Welcome to the MediaTek 2019 Third Quarter Investors Conference Call. Your speakers today are MediaTax, Manager of Investor Relations, Jesse Wang. And Wang will report 3rd quarter results. And after that, we will open for Q And A. Now I would like to turn the call over to Ms.
J. C. Wang, Ms. Wang, please go ahead.
Good afternoon, everyone. We'll continue to attack first quarter 2019 conference call. As a reminder, All content provided on this teleconference is for informational purposes only, not intended for investment advice. Natalie, Ensure, nor any of independent providers is liable for any actions taken in reliance on content contained herein. Mediatek provides non Ti virus financial measures and supplemental information.
Earnings distribution is made in accordance with financial statements based on TIFRS. Our authorized recording or redistribution of the video, audio, text and presentation contents of this teleconference is truly prohibited. By participating in this teleconference, you agree to accept the foregoing terms and conditions. Now let's start with the 2019 third quarter financial results. The currency here is the NT dollar.
Revenue for the quarter was $57,200,000,000, up 9.2% sequentially and up 0.3% year over year. Gross margin of the quarter was 42.1 percent, up 0.2 percentage points sequentially. And up 3.6 percentage points year over year. Operating expenses for the quarter were 21.3 $1,000,000,000 compared with $19,600,000,000 in the same period last year. Operating income for the quarter was $7,000,000,000, up 14.4% sequentially.
And up 11.4% year over year. Operating margin for the quarter was 10.5% compared with 10% in the previous quarter, and 9.4% in the same period last year. Net income for the quarter was $6,900,000,000 compared with $6,500,000,000 in the previous quarter, and $6,700,000,000 in the year ago quarter. Net profit margin for the quarter was 10.3% compared with 10 versus percent in the previous quarter and a 10% in the year ago quarter. EPS for the quarter was $4.38 compared with $4.11 in the previous quarter and $4.3 in the same quarter last year.
We also provide our TIFRS financial measures, which exclude share based compensation, amortization of acquisitions related as and the tax expense. Please refer to earnings press release and presentation for details. For the fourth quarter of 2019, We expect revenues to be in the range of $61,800,000,000 to $67,200,000,000, flat to down 8% sequentially and the forecast exchange rate of $30.60 to 1 US dollar. We are forecasting the gross margin at 42% plus or minus 1.5 percentage points and the quarterly operating expense ratio to be at 32.5 percent, plus or minus 2 percentage points. With that, we are now ready for Q and session.
You.
And to answer your question, please press 2. As a reminder, it is greatly appreciated that you turned off the speaker phone mode of your device to prevent possible echo effect. We thank you for your cooperation. The first to ask question is Randy Abrams, Credit Suisse. Go ahead please.
Okay. Yes. Thank you. And good result and outlook, especially for next year. I'm curious on the 4th quarter for the guidance to down 8.
If you could go through, the factors for it looks like a little bit above season or above some of the prior years. And maybe coming off of that with first quarter, the start of the 5G ramp, if it's your expectation, we may continue this, at least based on an early look at some of the more forecasts out there?
Randy, I think for the 5G, again, like what we said talked about during the Chinese call, overall in the last quarters, we feel the market momentum is actually improving or getting better. I think that's somehow a concern. But in terms of the detailed momentum, the volumes and also our customers, design and design win situation, we probably would not be able to disclose all of detail right now. But probably The best way to think about that actually is that we pretty much have a pretty solid design in it is a win progress with all the key customer. And currently, we will not be able to disclose those details, but once their product is actually in the market, I think everyone will know.
I think in general by it, before end of this year, people should know actually, it's a Huawei customer because we feel comfortable, basically, some of the customer we'll have a follow on to before end of this year.
Okay. Or maybe to take a step back, sorry, I was just more implying for the fourth quarter, if you could go through the factors, maybe your guidance for sales is down flat to down 8%, maybe which drove it a little bit better than some of the prior years. And then kind of the initial read, how that looks into first quarter?
I think for the fourth quarter specifically, in general, there's still in line with the past, some of the fourth quarter seasonality. In terms of the magnitude, like you say, it's actually slightly better. But mainly due to the smartphones revenue momentum in the fourth quarter. I think in the fourth quarter, for the non smartphone sector, it actually a seasonal down, which is in line with the past seasonality. I think on the other hand, I think our smartphone strategy for the 4G smartphone in the fourth quarter I think in general, we've got a relatively strong orders.
