Welcome ladies and gentlemen to MediaTek 2019 First Quarter Investors Conference Call. Your speakers today are David Kuo, Mediatek's CFO and Spouseman and Tian Yisheng, Mediatek's Senior Manager of Finance Division. Mr. Zheng will report first quarter results first and Mr. Guo will provide prepared remarks.
And after that, we will open for Q And A. I would like to turn the call over to Mr. Sun. Please go ahead.
Good afternoon, everyone. Welcome to MediaTech first quarter 2019 conference call. As a reminder, all contents provided on this teleconference is for informational purposes only 9.20 for investment advice. He's not an issuer nor any of independent providers is liable for any actions to take any reliance on content contained herein. MediaTech provides some TiVo's financial measures for supplemental information.
Earnings distribution is made in accordance with financial statements based on PIBarn. I'm authorized recording or redistribution of the video, audio, text, and presentation content. Of this data conference is strictly prohibited. By participating in this data conference, you agree to adapt the outgoing terms and condition. Now let's start with the 2019 first quarter financial results.
Revenue for the quarter was $52,700,000, down 13.4% sequentially and up 6.2% year over year. Gross margin of the quarter was 40.7 percent, up 1.8 percentage points sequentially, and up 2.3 percentage points year over year. Operating expenses for the quarter were $18,300,000,000, compared with $19,900,000,000 in the previous quarter and $17,200,000,000 in
the same period last year.
Operating income for the quarter was $3,200,000, down 17.7% sequentially and up 54.3% year over year. Operating market for the quarter was 6% compared with 6.3% in the previous quarter, and 3.9% in the same period last year. Net income for the quarter was $3,400,000,000. Compared with $4,100,000,000 in the previous quarter and $2,500,000 in the year ago quarter. Net property market for the quarter was 6.5%, compared with 6.7% in the previous quarter, and 5.1% in
the year ago quarter.
EPS for the quarter was $2.17, compared with $2.63 in the previous quarter and $1.61 in the same quarter last year. We also provide some TFI's financial measures, which exclude share based compensation, amortization of acquisition related assets and tax effects. Please refer to earnings press release and presentation for details. For the second quarter of 2019, We expect revenue to be in the range of $59,600,000,000 to $63,800,000,000. Up 13% to 21% sequentially, and a forecast exchange rate of $3.19 to USD 1 US dollar.
We are forecasting the gross margin as 40.5 percent, plus or minus 1.5 percentage points. And quarterly operating expenses ratio to be at 32percentplusor-2percentagepoints. And now I would like to turn the call to CFO, Mr. David Guo, for prepared remarks.
Well, thank you, Terry. Good afternoon, everyone. Before the Q And A, let me just give you guys a quick update for Q1's overall performance and operational details. 1st of all, I mean, for the Q Y, the overall, financial performance or revenue, especially a rich in the original is the upper end of the guidance. And also, I mean, the gross margin also reaching the mid to high end of the original guidance.
And on top of that, I think for our 3 major business lines, which uses smartphone, growth sectors and also small home sectors. I mean, generally, they are all contributes, you know, equally around 1 third of overall revenue. So, I think overall, I guess we have a much more balanced business portfolio after 2 to 3 years of overall adjustment. And more importantly, I guess, I mean, earlier this year, I would see a week what kind of mentioned that, 40% gross margins this is one of our goal trying to achieve this year. And now, actually, we're happy to report that in Q1.
We're ready to see a more important gross margin. That's, a quick overall update on the corporate level. Lay down the updates on free major product line level. I will start with some mobile computing. I think for mobile computing, which include your smartphone and tablet, overall mobile computing contribute 30 to 35 percent of Q1 revenue.
I think for Q1, generals, the due to the seasonality issue, the small computing is relatively weak, compared to the other line of business but we do see a strong, seasonal growth in Second quarters for our mobile computing sectors in, on on the product front, I think both for T70 is, ramp up pretty well and also for P90. Ramp up pretty well. I mean, we should be able to see our customers start ramps with our P90 inside products, in the beginning of Q2. And we will also foresee a stronger momentum extending to second half twenty nineteen. And I think for both of these 70 and also devices, as a media tech team, just leading players in providing some reach AI functions, not just camera phones or audio functions in a smartphone.
