Welcome everyone to MediaTek's 2019 second quarter investors conference call. Your speakers today are David Ku, MediaTek's CFO, and Tienyu Tseng, MediaTek's Senior Manager of Finance Division. Mr. Tseng will report second quarter results, and Mr. Ku will provide prepared remarks. After that, we will open for Q&A. Now, I would like to turn the call over to Mr. Tseng. Mr. Tseng, go ahead please.
Good afternoon, everyone. Welcome to MediaTek's second quarter 2019 conference call. As a reminder, all content provided on this conference is for informational purposes only, not intended for investment advice. Neither the issuer nor any of its asset providers is liable for any actions taken in reliance on content contained herein. MediaTek provide on IFRS financial measures as supplemental information. Current distribution is made in accordance with financial statement based on IFRS. Unauthorized recording or redistribution of the video, audio, text, and presentation content of this conference is strictly prohibited. By participating in this conference, you agree to accept the foregoing terms and conditions. Let's start with the 2019 second quarter financial results. The currency here is in USD. Revenue for the quarter was TWD 61.6 billion, up 16.8% sequentially and up 1.8% year-over-year.
Gross margin of the quarter was 41.9%, up 1.2 percentage points sequentially and up 3.7 percentage points year-over-year. Operating expenses for the quarter were TWD 19.6 billion, compared with TWD 18.3 billion in the previous quarter and TWD 19 billion in the same period last year. Operating income for the quarter was TWD 6.1 billion, up 93.9% sequentially and up 50.1% year-over-year. Operating margin for the quarter was 10%, compared with 6% in the previous quarter and 6.8% in the same period last year. Net income of the quarter was TWD 6.5 billion, compared with TWD 3.4 billion in the previous quarter and TWD 7.4 billion in the year-ago quarter. Net profit margin for the quarter was 10.6%, compared with 6.5% in the previous quarter and 12.3% in the year-ago quarter. EPS for the quarter was TWD 4.11, compared with TWD 2.17 in the previous quarter and TWD 4.72 in the same quarter last year.
We also provide on IFRS financial measures, which excludes share-based compensation, amortization of acquisition-related assets, and tax effects. Please refer to earnings press release and presentation for details. For the third quarter of 2019, we expect revenue to be in the range of TWD 65.3 billion-TWD 70.2 billion, up 6%-14% sequentially, at a forecast exchange rate of TWD 31.28 to one US dollar. We are forecasting the gross margin at 41.5%, ±1.5 percentage points, and quarterly operating expenses ratio to be at 31%, ±two percentage points. Now I would like to turn the call to CFO, Mr. David Ku, for prepared remarks.
Okay. Thank you, Tienyu. Good afternoon or good morning, depending on where you are. A quick update for our second quarter's performance. Before I dive into my three major sectors, I think overall for the second quarter, even though we see a pretty uncertain macroeconomic situations out there, I think overall we still can be very stable and good results for Q2 second quarter's performance. Especially, if you're judging from a gross margin perspective, that will be the fourth consecutive quarter, so we're continuing to improve our gross margin. Now our gross margin reached to 41.9% in Q2, mainly due to our strong product roadmap and also a much more balanced business portfolio. With that, I'll just quickly go through the three major business lines, which including mobile computing, growth sector, which including IoT, premium and ASIC, and also our smart home related product.
For mobile computing in Q2, the overall revenue contribution from mobile computing was around 30%-35%. We see a strong quarter growth, mainly driven by our P90 new product in Q2, and we believe that growth momentum will continue into Q3. Overall, I guess for this year, starting from P60, P65, also P90, and also recently we just announced a new series called G90. That's a new product portfolio designed especially for gaming-related platforms with upgraded CPU and GPU and also our APU, which stands for AI process unit, and we have a pretty good customer line-up and also design-ins for new G90 product. Overall, we see strong growth in Q2, and also we believe the growth will continue in Q3, on mobile computing sector. In addition to 4G product portfolio, I think currently our major focus is really 5G.