So I think that somehow offset the original or the embedded seasonality. I think that's actually when you combine both of that, that gives us a relatively stable and less volatile, less seasonal force boiler.
Okay. And a quick follow-up on that question. Is that more a export 4G that you're seeing the staying power hold up and that's where the strength is, it's a fairly healthy export market?
Well, I think export market is definitely one of the factors or one of the major factors like on top of that, I think the China 4G still has a relatively stable demand even for fourth quarter. It's actually both.
Okay, great. And then I wanted to ask on the margins where it sounds like more confidence on the accretive after seeing more market feedback. I'm curious if you could talk maybe the drivers on the confidence, is it a different look on the competitive pricing discipline or landscape or something you're seeing on either the differentiation of your product or cost structure, how you're positioned?
Like what we say during the TriNet's call, I think it's nothing secretive to be honest. In general, when we are approaching the mass production time, I think we got better handle about the pricing, about the volume, about designing, about the overall segmentation position I think it's just a natural of the business. So when we much closer or near to the mass production, I think we got a better handle on gross I think this is why we kind of indicate we feel comfortable that the 5G should be accretive on the overall margin. But again, like what we explained, it doesn't imply we change our view. It just in last quarter, we don't that's the right time to kind of disclose that because there's still some more uncertainty or some moving piece out there.
But right now, it's actually given the fact we're going to stop the 5G in 4th quarter and also in 1st quarter as well. And I guess we feel much more comfortable in terms of timing to disclose our view about the 5G's gross margin target.
Okay. Well, I guess what I'm looking at, because 4G, I guess when it came in, it got like as we got closer it was very aggressive pricing to go after market share. Is it are you just as you get closer to seeing a better environment or it's just more from your how you feel like your products are positioned for differentiation or for cost?
I think overall pricing needs to be competitive. And I think that's just a natural fit business. So pricing always got to be comparative. But another key element, I think some will probably do that, but we think it's obviously about we call, starting from earlier this year, it sounds what we call the segmentation migration. Okay.
If you recall Randy earlier, the CEO talking about, we probably start with 860, Then we migrated to P90. They have G90. So the portfolio right now is actually much more balanced and more importantly, we expand into the mid to high end, and that helps on the margin as well on top of a competitive pricing.
Okay, great. And then the last question I'll ask is, just I think you started to talk about a third chip. So the first chip is high end and then mid tier So as you expand that, if you could elaborate a bit more how you'll roll the product line further out and kind of timing, like if that's also going to come out kind of in second half for that 3rd chip on 5G?
We probably will not be able to disclose a lot of detail for the 3rd chip. And I think the general idea is just trying to let the market know that for the 5G product, again, that's not something new. We kind of explained to everyone that we actually have pretty aggressive portfolio strategy, which means we want to make sure we cover all segments, not just a single segment or a few segments. The only difference this time around is actually because 5G product is actually a new product. I go normally will start on the high end.
So that's why we just, in line with that portfolio, we have the high end first, started shipping 4th quarters and mainstream started shipping 2nd quarters and basically the midstream products and in the following basically the second half next year. But in terms of detail, we probably need to hold, we told that until the product is actually formally launch second half next year.
Yes. And for the price point, can your chips get or do you think we could fee sub 2000 RMB or that probably takes a bit longer for the overall build materials to get to that level of clickable.
I think it will take a much longer. I think in general, a little for next year, probably you're not going to see the sub-two thousand. Those cycles are going to be 2000, but Okay. Thanks a
lot, David. Next one to ask questions, Gokul Harishalan, JP Morgan. Go ahead please. Thank you. And thanks David for taking my questions.
So first of all, on gross margins, could you you just talk a little bit? I think Randy did ask about some of the gross margin details, but just wanted to understand what are you seeing from your customers and your competitors. And then previously, the view was gross margin is probably going to be similar to 4G. What has changed or what has even you're more confident on the gross margin side? And is that something that you expect to happen through the 5G product cycle?
