I could ask a follow-up just in terms of the roadmap, if you could talk maybe the timing when you think we get the first initial volume ramp, or models with the 800 series, when that'll the market. And then maybe the timing when, some of the follow on mass market chips as we kind of ramp into devices into the market.
Okay. The, as you know, our flagship, Chip Dimasively 1000 is being shipped already, and also being, is available in the market. Our 800 service chips will be shipped in 2nd quarter. I would say roughly mid to late second quarter, we'll have the production shipment. And for the mass market, we were shipping also in about mid to late third quarter.
Okay. Great. And the other change, you mentioned the new product, I think originally was 10% or over. Now it's 15%. Could you maybe talk to components, how much of that is versus when you made the forecast like a change on the 5 sheet view versus some of the other products like automotive and networking, like what changes you're seeing on that side?
Brilliant, I think we upsized that, the revenue contribution from new products, I think mainly still because of 5G.
I think, of course, both for auto and also for asset, we see a pretty healthy growth as well. But given the magnitude we talked about here, I think it's a big portion of the new is actually been from 5G, especially if, like the CEO say, even the overall product portfolio we have in auto even the current design in pipeline situations, we feel comfortable basically to see the new revenue contribution for this year will be over 15% growth in earlier outcome and say more in temperature. Okay.
And the last question, I think it's a good sign like the margins holding stable at these higher levels, like around 40 The 5G though, I think originally you were saying, would be accretive to margin. So with, I guess, one, if you still see accretive 5G margins. And then the second part, if you start getting more of the inflection with the mainstream in second half, if maybe at that time the margin could start to even move up a bit again?
Well, I think for like the earlier guidance we provided, I think the 5G could margins of our goal should be accretive to the overall corporate margin. And also, we're kind of expecting the 5G gross margin should be a solid balance in 4G gross margin So overall, I guess, I should ask if it goes to him. But very minor, please, on a blended basis, the all 4G plus 5G overall gross margin, because right now, especially for this year, most of the shipments still going to be 4G. So the gross margin on the smartphones basically, which including 4g and 5g with a big portion of that deal on 4g still slightly below our corporate average. And given the fact contribution, overall revenue contribution will be higher.
So if you put everything together, that's why we say, this year, most likely will be the stabilized gross margin. I think the gross margins still have the opportunity to grow up a bit, but I think the keywords will be stabilized gross margin. I mean, probably the key for this year is really to grow the top line. In the meantime, we see a pretty healthy operating leverage, which means operating margin dollars should be able to see another healthy year of growth this year.
Next one is to ask questions from UBS.
Yes. Hi. Good afternoon. Thanks for taking my question. On your Q1 guidance for revenues down 7% to 15%.
Can you just talk about whether that's factoring in any impact from the coronavirus? And in the last 1 to 2 weeks. I'm just wondering what you hear from customers since you're really strong in China?
Yes, Phil. As far as we can make out with our customers and suppliers, The current guidance does include our estimated of the virus impact.
Is there any way she
can quantify that? What would the guidance have been without the virus impact?
Unfortunately, I think the whole situation is still developing. So it's really hard for us to give out a quantitative guidance, but overall, I think that's what best we can do with the Q1 guidance. Usually, just we can see that everything. One more thing I'm trying to analyze, is because right now, again, I think one of the key idea of trying to propose here is really our overall business portfolio This time around, especially for the first quarter, probably China's, from a relative scale, probably actually the area with the most heat in terms of end market demand. But, because overall, we still have other regional businesses for demand, even when we zoom into the smartphone business, we have a sizable revenue I've been exporting to China.
So the end demand is actually not in China, even on the specialty buy now, but it's actually been exporting in China. I think for that one's business, I think the impact to the virus impact. It's actually somewhat mitigated bids. So overall, I think for the Q1, we do affect the, with a reasonable input basically based on technology we have, the valavirus impact, but we see a pretty still solid year over year growth in Q1 guidance.
Great. Thank you. My second question is on 5G. You talked about global market being $170,000,000 to $200,000,000. What do you what's your target for market share?
Question.
Bill is asking what's our target market share for Cobalt?
Well, we I think over the, lifetime of 5G, we try to do about as well as for 4G. About 40% of the set, 40% of the set?