We announced about our 5G product, the first product on the high-end product side, and I think recently, especially for the last quarter, there are some others market movements. For example, China just skip something we call the pre-commercial BOM, directly go to the commercial BOM. We believe that is actually a strong signal to show even strong 5G demand in China for next year. Also recently, China Mobile passed all major 5G chipset vendors product performance, which includes the product, the high consistency, the MIMO, basically all different technology attributes, and also for dual-mode SA and also NSA, all from basically, the MediaTek performance is actually leading bench in the China Mobile's testing lab. We are targeting to send our 5G SoC sample out in third quarters.
Based on the current design-ins situation, we believe we will be catching the first wave of 5G product next year. If everything went well, it's very likely that our product will start to ship in first quarter next year. We will be able to see with MediaTek inside chip 5G smartphone in the market in first quarter next year. I think that's a quick update for the mobile computing sector. Move on to the next sector, which is the growth sector. Again, growth sector, which including IoT, PMIC, and also ASIC. I think for Q2, we also see strong double-digit growth for IoT, especially both based on the quarter-over-quarter perspective or year-over-year perspective. I think for the IoT, it's mainly driven by strong smart speaker demand and also TWS, true wireless sectors.
On the PMIC side, I think this year, we see the platform synergies start to kick in. What do you mean by the platform synergies? Mainly on the smartphone side, because right now, a lot of our smartphone product are equipped with MediaTek own sub PMIC. We see double-digit growth, year-over-years, and also Q-over-Q on the PMIC side. The last but not the least, is which of the ASIC sector. For the ASIC sector, I think we have a consumer ASIC, and also we have an enterprise ASIC. Enterprise ASICs, as we previously disclosed, we start the first revenue in Q2/Q3. Currently, the revenue level is still very small, we do believe actually enterprise ASIC open a new sizable addressable market for MediaTek. We actually getting more design-in this year.
We believe that would translate into more revenue into the next 2 to 3 years. The next one is really our smart home related product, which include TV, set-top box, and also other products. I think we see a steady growth compared to mobile computing and also growth sectors is relatively weaker, but we still see a steady growth in Q2, especially for TV. Looking forward for second half, there are some macro economy uncertainty. Our view is actually the TV growth may be slowing down. Q2 overall on a Q-over-Q basis, I think probably will be relatively weak on the smartphone sector. If we put that short-term, that macroeconomic situation aside, I think we still feel fairly comfortable with our overall TV SoC positioning, both from technology perspective and also from technology perspective.
Currently, we're trying to encode more and more AI technologies into our TV SoC product. For example, currently we're just launching our flagship TV SoC, the SoC S900. The S900 is supporting 8K decoding, high speed edge AI computing for picture quality. We also have face recognition, scenes detection, voice recognition, and voice assistant functions on the TV platform. We will update more for the TV product, I guess, in the next few quarters. I think that conclude my quick update.
Thank you, David. We are now ready for Q&A session. May we please have the first question operator?
Yes, thank you. Ladies and gentlemen, we are now in question and answer session. If you would like to ask questions, please press 01 on your telephone keypad. Please ask a question after your name is announced. To cancel your questions, just please press 02. As a reminder, it is greatly appreciated that you turn off the speakerphone mode of your device to prevent possible echo effect. We thank you for your cooperation. Now, please press 01 to ask questions. Thank you. First, we are having Randy Abrams. Please go ahead, please.
Okay. Yes. Thank you, David, for the details. I wanted to ask the first question just on your view for the 5G market for next year. I am curious more for the ramp up, if you expect much coverage to support volume ramp in first half, or if you expect it to be mostly second half weighted. With your sampling of the first chipset now and then targeting first quarter, I am just curious if it does pull in the first half, if you think your market share could be up to the level if you were at in 4G, or it might take a few more quarters to kind of reach the speed you are at in 4G.
Randy, I think for 5G market, especially for China, our view is that the overall market demand could be around 100 million. Around 1 million plus, most likely our views for 5G sectors. From a segmentation perspective, they'll be on the high end and also need to go down to the mainstream as well. If we express that or interpret that from slightly different perspective, say, what's the end product selling price? I think maybe for the first half next year, the 5G product is still going to be RMB 3,000 and above, most likely maybe RMB 3,500 and above. Once we get into the second half, I think the 5G sector probably will go down to below RMB 3,000 sectors. With that understanding, I think let me answer your question.