Or is it primarily a function of the 5G products next year being more high end than the 4G product
Again, I think I kind of explained about what's our view because when you wish to work more confidence, I think probably the better way is actually last quarter, we didn't really commenting about the gross margin and because there are still some moving targets now because we are going to shift 5G in fourth quarter and also in the following quarters. I think a lot of, a little bit less moving piece out there. I think that's reason number 1, if you will be trying to drill down. But then number 2 is actually this because again, 3rd quarter and the 4th quarter is a 2 very important quarter for us because we're trying to ramp it up, stabilize the system. And more importantly, now I think both our side and also our customer side, kind of know what's the overall performance for our 5G product.
Because when we talk about the gross margin versus ASP, it's all dependent about what's our product positioning. Now actually, our customer got much at that understanding and handle about the performance and actually also related on the pricing also around gross margin as well, if you really try to drill down. But overall, again, I just repeat myself several times, it's not a new information. It's just, normally, we don't disclose detailed gross margin, but it's still too far down the road. But now as we get into the cycle and issue 5G this quarter, I guess we feel it's the right time to disclose that.
Fair enough. Okay. Could you talk a little bit about how this ASP increase IR 5G mix starts to translate down to your operating margins as well because it seems like that's where the bigger impact is likely next year. Could you talk a little bit about how we should operating margin improvements? And any thoughts on how much OpEx growth you would anticipate next year given next year, I think is going to be the 1st year of meaningful revenue growth after a couple of years?
I probably would not be able to provide the qualitative guidance on that one, because again, you know, we still have a few months actually 1 quarter to go and next year, there's still a lot of moving pieces out there. But just, if you look back on our trajectory, I think in the last 2 years, what we did is actually we're trying to maintained revenue and also managed to grow the revenue in a little bit. I would say very low single digit. But in the meantime, in the last 2 years, I think the key thing, the key initiative of what we did is, as an A, we're trying to improve the profitability. So that's why you see the gross margin have been on the rise in the last eight quarters.
And B, I think more importantly, I guess, probably the best way to increase operating leverage is really trying to increase the top line. In the meantime, a lift, maintain the gross margin, if not further increase the gross margin. But in order to increase the top line or increase the gross margin, the new product portfolio the complete the completions, the comprehensive of the product portfolio, and also more importantly, the timing of the product portfolio, when the product is ready, are 2 most important critical factors out there. So in the last 2 years, we've been spending lots of time and effort and also 3 hours, actually lots of R and D efforts on that. And 5G is obviously a long insurrection, but I think earlier this year, we're also putting the value addition to 5G the data switch, basically the enterprise business, the automotive services are all in the same line.
So again, it's going to lower to answer your question, I guess. For the next year, the overall game plan is A, which we're definitely trying to increase the top line because that's the most effective and efficient way to increase operating leverage and B, hopefully through the different business mix, we can still continue at least maintain the gross margin if not manage the gross margin a little bit. And one is we can achieve 1 or 2 of that. I think we should be able to see, continue to see pretty good operating leverage out Again, operating leverage, what we mean by that is actually, hopefully, continue to see the operating margin ratio increase in the meantime, the absolute dollar increase at a meaningful pace.
Understood. Okay. Could you talk a little bit about your market share, I think you mentioned in the Chinese call that 5G market share should be at least similar to 4G or if not, could be even higher. Could you talk about your degree of confidence, maybe first half next year? And second half, I think obviously the product is still coming out.
So just wanted to understand where is that conference coming from? I guess, first half is probably more more in the back, given you've probably already had sampled and kind of earned some of the designs?
Well, yes, let me give the detail since we asked this question, let me just take this opportunity. To do a small clarification, especially during the Chinese call. I've been doing the Chinese call. I think the wireless asking about rig about our view for the 5G market share, right? Our view is actually pretty straightforward.
Our goal is actually in the 5G product cycle. Our overall market share is to be a list of sand, if not better than 4G. I think that's a big statement. But, but somehow people link that directly to our earlier guidance, talking about all of you say for 2020 in China, we believe over 5G should be around 100,000,000 units And we will then talk about, you know, the market share is 40% of which, does that mean imply our 5G shipment is going to be 40,000,000 The short answer is no, because actually the $100,000,000 is not, the just market is this the total adjustable market, not the service market, because there are some internal solution vendors out there. So again, what we're trying to calculate the shipment on the MediaX side, There's a 2 factors out there.