For the life cycle, that's what we've said in the first quarter of 1st year.
Sorry. I couldn't quite hear that. 40% of what
Oh, the serviceable addressable market.
Okay. So I guess you would define that as the total market ex a couple of the customers that you don't you don't serve currently?
Correct. You know, they are like Apple or Huawei with their own captive chips. Okay, great.
Bill, just one thing the highlight actually is, I think what CEO talking about is for the 5G lifetime. So it doesn't represent the first quarter or 1st year market share.
Yes, understood. Okay. My other question is on the ASIC business. It looks like that's growing quite nicely. Can you talk a little bit about, first of all, if you can quantify the growth for us for this year?
And then secondly, if you look at the various segments that you serve, I. E. Networking, gaming, maybe AI? What are the key drivers for this year?
On the growth, it's about high single digit to double digit loading. The key growth driver I think for this year will be India network and, some of the data center applications. What are the game? The game ASIC probably will have a good second half. Performance because of the change of the major game consoles for the key customers.
Great. Thank you very much.
Now the line is open to Gokul Hari Harlan, JP Morgan. Go ahead please.
Hi, thanks for taking my questions. First of all, could you talk a little bit about the kind of ASP step up that you're seeing in 5 g? And what do you expect the margin profile in 5 g when it comes to operating margin, your bigger competitor talks about 50% increase in dollar content in 5G compared to 4G. And is targeting around 500 to 700 basis points increase in operating margins as well. Now that we have achieved most of the targets that we laid out on corporate level, gross margin more than 40%, close to double digit operating margins as well.
Could we also talk a little bit about as 5g propagates into the portfolio over the next few years? What does that do from an ASP perspective? What does that do from a margin perspective for media side?
Sorry, it was little to bring it up. So let me check your question. So first question will be for the ASP profile for 4G versus 5G. What's your second you repeat again?
Yes. The second question is, as 5G becomes a bigger portion of revenues, what does that mean from overall operating margin perspective? I think just to give some reference points, I think MediaTech making 20% operating margins back in 3g, obviously 4g, we had a meaningful margin compression. Competitors is talking about going back to 20 percent operating margins in terms of business in the next few years with SiGe. So how does MediaTech think about operating margins in the next couple of years now that we have reached 10% operating margins in the last year or so.
Okay. For the ASP, I think, the ASP, as we explained, the ASP for 5G versus 4G should be a multiple time hires. But unfortunately, we generally provide a detailed guidance, but overall, it is a pretty nice credit in terms of the 4G versus 5G 5G versus 4G ASP. I think that's the first question. The second question is about the OP and operating margin target if I take that.
I think for this year, if you look at 2019 2018 in the last 2 years, we both been growing, both from the ratio perspective and also from a dollar perspective very nicely, I think, especially for the last year. Feel for this year, I think overall, we're aiming for the same thing. We should be able to continue to grow both from the ratio and from the dollar think more importantly, for the dollar, ratio wise, like we explained earlier, this year is more like a transition year, even though the gross margin this year is the key for which the top line growth, gross margin stabilized. In the meantime, in the meantime, actually, we controlled off any expense, so we will see the operating leverage. So we should be able to see both operating margin dollars and also ratio growth.
But when you're talking about like 20% or 25%, unfortunately, I've is not what the industry exists right now, especially we will get, a competitor, a key company, I think even, for the leader right now in the smartphone right now, we don't really have 20% gross margin, especially if you're charging from a GAAP perspective, even with the non GAAP perspective, I think it's below 20 percent. So, I think for the near term, we're just trying to focus on increased operating margin dollar last year's nice, but more than 30% 40% this year. Hopefully, it will be a nice double digit as well.
So, David, do you have any guidance on OpEx growth this year? What kind of OpEx growth should we expect for 2020, last couple of years, I think OpEx has been under a reasonable level of control?
I think for last year, the total OPEC increased around 6.5 end. This year, I would say it will be the similar pace, if not slightly lower. I think that's our goal.
Okay. And my second question, could you give a little bit more breakdown by the different segments for Q1? I think midpoint you're looking at about to 11% revenue decline in Q1. How does that shape up for smartphone versus growth segments versus the mature segment?