I think most likely from the overall volume, from our own shipment perspective, most likely will be the second-half heavy. I think first half, we do expect some of the shipment for 5G, both for high-end or also for mainstream. In terms of overall volume, I believe actually the 5G shipment will be the second-half heavy pattern.
Okay.
For next year.
Great. Okay. If I could follow up, maybe an initial view, if you can gauge the competitive landscape, the start of 4G, it seemed like an aggressive pricing between yourselves and Qualcomm for market share, and even ended up impacting their margin. If you could take a view how you're seeing the early-stage ramp-up, if it could play out differently, and also how you're viewing Samsung. They may not be the first choice because they also compete, but if you see them having any impact both on share or pricing.
I think overall for 5G SoC is quite a competitive dynamic out there. Like you say, Randy, it's really just Qualcomm and also Samsung and MediaTek right now. Overall, we do believe both from the product portfolio perspective and also from the timing perspective and on top of backend performance, I think we have quite confidence that we should be able to, A, not just cash the first wave. B, I think we should be able to get a reasonable market share for that. In terms of a competitive landscape, I think as you know, for 4G, it's been quite competitive out there. For 5G, our view is it probably will be the similar competitiveness. We don't think it will be even intensified.
Okay. I guess the follow-up, I guess on the profitability, because you spent a lot of time through the 4G cycle redesigning to get the optimal cost structure. I guess factoring in a similar, even tougher competitive landscape, is there a range you're expecting as you hit this first wave inflection margin if it's this similar 40%-43% as a base case or plus or minus?
It's hard for me to provide sort of the gross margin guidance right now because, like I say, it's still a moving target out there, especially given the competitive dynamics out there. Overall, I think we feel, A, fairly comfortable that ASP is going to be accretive compared to our current 4G product portfolio. Regardless of the gross margin ratio, I think the gross margin dollar, which will be translated into the operating margin dollar ratio, should be very accretive. In terms of exactly gross margin ratio, we probably still need to wait for next few quarters, because as you know, it's quite a dynamic out there.
Okay. Then I think on the operating side, you've had some ability to get some leverage or not need to grow much in OpEx. Do you see that, I guess now factoring in you've got the 5G millimeter wave and then some of the networking auto, or do you think given the base you already have, you could continue that just modest increase on the OpEx side?
Well, I think for the OpEx side, first of all, for this year compared to last year, I think OpEx, operating expense, only increased moderately. Given the fact, I think the first product is taping out, the first 5G product is taping out, and we're going to give out the sample in third quarters, and a few more products on the way as well. I think the heavy lifting part for 5G is pretty much done. We don't really expect in order to expand or extrapolate our 5G product portfolio will increase substantially our operating expense. I think definitely will increase a bit, but I don't think they're going to be substantially. That's one point to think about that. Another point is actually, I think the last few years, what we did is we do a redistribution of our overall resource and man.
To precise, really just we moved a lot of resource from 4G and also 3G into 5G right now. I guess our goal is trying to increase the 5G investment, but on the overall scale, we can still contain or control the operating expense to a mild or low single-digit growth. I think that's our target.
Okay, great. Just the last question I want to ask is, in initial view, fourth quarter, there's usually a seasonal pullback and this year we're late stage 4G. Wondering if there's any swing factors that either product launch or share that could swing that, or if at this stage you're expecting that normal season or any risk of a worsened seasonal?
I probably don't have detailed visibilities for fourth quarter right now. In general, I think fourth quarter, based on the normal seasonality, it should be coming down overall. It might be a little bit too early or too premature to talk about by sector. I think, I guess one view concern or things trying to sort out, usually on the smartphone side, but I probably would not give a wide comment right now for fourth quarter.
Okay. All right, great. Thanks a lot, David.
Next, the line is open to Gokul Hariharan, JP Morgan.