A, I think market share wise, we feel comfortable with looking for 4G, if not higherly 4G market share, that's our goal. And but just for the drift market, people need to apply to your judgment on that. That's probably point number 1. Put number 2, let me answer your earlier question and say what's the confidence level? Why would you feel comfortable on that?
I mean, again, it's all about the product portfolio. The the comprehensive polypella portfolio and more importantly the timing of the polypella portfolio. When you think about a monthly share, it's especially 14 market shares. Why do you think you need to realize actually in the past, our market share on the high end is near to nothing. It's like 0%.
So this time around for 5G, if we can get something, okay, on the high end side, assuming on the entry level, and mainstream side, we can maintain the market share. If you do the math, which means our market share should be higher in 5G product cycle versus 4G. I think that's a simple assumption. Because in the 4G side, I don't have the high end. On the 5G side, I start with the high end right now based on deciding a design win situation is actually much better than 0%, fifty-fifty the path I got 0% on the higher.
So assuming on the mainstream and entry level, I only get the same 4G market share overall if we do the math together, the market share should be high. Okay. But when you're taking into consideration about the timing, this time around, about when I have the comprehensive 5G product portfolio ready, is actually much faster than earlier compared to my 4G market share. And so in general, from an industry perspective, when the player half the company has the public portfolio ready at day 1, they actually got a better chance providing the product portfolio and very competitive. In general, it got better chance
to get a good amount of share.
I think that's basically the assumptions.
Okay. Could you also talk a little bit about, I think on the competition side, it looks like number 1, number 2 merchant player seems to be very disciplined on pricing and pricing is going up. Do you see any competitive risk from number 3 player like Samsung coming in and disrupting the price pricing dynamics in 5G? And how do you think about the price premium for 5G versus 4G? Is it just that 5G Dysize, foundry node, all those kind of things are more expensive.
And the price premium that we are seeing 5G was 4G is going to stay similar in pretty much every segment on a like for like basis?
I think that is a I don't have a strategy to balance, okay. But I think overall, again, maybe it's come back to the baseline is Our review actually has a comprehensive portfolio starting at day 1. I think that would change a lot of dynamic. Both from a customer perspective and also the competitive landscape. Therefore, number 1, point number 2, I think again, during the charter school, some people are talking about our high end maybe is getting to our competitors like 700 series.
But in reality, I guess, we feel very comfortable our high end on the 5G side is actually very competitive, even compared to compete with how peer companies, such a product, which they are too serious. I think that actually changed a lot of the competitive dynamics out there.
Okay, okay. But you don't see a
Yes, go ahead. For example, right, in your child's call, we're kind of talking about we are probably First one, an only one right now, put a new radio care litigation. So the download speed will be up to 4.7 gigahertz And our view is actually we are probably the leaders in the high end SOC with the fastest, fastest the download speed. That's just one example, right? Another example is actually, if you think about from the CPU perspective, we are the only one using on the latest A77 CPU architectures that actually will translate into pretty good application process and performance.
And I think we will have a lot more detail to talk miles by end of this year. So I think we will have a 5G product launch event. But in general, I guess we feel this time around, we feel are fairly comfortable for the product performance, not just on the timing and the comprehensive of the product portfolio, more importantly is with the product performance itself actually give lots of confidence.
Understood.
Just one last question, just shifting gears a little bit to ASIC. How do you can you give us an early read on how you think about growth next year. I think we were expecting some of the networking ASIC to start up ramping up, I think, in Q3 or Q4. And also, I think, consumer probably has a good cycle. So if we, I think 5 year basically is the spotlight, but if you step aside into the growth businesses, Could we say ASIC is probably going to be the fastest growing segment within the growth segment next year?
When you talk about ASIC, I'm assuming more for the enterprise sector, really the consumer product, right? Right. Service. I think something from Q3, this is the first time we start to ramp up, actually, we started to ship our enterprise solution I've been overall, both from a performance perspective and also from deliverable perspective, the customer are all very pleased about our performance. So in return, I think starting from this year, we have more a few more design wins.