We probably can provide some directional guidance, but not the detailed quantitative guidance. I think for Q1, we see both from the mobile set and also from the growth sector, we all see a pretty healthy growth. For the smartphone sector, I think, for Q1, we've actually a seasonal decline.
Okay. So the other 2 are growing on a sequential basis?
Yes, but mainly you should use a small I mean, in terms of magnitude, I think smartphone was still the 1 to strongest growth quarter over quarter growth.
Sorry, this is for Q1 or for Q4?
Next to ask questions, Charlie Chang, Morgan Stanley. Go ahead, please.
Yes. Go ahead, Tari.
Yes. So my first question is 3, my question last quarter about your brand image for the 5G AOC. So after your key customer did a product launch. In fact, if you do like to like, compare end. The price for the end products is a 7 it's around a RMB 600 whereas your chip performers is similar to Qualcomm.
So how are we going to reverse that brand image discount? And, longer term, do you see any difference of media tax product strategy versus Qualcomm in the 5G.
Well, our key customer, if you watch their launching event, they also announced they will use our flagship chip for their higher end products. And then that should be launched in the first quarter, the first quarter, late first quarter. So I think our customers obviously understand and recognize the value of our trips and the, well, we do have different grades with our within our chip series. So there you can a different grade of the chips or a different grade of their product. Which is usually quite normal for most of the customers.
Okay. So does that mean you don't see any so called price discount due to the brand image?
I think well, the price I I wouldn't use price discount. I mean, price is always the field in this part of the business. The important thing is as you will see also some other customers will come up with their products using our diversity 1000 chips for a higher level, tier of their product. So we are quite comfortable with that.
What matters is really for the long term, right? So do you see any kind of differentiation of your products versus, I guess now it's the only one competitor, right, Qualcomm in your product roadmap or your chip set strategy. For example, I think Qualcomm is the reason why they can really increase their 5G content is because they also bundle sales with the RF module, right? So just want to give some thoughts from you. About this technology, sorry, strategy differentiation?
Thanks.
We could we continue to focus on the SOP solutions. We work closely with the partners. You know, RF front ends such as Skyworks, Google, and to provide our customers, the solutions that they feel comfortable with. If you look at our our market position, I think, is just the right thing to do. Our competency resides in our SOC and modem capability.
We want to provide the best cheers, a best roadmap for our customers. If you compare our chips for portfolio in 5G against our competitors. You'll find that we have really very competitive and the really very competitive portfolio. So we are quite comfortable with what we're doing.
Okay. All right. Thanks. And my next question is about your 5G gross margin. So this is kind of a key investment on that, given some delay due to the coronavirus issue, and your pre you would enjoy fewer premium for your new 5G associate products and maybe give your competitors some some time to catch up and to do some price competition.
Do you think that is the case
Oh, not really as you know, competitors also have their chips out. We are already think we we they have their, SKUs, we have our pockets. I really feel comfortable that we're working with our customers with the pipeline of the products to come out in the first quarter, 2nd quarter. And then in second quarter, there will be, really also a mid tier product trials using our 800 series chips, which I think that this right at the very beginning of the 5G generation, again, as I said, I really feel comfortable with our roadmap And this roadmap plus, of course, what are in the pipeline for next year Wearn provides media attack a strong positioning in the 5G generation right at the beginning of this era. So I think we have to look at this in this perspective.
The virus will have is impact, but this will be gone, I think, after relatively short period of time. The important thing is that we have the right technology and right products.
Thank you. Yes. So just out of curiosity, right? So your comment is that 5G, FOC margin is higher than 4G. Do you think there's something structural?
I mean, I think maybe 6 or 7 years ago, you're 4G margins actually lower than a mature product like a 3G in the future. So what makes a difference this time that 5G margin could be structurally higher than 4G. And how sustainable do you think that's going to be? After 5G becomes a mixed market?
Well, I'm going to Anzo your question, well, I'm not going to give you the numbers, but again, just as I said earlier, the key for us with media attack for the 5G products is we have the right products with advanced, the really competitive technology building right at the beginning of this 5G generation. And this brings, we're at the 1st phase of the business. And for 4 gs, I think we, unfortunately, we were kind of a follower when we were playing catch up for quite some time. And that obviously was not ideal for the gross margin.