Hi. Good evening, David. Thanks for taking my questions, and congratulations on the good consistent delivery and margins. First of all, you mentioned more mainstream 5G SoCs also coming next year. Could you outline what is the timing? If I heard you right, you probably have it ready in Q2 next year itself. Could you also talk about, even for mainstream 5G SoCs, are you still going to maintain that kind of price premium to comparable 4G products? For the premium, obviously, we're expecting a meaningful price premium to the 4G comparable product. When you get into mainstream 5G SoCs also, is the price premium still going to kind of sustain? Lastly, what are you seeing from your competition? There's a lot of noise about Qualcomm trying to do RF bundling this year, as well as going into next year for their 5G products, especially in China.
What are you seeing and hearing from your clients on this, and how are you kind of trying to circumvent this? Thanks.
Okay. I think for the timing for our product portfolio, I guess probably that's the best way to describe our 5G product strategy. First of all, I think we have more than one product. There's going to be a product portfolio which covers different segments. We're starting from the high-end, we will gradually swap. Not gradually, basically within the year, I think we'll expand to different sectors. Until the exact timing, I probably will not be able to disclose that yet. During the trials call, kind of talking about at least one more product will come in first half next year. In terms of the other product timings, I probably will not be able to disclose this right now, but we would certainly disclose this maybe sometime early next year. That would be your first question on timing side.
The second question will be on the ASP side. I guess your question is, for the mainstream 5G product, on the apples-to-apples comparison, will or not we still see ASP accretive compared to the 4G product? I think the answer is a short yes. Overall, we see on a like-to-like comparison, what do we mean by like-to-like? Actually, on the similar sectors, we all see a pretty good ASP accretions on 4G versus 5G. Simply put, I think 5G, we need to just put in lots of new functional layers. You purely based on from the cost of material perspective or device size perspective, it's going to need to be increased. I think physically, I've been listening to Neil turn, there's no way we're going to sell on a similar ASP. I think the ASP need to be higher on a like-to-like comparison.
For the ASP accretive, basically, on a like-to-like basis across all different sectors that we all feel fairly comfortable it should be accretive. I think that's your second question. I mean, the third question is on the RF front-end question. I think overall, currently, we didn't really involve in the RF front-end business. On the other hand, we work very closely with all different partners, which including but not limited to people like RFMD, Qorvo, and all other like. Based on the current, sort of both from the product portfolio and also from the price competitiveness perspective as the total solution, by working with our partner, I think overall, we feel fairly comfortable in competing with other companies.
Okay. Great. Looks like the 5G expectations have clearly gone up in China in terms of the volumes. David, I know that you don't want to volunteer exact market share expectation, et cetera. When you say reasonable market share of that 100 million, what does that mean? Is it a 10% number? Is it a 30% number? Could you give us a little bit more clarity about how you're thinking about it? Because sub-3,000 RMB market is kind of more mainstream, and you clearly have a reasonable share of that market in 4G. That's my first part. Second, could you also talk a little bit about getting down to sub-3,000 RMB price range for 5G phones in second half next year?
What is the kind of feedback you are receiving from your customers in terms of the ability to get down to that bill of material without any carrier subsidies? Do you feel that carrier subsidies are going to be essential to get down to that kind of consumer price point? Thank you.
I think the first question is really on view for our 5G market shares. I think internally, we do have a target, and we're working pretty hard on it. I don't think it's the right timing for us to disclose it. I think we will, like in our trials call, our CEO talked about, we probably will kind of talk about it maybe either later this year or early next year. Right now, there's still a lot of sort of task or moving targets ongoing, and it may be a bit too short to talk about the market share right now. That's your first question. The second question is, what's the sort of customer view and also what's the potential market feedback for the 5G segment being pushed down to different segments, say below RMB 3,000.
I think in general, based on the feedback we got both from the customer side and also from the potential end customer side, I think in general, they are all fairly positive about that trend, even without a huge subsidy by the China operators. With a caveat, with assumption, is actually it's end customer for the 5G phone. Okay, if you're trying to sell a 5G phone with the same price as the 4G phone, I guess it's not going to happen. I guess from the phone maker perspective, I guess one of the view is, hopefully, with the 5G phone upgrade cycle, if you like, they can actually somehow increase their ASP as well on phone side, or at least they can increase or change the sort of segment allocation.