And we are probably the first one to focus on we call the APU is on top of CPU and GPU is an AI processing unit. They've used that for AI processing units. For our customers and also lots of, app developers to truly leverage the AI to collection function provide more, embedded use insurance to our end customers. I think that's pretty much from the, p 17v90 from And also looking for the 5 g from, again, like what we explained, to the Capital Market, we already demo our M Seventy moments, during this MWC earlier this year. And, we are also right now implementing our 5G SOC with pretty good feedback from the leading customer in China.
And, we, right now, feel fairly comfortable. Basically, we should be able to catch up the first half 5 g product cycle, and we should be able to see, few customer and sponsorship our 5 g s l t products, in the first half of next year. And I think for our 5G SLC product, we were starting with, the high end product, segments. For next year, I mean, we would extend that 5G product portfolio from the high end to the end range as well. And but, overall, I think it's kinda wrong.
We feel fairly comfortable both from the product timing and also product competitiveness for our financial products, for the 5G product cycle, especially. I think that's conclude about my update for mobile computing. Now we'll move into the next sector, which is a growth sector. And for the reference, I think growth sector, which include an IoT product, PMIC product, custom enhancing product, and some other product. But in general, I think the IoT product is account for half of the growth sector revenue and also, few megahertz, crop your account for not a 45% of our revenue on the growth factors.
So, for the IoT product, it's, we see a strong moment. In Q1. And also, we will also foresee a pretty good momentum in Q2. I mean, for IoT, within IoT, we have like, Wi Fi product, voice assistant product, machine to machine product. But in general, I think, for IoT product, we see the long term growth mainly due to a very diversified customer portfolio and also a lots of new emerging, applications for the IoT products.
And on the payment and also on the customer ethics side, I mean, we also, see a pretty strong year over year growth for both for PMIC and also customer ASIC. And more importantly, I think for the currency, the major my or on all business. Other piece of customer assets, which may be able to get counsel from. But starting from Q3 this year, you know, new sector, second sector, which is the end of the diagnostic, will start to, to shift manufacturers. And I think there will be a, a very important milestone for our customer asset business.
I think that's, a quick update for the growth sectors. The least one on leads will be on a small I think for the smart home and other products, like for the first quarter, we see, seasonal sequential down. For the smart home sector, I've been Q1, overall revenue account for 32% to 37%. We still believe, even though it's actually some people think it's smart home, mainly the digital TV. It's actually a mature product.
But we do believe smart TV and also a small home in general, still have a bit too long term growth opportunity. Like what we download during yes, earlier this year, we are probably the 1st company out there to operate AI with the picture quality. And, now, actually, we're trying to import more AI function, you know, smart home and platform and all have pretty good receive, response from our end customer. I think we will continue to incorporate our new technology to the TV platform, and we do believe that will further the future growth even for the TV from I mean, that's conclude my, quick update for from the corporate level and also from the 3 major product line.
Thank you, Debbie. We are now ready for Q And A session.
Yes, thank you. And please ask your question after your name is announced. And as a reminder, it is greatly appreciated that you turn off speakerphone mode of your device to prevent possible echo effect. We thank you Press the line to ask questions. Randy Abrams, Credit Suisse.
Go ahead please. Okay.
Yes, thanks a lot for the details, David. I wanted to ask, the first question on the revenue growth for 13% to 21%, which is pretty decent, but one understand how much of that you're seeing in terms of environment more just say like seasonal pickup both in the smartphone and in the in some of the growth products or how much are you actually seeing incremental that's from your business drivers? And then a lot of companies are talking about a second half or a strong second half. With your guidance for second quarter being fairly healthy, guess, do you have a view second half kind of relative to most years? If you see certain drivers for that second half could be coming in better?
Okay. Well, 1st of all, I think for the second quarter, we see a fairly healthy growth across all three sectors. You know, within a three second, probably SmartVoice, the one with the strongest wheels, I mean, mainly due to the relatively lower base in Q1. But bear in mind, actually, even though we see a pretty strong, due to, I should say, stronger than normal seasonality. Normally, if you look at how the Q2's and the seasonality in June or it's 10% to 15% off.