Okay. That's very helpful. Sorry for the long question, but there is firmly helpful. Thank you.
Before I update the Q next question, let me just make a quick correction. I think for the previous question asked by JP Morgan talking about the smartphone seasonality. I think what we say is obviously Q4, not Q1. It's 'nineteen, Q4 last year. I think for the mobile phone, we see all the options, not Q1, okay, just a quick correction.
Please take the next question.
Next one to ask question, Sebastian Ho, CLSA. Go ahead please.
Thank you. My first question is, on the so the CEO mentioned the new business will account for a 50% of the revenue, 2020? And how about the other, the existing business, the other business that are not categorized as business? Do you expect it to be stable or grow or decline?
I think we said in my opening remarks, Number 1, 2020, we will see a solid growth in our revenue overall. Of course, with 5G and some of the ASIC auto, we will have good growth. We, we continue to have our growth sectors like a ai0g pmic also to continue growing for the smartphone business, I think we'll see, we'll have a more mature, you see, it's a more mature market. Plus some of your quite old products, we probably will not see much growth over there. Okay.
All right.
On gross margin, that is my question. On gross margin, I think the CFO mentioned that this year, the goal is to stabilize the gross margin. But if you're a new business like auto ai, 5G will account for 15% of revenue this year versus, I assume, mid single digit last year. And assuming these new businesses carry higher margin presumably? And why what's the reason behind the stable margin is because the the 85 percent of revenue, the market is the margin is declining?
No, I don't think this is how we should interpret the thing about our business segment is the mobile growth in those models. Obviously, these years, we didn't see a strong growth on the mobile side. Mobile by itself, I think the gross margin will improve due to the 5G rollout. But overall, I think even on the blended side, mobile this year, most of gross margin contribution is still going to be on the 4G side. So which means the mobile sector to gross margin still is slightly lower than corporate average.
And to emphasize value and sort of the small home sector. So for this year, we're going to see some revenue mix shift, which higher mobile, lower smartphone. And on a blended basis, basically, you will see a stabilized gross margin So it doesn't mean that gross margin or auto sector is declined. It will be just the big business that makes its difference this year.
Okay.
Okay. So when we compare the first half and second half, it looks like the domestic 800 will ramp in be late second quarter, assuming more in second half and your 3rd, January 3rd SOC will ramp in So which means the 5G as the total smartphone, total revenue will be higher in second half versus the first half. So that's just supposed it should be a toll in the margins. Okay. We assume that the second half gross margin will be higher than 1st half?
Currently, we didn't really comment about the second half gross margin. We only provided first quarter and also the full year, but basically a heads up.
All right. The question is on your 5G products, on the if you're assuming, if you assume the, I would say, the initial point of when you launch the product without price erosion happening yet. On the 1st, a diversity, 1800 and your 3rd generation, they can have this year, how do you compare the margin? Would it be a similar across all three different tiers of the product?
We don't really provide a Dementia Soutin's specific gross margin.
No, I know, I'm not asking about the margin numbers, unless it felt like you could compare, would it be similar across within the 5G different product lines? I think that's what I don't understand. Yes. Okay. So some needed that we'll have 3 5G products this year, right?
And so 5G, so see. And I know it target different tiers of the phone, but I think the lower tiers on, certainly, the cost is lower. I'm just wondering, what's the, what are the different tiers of the 5G SoC, what carries similar gross margin? Assuming no hydro motion, yes.
Yes, again, we don't really provide the obviously, it's a serious gross margin. We only provide the overall 5G blended gross margin.
Okay. Okay. But that still means that the overall, based on the product mix you the shift, the mix you see for this year, overall 5G will still be accretive or higher Yes. Okay. Got it.
Can you my 4th question is that, can you mention about be millimeter wave products will be ready this year for volume shipment next year. Would it be you already have the customer attraction where you see the customers, their phone will go into adopt this, committed to adopt this next year?
We are having a discussion with actually multiple customers. To the timing of their requirements and what assessment they like to have So in addition, the minimum wave technology can also, of course, be used for the single modem type of business applications. So we have discussion with multiple customers, but, as I said, the will be available sometime in last year.