For example, maybe in the past, I just make it up, say maybe 50% of the phone being on the like CNY 1,000 or maybe CNY 1,500 sectors. Now with the 5G phone, customer are going to migrate from the CNY 1,500 sector to CNY 2,000, maybe CNY 2,500. I think that's the assumption, if you like. Overall, I guess people feel, both the end customer and also the phone makers are positive about moving towards this direction or assumptions.
Okay. Just one follow-up, David, on that, on the market share. If I ask the question in a slightly different manner, do you feel more comfortable about your 5G volumes expectations for next year, given that the market size has also gone up? I think at the beginning of the year, I think you guys were expecting some 5G next year, really, I think hitting mainstream in 2021. That definitely seems to have pulled in by a significant margin. Does that also mean that MediaTek phone 5G shipment expectations have also kind of moved up in that same time frame?
Unfortunately, to make a view too mature or too early to talk about our view regarding market share. I guess, let me answer your questions from a different perspective. I guess with top operations, and especially both from a 5G product portfolio perspective and also from the timing and performance perspective, I guess we do have a pretty high expectation on market share. Okay? We use the word some market share, I guess internally, at least, this is not our goal.
Okay. Got it. Yeah. Thanks, David. Thank you very much.
Next one, we're having Charlie Chan from Morgan Stanley. Go ahead, please.
Thanks. Hey, David. Back to near-term trends. Can you give us some comparison of different segment growth in third quarter? I mean, for smartphone, and also the growing segment, which part of the division is growing faster in 2Q?
I think in Q3 is, among the three product segments, namely mobile computing, growth sector, and also smartphone related. I think that the one with the strongest growth is really the mobile computing. The second one is really the growth sector. The last one is smartphone related.
Okay. Can you give us some color about the blended ASP trend in 2Q and third quarter?
Charlie, I didn't hear you completely. Can you say it again, about your question?
Sure. Blended ASP for smartphone in 2Q and 3Q.
Oh, blended ASP.
Yes.
I think for Sure Q2 or for Q3?
Both.
Both. I think both for Q2 and Q3, we see a blended ASP on the increasing trend. I think mainly due to, for Q2, we start to ship P90. Q3, we will see more P90 coming in, and likewise, I think for Q3, we're starting to see some G90 coming in. From blended ASP perspective, they are all on the positive side. In terms of magnitude right now, we didn't really disclose the magnitude.
Okay
of ASP.
Okay, got you. On gross margin guidance, again, the midpoint of the guidance is at 41.5%. Again, it's kind of down slightly from 2Q actual margin. Any implication here?
Well, I think, probably the fair comparison is if you compare to the 2Q guidance versus the midpoint guidance versus the third quarter midpoint guidance because, like you say, as you know, sometime the gross margin moving within range. The guidance giving out 41.5% or midpoint doesn't mean that's the target, right? After all, we need to consider about the different dynamics.
I don't really think that's a signal of weakening about the gross margin. That's point number one. Point number two, actually, for the gross margin, after, like we talked about, like we explained, in the beginning, right now we have a free, rather balanced product portfolio, and different product portfolio have different gross margin profile. I guess the within a range, when we give a guidance on the gross margin within range, it also need to take consideration about the potential different sort of revenue pie movement among different sectors. Overall, probably the best way to describe our view about gross margin, I would say it's steady, stable, and with some upside potential. Maybe that's the best way to think about that. Put the sort of actual numbers aside.
Okay. Lastly, I think, the question was already raised in Chinese call. What was the thought about Huawei's share gain? They actually kind of gaining share quite aggressively in second quarter, and that continue in the second half. How do we reconcile your very strong smartphone shipment growth in third quarter versus Huawei's market share expansion? If there will be any risk of market share loss of your customers, would it be more like a fourth quarter or third quarter risk?
Charlie, first of all, when I commenting about sort of the growth for third quarters, I was commenting from the revenue perspective, not exactly from the shipment perspective, because starting from, I guess a years ago, we stopped providing the forward-looking shipment numbers. That's point 1, is really the revenue growth. Point 2, how do I reconcile that? I probably would not be able to comment directly for single customer, because you asked me about Huawei, but maybe I'll explain from, take one step back from different perspective is, on the blended ASP side, it is increasing. On the market share side, we do believe on addressable market perspective, we increased the market shares within accessible market as well, and plus the ASP approaches. I think this is the major drivers for the revenue growth on a quarter-over-quarter basis.