Given the fact for the enterprise asset, the revenue phase very low this year. I think from the our revenue growth momentum perspective or growth rate perspective to be precise, next year will be pretty strong, what would be really strong. But on the absolutely scale, I mean, the revenue absolutely revenue scale, I mean, no matter this year or next year, it's going to be still relatively small. Because of the enterprise solution, I've been ramping up time actually taking much longer compared to the consumer product. But overall, if recharging from the adjustable market perspective.
And more importantly, based on the current design and design win, the momentum perspective would feel fairly comfortable that will become have another gross pillars in the 2 to 3 years time.
Understood. Okay. Thank you very much.
Right now, we're having Brett Simpson, Eritha Research for question. Go ahead please.
Yes, thanks very much. David, can I ask about the segment breakdown in Q3 just to go through the 3 divisions and where exactly sales splits between those? And also just on Q4, do you expect to report positive year on year sales growth in the mobile business? Thanks.
Sorry, your first question was talking about, it really breaks down different business lines? Because I've seen it earlier probably, okay. I think for the smartphone or the mobile computing to be precise, we can put in smartphone and tablet, in 3rd quarters, which account roughly 32% to 37% for the growth factors, which include in IoT, Pemc, Balvin and I see, ASIC, which is consumer asset and also the enterprise. All together, I think that account for 32 to 37 percent as well. So pretty much the same size of the mobile computing.
The rep goes through the Tahoe and others, which included TV and others, which account for roughly 28% to 33%. I think that's the revenue breakdown among our 3 business sectors.
Okay. Great. Thank you. And then just on mobile computing specifically, does that suggest, I mean, just given the guide for Q4, it sounds like it won't be declining, maybe it's relatively flat for you guys. Does that mean we go back to positive year on year growth in mobile computing?
For Q4 precisely, Q4 year over year growth, I think it's positive for
And in terms of unit numbers, because I know you sometimes talk about how many shipments in mobile computing. Are we around about the $100,000,000 a quarter level? Can you give us some insights there?
No, actually, we really provide the detailed shipment right now, unfortunately.
Okay. Okay. And then I guess, I guess in Q4, you have a couple of things happening that's a little unusual in Consumer Tech. You have Chinese New Year coming a little earlier, in January versus February, And also you have in the U. S, you have tariffs being introduced potentially being introduced in mid December.
Are you seeing any pull ins because of both these issues? And can you talk about what impact this might have? I mean, are you concerned at all about finished goods inventory? Heading into year end this year?
Different business unit probably have difference. Implications. If I may, let me just go through 1 by 1. I think for the growth sector and also for Marjo and others, by and large, they are mainly consumer product related. We all see a seasonal downturn in the fourth quarter, which from our perspective is pretty much in line with the past seasonality.
To reprice, actually, you're kind of talking about several macroeconomics factors out there. We did really see those macroeconomics factors somehow coming and cost severe seasonality. When I say severe, I mean, compared to the normal seasonality, I would say it actually is a normal compared to the last few years. So I think that's on the non mobile computing sectors. On the mobile computing sectors, on the other hand, I guess, it truly somehow, what we show in this year is actually a different seasonality pattern It's actually it's a much better seasonality.
And I think the rationale, reason behind that, I think A, all these actually would probably still manage to gain some market shares. In the mobile computing. That's the reason number 1. Reason number 2 is kind of like you say, this year is actually where we're earliest Chinese New Year. So some of the customers started building the inventory in 4th quarters.
Number 3 is actually, in 4th quarter, we see the exporting market, which is outside China, they are all pretty healthy and stable as well. I think that's a combination of all three factors out there.
Okay, great. Thank you. And David, just on 5G, can you give us an update around how you are thinking about the market size in 2020, maybe split between domestic and exports? And what market share do you think is achievable for MediaTek in 2020 for 5G?
We actually don't have new guidance or new views about the 5G. But let me repeat what we talked about last quarters. I'll be able to talk to these, for next year, global if I maybe around $140,000,000 and with a big portion coming up from China. I think for me, in China, our view is, it will be like 100,000,000 than $140,000,000. But, by the way, that was our view for last quarter.