Okay. Got it. The last one is in terms of your mass market SOC to be ready, third quarter this year, I know MediaTek has been very confident in your 1st and second generation of the 5G So see, it's very competitive, but to how, what's your current assessment, on the, on this mass SSL when you, is it compared to yourself and also compared to your competitors offering?
Well, as far as our discussion with our major customers is concerned. We believe we have a very competitive mass market SOC. Since this is already January, I'm sorry, February, you know, for a third quarter long or I should say, production shipped in third quarter, basically, several projects already in the line. So again, we feel comfortable with our competitive test in our SoC.
The next question, Rohit Shee, Citigroup. Please ask your question.
Hi, good afternoon. Thanks for taking my question. First question is on your 5G global shipment number 175 to 200,000,000. This Is that compared to compared to the number industry? I think that looks a little bit low.
Probably it's at the low side. So Any reason on that? Is this because you are particularly conservative on the number or is that you factor in the impact for the various issue?
We do include the what we believe the impact of the virus situation. And, Roland, if you, again, if you follow our last two, conference calls, we have been We said $140,000,000, 6 months ago, and we said last time higher number than $140,000,000.
Yes, I know, but there is a $140,000,000.
We're increasing our estimates. We're not overly aggressive, I guess.
Okay. But lastly, compared to, the market number, I think, your competitors are looking for 175 to 225. DSMV is looking for making somewhere around $210,000,000 to $225,000,000. And some expect even more So your number actually definitely the lowest in the market. So going forward, do you expect more upside or more downside for your numbers?
We're giving you guys a good a number as we believe, really. The 5G is really its 1st year I guess we're taking a bit more cautious stance number. Yeah. And we're comfortable with that.
Okay. Thank you. And so for your targeting, you know, 5G market share, you said you are trying to achieve a 40% same across the whole 5G laptop. Yes, so, question is, I'm going to start this 5G share with a high market share or starting from low and gradually were above 40% and then average the the whole life cycle is 40%.
I think most of the rollers should be gradually going up because things, that's, basically, that's only how a new product coming out, how it will work out, especially at this time around, we're starting the high end segment. In the past, we actually don't have any market share. So you can't really expect, it's the first time getting the high end, the flagship product. And all of a sudden, we just get a super high market share. I think that's, in our original plan, but we do try to get in and expand into different segmentation in the meantime, increase our market share gradually.
Market share we are going to start with? 10%, 20% or?
We I think there'll be first of all, we don't provide enough guidance. I mean, you will be up to your advice to make your adjustment.
Okay. Thank you. Am I following question is, how about the overall 4G market in first quarter 2020 outlook?
It looks actually good. We have a strong demand we saw 4g Chips and the sales, David, kind of mentioned earlier, a lot of those chips are going into the phones, which then are being sold outside of China, from Chinese customers are also from non Chinese customer. So, again, we feel good about the 4 gs
So in terms of the total SOC shipment to 4G, this year compared to 10 2019. Is the total shipment for 4G going to increase this year?
I think we're talking is all shipments should increase.
You said, Lisa, export market has increased, right?
The total shipment, which is including, so mainly on the export market, because in China, you know, size proportion will be played by 54g5 So the big portion will be fully bump. When I'm talking about the increase in shipment, I'm talking about total shipment.
Total shipment, 3G, 4G and 5G will be increased, right?
I'm talking about the 4G shipment from MediaTek.
Ladies and gentlemen, we thank you for all your questions. Due to running shortage of time, we are going to take the last one to ask And the last one is Brett Simpson from Airtier Research. Please go ahead and ask your question.
Yes, thanks very much. Just had a question on the automotive business. I mean, obviously, this is a business with long products like But can you talk about your design win progress you're making? I don't know if you can share with us what sort of backlog or order book you've got sort of stretching out into the years ahead, but of what portion of RFQs you're winning, but maybe where specifically do you see the most opportunities in autos. We see a lot we hear a lot about Android auto in the dashboard.
Obviously, 5G, you're repositioned. Maybe you can just sort of frame how you think about all those from MediaTech and which OEMs are you really targeting? Which regions just to get a sense for how you're going to build up this business over the next 2 or 3 years?