Okay. One quick follow-up. Within the market share, again, do you think it is kind of related to the US-China tension or if there's something else that helps you to keep growing your market share?
I think it's hard to contribute to one single factors. I guess maybe it is multiple factors, and also it's hard for me to quantify from different sectors. I would say, I think on the combination of strong product portfolio, I think getting more customer traction and also customer confidence, especially now they see our 4G product and also 5G product portfolio, and plus the macroeconomic situations. It's really a combination of all those factors.
Okay. Fair enough. Thank you.
Next in line, Brett Simpson, Arete Research. Go ahead, please.
Yeah, thanks very much. David, I just wanted to get your perspective. If you go back to 2014, when China Mobile launched 4G. Within the first 12 months, they pulled in 100 million subs. Quite an aggressive ramp from China Mobile in the start, firstly, the 4G. How do you think the sort of launch of 5G plays out for them? Do you think they're going to be more aggressive? Just want to get your perspective on how the sort of relative ramp-up might play out for China Mobile.
Currently, Brett, our views will be either similar, like the 4G ramp-up, and maybe even slightly faster. That's our current view, based on our conversation with all related parties. Based by, I would say we'll be on a similar fashion, at least.
Interesting. Okay, thanks for that. Just from an ASP perspective, if we look at 5G versus 4G on a sort of like-for-like basis, what do you think the premium that MediaTek gets selling a 5G device at the same handset price point versus 4G?
When you say PMIC, you're talking about 4G versus 5G ASP? Is that what it means?
Yeah, exactly.
Again, it's hard for me to qualify that. Let me answer your question from this way, okay? I think currently, if you're judging from our competitive ASP price quotation, it actually is, again, it's a dual solution for this year, is really just the baseband plus a modem. It is AP baseband plus a modem. ASP right now is actually a three digit, it's TWD 100 plus. Getting the SoC, I think the number will be lower, will not be three digit, but overall, I guess currently, people are still looking for at least TWD 50 kind of to start with, for the high-end. In terms of what's the final numbers, again, it's a moving target. Overall, I think people all believe 5G, especially the IM products, to be pretty high ASP.
Versus our current ASP on the 4G side, because on the 4G, we don't have IM product. Our product are mainly on the mainstream and also on the entry level. I think the blended ASP, let's just pick a range of, say, $10 to $13 or $15. If you use this range versus the 5G, I think it should be a pretty good ASP approach.
Great. That's helpful. Is your expectation that we're going to see aggressive handset subsidies in China next year to try to stimulate the market to adopt 5G?
Currently, we don't have detailed visibility for the handset subsidy, and I believe actually for next year, that they will have some. Maybe, we don't need to wait for next year, maybe in the next two quarters, we will see the operators, all three major operators.
Okay. Just on 5G customers, are you planning to sell to Huawei? Do you have design-ins with Huawei for 2020 on 5G?
I would not be able to comment on the customer side. In general, I guess, currently, 4G product, 4G customer, they all are our potential 5G customer. Currently, I would not be able to comment on 5G customers, specifically.
Okay. Maybe just switching gears a little bit to the PMIC business. You mentioned in your prepared remarks that PMIC is starting to ship into smartphones. Can you give us a sense as to how big that business is today? What typical penetration are you seeing for the PMIC when you sell smartphone chips today, and how do you think this plays out over time?
First of all, for the PMIC business, there are four major segments out there, which is the computing, display, mobile-related, and also AC-to-DC converter. Normally we don't break down specifically for mobile. When I talk about PMIC, I'm talking about all four sectors altogether. I think all four tech sectors altogether right now for this year, not just any given quarter, for the full year, our view is roughly probably will account for close to 10% of our overall revenue. In terms of growth rate year-over-year, we're looking for double digits this year. For next year, again, too early to tell, but at least for this year and on the last years, they've all been growth double digits.