I mean, this quarter's overall view becomes even more positive about the potential size. But in terms of the actual view, we're probably with likely withhold that for one more quarter because again, there are several factors blending in. I mean, we do see stronger demands out there. We do both from the customer side and also from the, especially from the operator perspective. But on the hand, we also kind of worry about the global macroeconomic situation.
Brian, if you follow the reasons several big companies out there, they got somehow mixed view about the global economic situations. I'm not just talking about the China U. S. Trade issue, but also in general, of course, sector and of course, geography. So that's something we still need to monitor and follow closely.
But overall, I guess, our views still feel positive for 5G demand. And the baseline China 100,000,000 global 140,000,000, it's not changed yet, but most likely for next quarter, we're going to upsize that. But until the magnitude, bear with us, we've got better view for you maybe next quarter. In terms of market share is that's the same target and view. I think our 5G market share, especially if we don't just focus on Q1 or Q2 or not even for 2020.
I mean, I need to clear on that. Our view is actually for the whole product lifecycle for 5G our market share should be better than 4 gs. Okay. It doesn't mean in Q1 next year, my 5 gs market share will be better than 4G, I think that's not what we're referring to. And why we feel comfortable for the 5G market share versus 4G for 2 simple reasons.
1st of all, for 4G, I'll not share it at the high end. It's like 0%, 0% is very low, okay. But for 5G, in general, we should have some market share on the high end. So assuming we share the same market share for mainstream or even for the entry level, as long as we can get some more market share on the high end, on a blended basis, our market share for 5G should be better than 4G. I think that's reason number 1 or assumption number 1.
Something number 2 is actually if you look at the 4G product cycle, when do we have a comprehensive product, 4G product cycle ready? Versus when, which I have a 5 comprehensive 5G product ready, I mean, the redness actually is much a difference. They find a run we talked about, you know, we have a fleet at least 3 products across all different sectors. On the 5G, you're ready pretty much right now versus 4G would probably take us 2 to 3 years. So, I think our positioning, more importantly, when we talk into our about their product planning.
I think the overall position is actually very different. That actually give us some, a bit more confidence about the Bockey share as well.
Interesting. Okay. Thanks for that, David. And maybe just on understanding the number of design wins have or anything you can help us just in terms of the engagements you're getting, do you have multiple customers for your first chip, your high end chip, or do we really have to wait for that second generation or second chip before we see the customer can't really start to grow?
Think for the first product, which is the high end product, I think we have a multiple customers. We don't need to wait multiple integration products.
Okay. Okay. That's helpful. And then maybe just finally on smartphones and 5G, how should we think about ASP because as you say, this is a new segment for MediaTech. We haven't seen you in the sort of premium segments, in 4G.
So how should we think about ASPs? And I guess if we look at 4G today, you're maybe under $10 or so around about $10 ASP. In the early in the early ramp in 2020 for 5G, she would be assuming around about the sort of 30 to 40 level if it's competitive with, say, 8 snapdragon 800 or snapdragon 700, that would suggest ASPs well ahead of what you're producing today in 4G just want to get your sense as to how we should be modeling that?
Well, first thing first, I probably would not be able to comment here on the absolute number of bread, unfortunately. But let me let me ask you a question from slightly different perspective. First of all, I guess, because we feel comfortable and confident about our overall product for portfolio, more importantly about the product performance. So we're definitely trying to make sure we capture the value we create, and which will reflect it in and also on the gross margin as well. I think that's how we pricing our pricing strategies for new products.
So we will not go low bore ASP because it's tied rather than I guess our product portfolio and also product performance is actually very good. It's actually very good. So we will matching, but in the meantime, we will be competitive as well. Okay. So I guess, we just need to find a delicate balance, but about compativeness, versus the capital price, our capital values of our product portfolio.
And maybe just lastly, David, on foundry availability, you're going into 7 nanometer and potentially 6 nanometer next year. And I guess when we look at the ramp ups that TSMC is committing to with other guys at the same node, whether it's Iphone 5G, Huawei's obviously a major customer AMD's ramping hard. Are you happy with the availability of wafers to deliver potential upside scenarios for 2020 particularly in the second half of the year when seasonally the leading edge is pretty tight for capacity?
Brad, this is a tough question. Probably the best way to answer that is actually so far we work very closely with our foundry partner. We'll be the loan to our foundry partner. And we lay on the stand. We have a pretty comprehensive and compacted product portfolio.