Okay. You're right. Automotive is the, I guess, how should I say it? A very long term business to build. We are focused on a product that we believe we have strong competency, such as IVI product, telematics product, We have now, I don't remember the details, but we do have production shipment to one of the large tier 1 customers for IVI Chip We're also making, I would say, pretty good inroads in the Chinese market, Chinese domestic car.
Manufacturers. This is the long road for dispositions, but as far as I can see, the two products I just mentioned have the right technology content and also a good really access now to the major, either Tier 1 manufacturers or sometimes the OEM customers. So we again, we're seeing strong growth, but bear in mind, it's stopped from a very, of course, no, no base.
Thank you. And maybe just on that point, Rick, I mean, you mentioned a lot of these areas are coming off a low base dividend investment node today, you obviously have relatively high OpEx to sales compared to the free average, but you also have a great balance sheet. You have a lot of cash. And you haven't done M and A for a while, meditech has done deals for a while. So I'm just trying to understand, like, how you think about M and A playing a role to help you supplement, strategies around some of these new areas in ASICs or autos, etcetera.
Maybe help us understand how you're thinking about M And A for MediaTek?
Good question. We actually we really continuously look at potential opportunities from inorganic growth point of view. I cannot, of course, give you any details, but the what I can say is that if there's a good opportunity which has a synergy with our market position, our technologies and also fairly reasonable valuation, we will certainly pursue it vigorously. So we're working on this constantly.
Helpful. Thanks. And maybe just on 4G, I think this is a question earlier, but when we see these transitions, from, old generation to new generation. It's often an old generation that surprises us in a negative way And I'm trying to understand how you see 4G playing out for MediaSync in 2020. Do you think it's a revenue a flat revenue year for you guys do you think it's going to inevitably start to decline, say, in the second half of the year?
And how about that gross margin as you go into the sunsetting of 4G over the next couple of years. Would you expect returns in 4G to actually start to rise?
As we said earlier, we believe actually 4G is a long tail market. It's not where if you use sunset, it's going to be a pretty slow sunset. The, if you look at the, the 5G certainly is coming up, the majority of the volume will start in China. And then, of course, in the U. S.
And the other geographies. But there are many, many, many people, the current user who will need 4G phones this year and next year in different, again, different part of the world. And our customers are really providing those services to those people. We I think David said earlier, our 4G shipment this year will go up compared to last year that I guess demonstrates our belief in the 4G market.
Great. And maybe just finally, Wi Fi Six, I think this is a big transition for Mediatech. You've obviously got a large Wi Fi business today. Can you talk maybe more broadly about what Wi Fi 6 looks like for this year for MediaTek. I assume it's going to be largely smartphone driven or do we start to see Wi Fi Six and televisions do we see Wi Fi Six going into home gateways?
Maybe just help us understand how you think about that and also what the ASP step up is some of your competitors are talking about a 50% increase in ASP. Is that right ballpark to think about for 1.6 relative to current generation either to 11N or ax or whatever it is? Thank you.
Okay. Wi Fi set, of course, it's again, it's kind of a new generation for the Wi Fi. And we have the, our first products in a router late last year already. We have of course, we have our, what I said, building our 5G SLC chips, but I'm talking about the Wi Fi Six products that we can show independently. We also have the line in the high end 8 K TV for our WiFi chips.
We are quite happy with our technology and our, again, our product capability. I think our customers are also happy with our offering. It will take some time, of course, to get up the scale for any the new generation, but we're pretty what we're seeing is the acceptance attitude for my customers have, shall we say, accelerated over the past several months. So we have also a roadmap portfolio of Wi Fi Six chips for different application routers for the consumer. For consumer electronics and also for the high end applications.
So would be good.
Okay, ladies and gentlemen. That concludes our Q And A session. Now, I would like to hand it over to Ms. Jesse Huang for closing comments. Ms.
Wang, please go ahead.
Thank you, ladies and gentlemen. This concludes Mediatech's 2019 fourth quarter conference call. I would like to thank you for your participation, and you may now disconnect. Thank you.
We thank you for your participation in today's conference. You may now disconnect.