Okay. That's great. Just on the same division, Wi-Fi. I think you've mentioned earlier that you plan to start shipping Wi-Fi 6 in Q1 next year. Is that still the case, and what sort of pricing PMIC do you get for Wi-Fi 6 versus your typical Wi-Fi AC today, just to get a sense for that transition that's going to happen?
I think for Wi-Fi, yes. I think that's still the plan, that we'll start to ship to plan. I think the product actually will be ready this year. We will start to ship next year. In terms of ASP, I probably don't have the detailed visibility right now. I think it will be higher, that's for sure. In terms of the magnitude, I guess, again, it's still evolving right now. We probably would not be able to provide detailed information for this question.
Okay. Just maybe final question on ASICs. I guess your consumer ASIC business today is more around game console, and there's a big upgrade in game console for next year coming. Can you talk a little bit about that, what that means for MediaTek? On the enterprise side, help us understand how the ramp of that opportunity, I think you mentioned multiple design-ins on ASICs for enterprise. Can you help us sort of how this might translate to revenues in 2020?
For this year and also for next year as well, I would say, majority of the ASIC revenue probably will still be on the consumer side. I.e., the game stations, the two major platforms, and also some related product. Even though we start to ship on the enterprise ASIC side, starting from this year, our view is for next year, I think, in terms of revenue contributions, if I quantify that as a % of overall revenue, it's going to be still very low. Low single %, if you like. I think that's on the revenue contribution side. But in terms of the potential market size or potential addressable market, maybe that's a better way to describe that. We believe actually based on the current technology we have, and also based on the current applications areas, we should be talking about close to 2 billion addressable market.
The good news is actually that addressable market should be growing as well, given the fact actually right now, people are just craving for more and more data. The much faster transmission speed, high-resolution contents. When you put all those together, right nowadays, consumers should be data craving for that. That would translate into more and more demand for the enterprise ASIC side. Brad, your voice is breaking down, so maybe you need to repeat again because we can't really hear your question at all.
Okay. With timing higher than corporate average gross margins, can you comment on the gross margin opportunity here? It sounds like this might be an accretive story for the business overall. Just wanted to get your sense for that.
Brad, sorry, actually, for some reason, your voice is breaking up. Can you just repeat your question again?
Yeah. Just looking at all the new products you have here, we mentioned Wi-Fi 6 and 5G and PMIC ramping up and ASICs, et cetera. Are these new product areas all higher than corporate average gross margins for MediaTek? Thanks.
I think in general, again, because none of those products are shipped yet, so the ASP, again, is still a moving target. In general, we are looking for should be similar, if not higher. Again, like I say, I think for Wi-Fi product, probably it's relatively common because the trend is quite clear. 5G right now is pretty heated in base and also pretty heated in competitions out there. In terms of final gross margin, I think we still need to wait for second half this year to finalize that. In general, based on currently available information, it should be better. Again, who knows what the ASP profile will look like once we get into the second half of this year.
Okay, got it. Thanks very much. That's it from me. Cheers.
Next one to ask questions, Gokul Hariharan, JP Morgan. Go ahead, please.
Hey, thanks. David, just one question on both gross margin and operating margin. I think we've done a very good job in the last few years of improving the gross margin pretty steadily. How should we think about further improvements of gross margin? Then kind of tagging along to Brett's previous question, should we expect the gross margin improvement from here on is not going to be that big? I think we're probably going to stay around these levels. At the same time, could you also talk a little bit about operating margins, given, I think we hit 10% operating margin after quite some time, and some operating leverage is starting to come through. Next year, obviously, you're expecting revenues, looks like revenue growth is likely to happen with 5G and some ASIC products also coming through.
Could we talk a little bit about the operating margin dynamics as well?
Well, I think for the operating margins for Q2, as you can see right now, we get back to 10%. In the last few years or multiple quarters, our operating margin is below 10%. Again, our overall goal in last two years or for next two years, we are actually trying to improve the profitability. When we're talking about profitability, again, it's really just both from the gross margin and also operating margin perspectives. In the last two years or four, six quarters, I think the major focus will be increase the gross margin because we come out from a relatively low base. Once we get into 40 something, I would say even though there's still room to grow, but in terms of the growth pace will be much more slower compared to what we had in the last few years.