And we so far, we got I think we got enough we'll get on to 4.
And next, we're having Charlie Chang, Morgan Stanley. Please ask your question.
Thanks. Hi, David. I am sorry that I went through my own math based on your comments. So, thanks for your clarification on those 5G market share and those comments. So first of all, if I may get more color, what is your 4G market share in China or globally based on your your company's own data?
Charlie, can you repeat your question again? I didn't really in the 4G market share?
Yes. So I just want to get your own kind of the assumption for your 4G On market share,
yes. We are judging from the adjustable market perspective, not the total market perspective. Around 40%.
Roughly 40%. It's global or China.
That's actually some addressable market is mainly in China. Should say China and emerging markets.
Okay. And then I think the a big part of the 5G demand next year probably comes down another player Huawei, right? So can you comment your possibility to get a Huawei's 5G smartphone order? I remember last week sorry, last quarter, you did try to answer this question. I remember the answer is that you wasn't sure, but how about the possibility?
Now for Huawei 5G?
Charlie, I probably would not be able to comment on this question.
Okay. And then, yes, in terms of time frame, how long do you think that you can bring your 5G market share to your 4G market share?
I think this year, we managed to increase the market a bit. I think that here is like what the CEO talked about during the charter school, still have a pretty solid 4G business portfolio, product portfolio for the next few years because we do believe for the emerging market, I think 4G will be a long tail business. And will be last will be layered actually for many more years. So I think based on our product portfolio and more importantly based on our current market shares, our view is actually we can't at least maintain if not manage the increase a bit. I'll mark this year, unfortunately.
Okay. Okay. And then, I guess, on your mini meter with products, remember last time you mentioned, it could be out around the next year end? And do you think this one would target even higher end markets? Or the same segment as the MT-six thousand eight hundred and eighty five?
I think for the millimeter wave, think it's merely for the non smartphone product. I think definitely, I think for the super high end smartphone, there might be a few sectors will require boats, maybe the way being also a top 6 gigahertz product. But at least right now, especially if you base on from the China's demand perspective, I've been subject, it actually is probably the best solutions. You know, the I am, people probably want more about the media, functioning, air, functioning, education, possible functions, really in the mini media wave function. But by saying that, we're still going to have a mini media wave solution, but it's mostly the beginning of the mini wave solution we'll be targeting on the non smartphone sectors, basically non smartphone casings and quickly migrate that into the smartphone solutions.
Okay. Yes. And actually between Chinese coal and the English coal, we start to get some investors feedback, right. So somehow investors are a little bit concerned about the OpEx trend. I'm not sure why after your explanations investors are still concerned about the quarter OpEx.
So if you can give us just kind of a more comments about the future years OPEC term, for example, a negative regardless top line? What kind of OpEx in terms of growth rate are you expecting for the OpEx?
Charlie, I probably don't have the number on top of my head with me right now, especially for Nancy OpEx because right now, to be honest, we're still going else we call the annual planning right now. In general, we will have a bit of understanding, it's a better view, go back to next year. Probably in late November, because this is our planning sessions. But if I may, why don't I just comment about this year, a list? I'd be able to hear we go earlier this year, we kind of give out the guidance, say, the OpEx on the absolute dollars, we're looking to manage that to low single digit to mid single digit.
I think for the full year, if you take our midpoint of our guidance for 4th quarters, I think overall, we are pretty much in the mid single digit year over year growth on absolute dollar terms.
And I
think for this year and last year, if people only for OpEx asset ratio, somehow we are handicapped because, for the top line, in last year, this year, we did really see a strong top line growth this year, probably we see the low single digit top line growth, if you think about how we do say in the fourth quarter. So how we manage our OpEx this year and last year as well as we explained to the shareholders is actually an potential investor. It's actually on the absolute dollar terms. I think for next year, again, I don't have the detailed visibility yet. I think we will have better view maybe later this year.
Okay, okay.
About that, I think the how we manage our P and L also operating leverage, call and cooperative leverage is really trying to increase the operating margin dollars at a very healthy pace. Like last year, operating margin dollar grows more than 60%. This year, again, if you take the midpoint of the guidance, I didn't know who are we looking for very strong double digit growth on operating margin dollars this year as well. And on top of that, you also see the operating margin ratio expand continue nicely in the last few quarters.
Okay. Thanks for those comments. And lastly, can I switch gear to your kind of a new growth drivers, right? So besides the networking ASIC, Can you comment about your progress in those AI or kind of data center server type of ASIC? And when do you think that is going to contribute to your revenue?
Probably would not be able to break down such details, asset expectations. But in general, for asset, we'll break it down to consumer product right now is actually the majority of our revenue coming up from consumer product mainly from the game console, both for basically 2 big platforms, the Xbox and display stations. And for other new initiatives, mainly something we talked about on enterprise sectors, which including data switching and also all the AI and other stuff you talked about, but we only don't do further greater level to break we're only just, you know, categorized into the enterprise solutions. And this year is, the revenue is still very tiny, very small. Nancy years, we see a very strong growth rate, but because the base is still very low, even with a very strong growth rate, I think on the absolute dollar revenue perspective, it's still pretty small.
It's still pretty small.
Okay. And then on TLS, What's MediaTek's view about the market size and the pricing trend? Do you think it already reached a point that the cheaper TDOS is commoditizing? And what was the kind of MediaTek's overall target to grow this kind of an overall IoT business in next year?
Well, I think for TWS, our view is actually currently, if you're joining from a market share perspective, I think we're still the leader in this space, And so we think AWS is being commodified because we have seen a lot of new application coming in. There's still a lot of new now to be putting into the TWS solution. And I think overall, we have several new products coming out in TWS, And we do believe once we get into 4th quarter and 1st quarter next year, we should be able to gain more market share on the TDA scrub
Okay, got you. Thank you.
The next one to ask questions from COSA, Sebastien Ho. Go ahead please. Yes.
Okay. So my first follow-up question is on the I think the combination about the 2nd generation 5G. So if you were to target the phone selling price out of 200. 25 hump 3 or RMB dollars. So what about the 3rd is for following 5G sales?
Would it talk to you surprised that the lower one over to your phone?
Sabrina, sorry, if your voice is kind of breaking out, can you repeat a question. Again, I
can't really hear you properly. Okay. So the 2nd generation of 5G associates that need us to have is targeting the selling price, the Foncellin price at RMB2500. And how about your 3rd and for the following 5G. So would it be targeting even lower tier or pricing of the phone?
And what would that be, what kind of the price range?
First of all, I guess, again, so we're trying to clarify that with the Transco and I'm trying to clarify it again. I think the precise way to that it's actually RMB25 1,000,000 and above. And most likely, for the next year, beginning, we're starting from RMB3000 brilliant by far beyond B, I think that's actually, it's somehow caused a lot of miscommunication during the Chinese school. So I would just be clear that we're talking about £25 to 3000 and most likely to the beginning of the product cycle will be gearing towards 3000 realtor And that's my clarification. But going to a question, I guess, what's 3rd generation product is, yes, we're trying to cover the all segments So the 3rd, second product, most likely, we'll be covering from 25 Tongi on V and below.
Okay.
Do you have it online for the third one? The product?
We do actually, but we probably would need likely withhold that until the right timing to disclose that.
Okay, got it. In terms of the foundry technology note of your 5G SoC product, So for the next year, sorry, what's your plan on the 5 nanometer? When will you move 2 partners.
I think for our 5G solution next year, it will be all on 7. We do have 2 products projects coming out from both 65. But again, it's, we will just close that in, with the tires, right? Okay. But we do have projects on both 65.
Okay. So when you talk about on 7th and next year, this doesn't include extract. This is actually the same thing we have 7th.
For all 5G products, commercially launched products, 5G next year, 2020, we're always having.
Okay, got it. Just last, double check. So the smartphone business in the fourth quarter is going to be up both Q on Q and year on year?
Ladies and gentlemen, we thank you for all your questions. Now I'm going to hand it over to Ms. Jesse Wang for closing comments. Please go ahead. Ladies and gentlemen, this concludes MediaTek's 2019 third quarter conference call.
We would like to thank you for your participation. And thank you. Now you may disconnect. You may disconnect.
Thank you for your participation in today's conference, ladies and gentlemen, You may now disconnect.