Doesn't mean there's no room to improve. Again, I'm really careful when I answer this question, but neither to indicate we will continue to see quarter-over-quarter growth of improvement on the gross margin. After all, gross margin have something to do with our product portfolio or product mix, and every quarter is different. In the last few quarters, all on the rising trend, but doesn't mean the next few quarter you always stay the trend, especially on a quarter-over-quarter basis. If we focus on year-over-year perspective, if you just lengthen the observation window, I guess we still feel comfortable to see some growth year-over-year as on the gross margin side. Move down to the operating margin side, I guess, what we're really trying to push, in the last 2 years and also for next few years, is really the operating margin improvement.
Like what we explained earlier, for last year, the operating margin, and especially operating margin TWD grow, I think more than 50%. This year, I guess overall, we're looking for 20%-30% operating margin TWD improvement. Next year, we don't have the view yet. I guess hopefully will be the similar fashion, because if you do the math, as long as we can somehow grow the revenue, the top line, even at a mild 3%-5%, very much actually in the last two years, our top line pretty much remained the same, right? If we can somehow grow even for a low single-digit growth of revenue next year due to the new product portfolio, which including, but not limited to 5G, I guess the translations or trickle down to operating margin should be still quite sizable.
This is how we're trying to drive our overall business for the last two years and also likewise for the next two years as well. Unfortunately, I probably would not be able to give out a sort of guidance or view or target for that. Other same people kind of like expanding their numbers. I guess that's something we probably would not be able to provide right now.
Okay, great. Thank you. Thanks, David.
Right now we're having Randy Abrams, Credit Suisse. Go ahead, please.
Okay. Yes, thank you, David. I just had two follow-up questions. One on the consumer ASIC, just following up on Brett's comment or question. For the new upcoming gaming cycle, just want to see if you can comment if you expect to maintain the existing two platforms, and at this stage, if you view it as stable content or could be start where you could see some increase in that business.
Randy, what do you mean steady?
Yeah, just for the consumer ASIC, because you've had those platform wins, if you expect to maintain with the upcoming game console refresh your market share and from a value you provide, if there's room to increase the value or content you provided to those game consoles.
I see. I think for the consumer products or game console, I think overall, we probably need to wait for the sort of new product coming in. I should say, the customer new product cycle. Normally when the new products come in, we actually have the opportunity to win more sockets. For the current product, I guess, this is what it is. It's probably relatively stable. In terms of increase the market shares, normally we have the chance toInaudible state when there's a new product coming out, the new product on the customer side. Overall, based on the current design-in situation, we feel comfortable. We should be able to still continue to grow consumer side ASIC business.
Okay. The last one, I just wanted to ask on this G90 as the new product you launched. If you've seen anything on sizing or the customer interest, what type of category, what remain niche and very low volume, or do you have any expectations for this new category or accretive if it's higher ASP?
Well, first of all, actually, G90 is a gaming, I won't say it's a gaming platform. It's actually one of our platform, especially tuned performance for game-related performance. Very much, it's one of the key features or applications, if you like, for the smartphone, usually gaming for China. Some people play the high-end game, some people play the social game. Game is actually one of the most frequently used and very popular applications out there. Our view is actually, G90 is good for high-end gaming phone as well as for others, the general phone, even if you play the games occasionally. That's why we say the G90 is not designed as a niche product, usually a product with niche features, if you like, or niche performance, but actually designed for high-end game phone plus the general product as well.
With that, I think overall, we do believe actually G90 is, and also P90 as well, is actually really two of our 4G major product, the pillar product, should be able to provide reasonable returns for us.
Okay. Do you have any feel on traction or design win momentum at this time? Since it just launched, but how it's getting adopted across your customer base?
I think the adoption is actually pretty well. I think right now, today is the end of July, right? I think soon, within the month, you should be able to see some of our customers announce their products, the go-to-market plan. Design win is actually pretty good.
Okay, great. Thank you, David.
Ladies and gentlemen, we thank you for your questions. Now I'll hand it over to Mr. Tseng for closing comment. Please proceed.
Ladies and gentlemen, this concludes MediaTek 2019 second quarter conference call. We would like to thank you for your participation, and you may now disconnect.