But right now, the guidance is 13% to 21%. So it's actually slightly better. Than normal seasonality. But but when we look at the full years, and, I guess, right now, we're still not change our full year's view yet. Ready to record that in Q1, I think the CEO rate kind of giving her out that the full year's view on top line, especially our technology, we still remain in the back of 2019, versus 2018.
I think the revenue probably was still gonna be, a relative flattish, maybe, signed up, but we we didn't really foresee a stronger EOBE to top line growth. On the other hand, I guess, the way we're trying to manage with our driver business is, because we understand from the overall demand perspective across our sectors, We didn't really see any. It's a bit of fundamental change if you ask me, because, for 4 g right now, it's obviously, it's quite clear people are getting ready to transition from 4G to 5G. So obviously, it's, you will not be able to see, but very strong 4G growth. This year.
But hopefully, that will lead to a much stronger 5G growth. For other markets, actually, we will see this pretty much in line with the global semiconductor growth rate, which is low single digits. So I think, so again, answer your question, let me just summarize the First of all, for Q2, we do see a pretty healthy growth across all three sectors. And among the three sectors, our model has a strongest growth rate, which are one good reason we started late at risk in Q1. But that doesn't constitute you.
We're going to change our view because if we for the full years, We're still kind of conservative right now, if you like. And, to your side, I guess, we're still looking for maybe another flattish display up here on the top line. But, we do foresee, we should be able to continue to improve the gross margin and capture the operating expense and to see another good year of operating margin dollar growth. Very in my last year, I think, 2018 versus 2017, The gross margin dollars rose more than 40%. I mean, this year, we kind of, probably would not be able to reach 40% another 40 year, percent growth.
But at least we're looking for double digit growth, if not 20%, if not higher, specifically for operating margin dollar growth this year.
Great. Thanks, David. Again, if I could ask a follow-up then on the gross margin. I think on the Mandarin call, you mentioned smartphone now at corporate average, if you could take up maybe a view on margin by segment, if you now think mobile should be, you think more in line with corporate is something here to looks more sustainable. And then if you're thinking on 5G, the initial stage, how should we think of the profitability in the early stage?
Starts out high margin or it's high development costs that takes time for the profitability?
Well, I think for the 5G right now, as I is, maybe a little bit premature to give us on the guidance viewed on 5 g, but, let me explain to you a question from a slightly different perspective. I mean, Zalguis, from an ASP perspective, I've been 5G Stephanie's, a very good product, I think compared to our current 4G blank ASP I think 5 g will be multiple time hires. But, but on the other hand, actually the 5 g is because right now, we're gonna put in more technology on the chipset. And the cost will be much higher as well. But, by end of day, I just need to know what's the final pricing, we can charge to our customer.
Currently based on the pricing, portfolios, I mean, overall, the gross margin should be, compared to 4th, you should be able to sustain But, again, it's that the pricing is always a moving target. And by end of this year's, you never know landscape will become on the 5 g side. I think for 5 g, probably the better way is actually when we report to do everyone of our view maybe later this year. But so far, based on the currently available information, I would say, if I see probably because we can use a similar, gross margin, baby, slightly better. It depends on the final, ASP profile for my GMV.
Okay. And do you think the margin for mobile overall, it's now, I mean, or do you still think of the non mobile as incremental gross margin driver if that goes faster? Or it should probably stay pretty balanced between the 2 now?
I would say it's, it's a later basically to stay pretty balanced among the 2.
Okay. The last question I had, just it seems like you've made a bit of change where it used to be. You put everything in the mature product that wasn't growing as much now it seems like the emphasis more to call it digit like smart home. Has there been a reclass of products for now certain things are moving where it's no longer just a mature bucket, or if you have some of the Wi Fi that goes into the home or set top box like other products going in there? And if you change kind of your view on, is it still mature bucket or now you want to see that as a growth category as well?
First of all, we didn't really do any reclassifying. So basically, it's a, that's a counter to say, but we do change in the naming for the good reason. Earlier because even for the digital TV or smart home, we do believe going forward, we still have new growth activity especially we right now, we see a lot of emerging technology will be flowing into the small platform. So that's why we're we're kind of changing them, trying to get a mature product for small, beautiful, mature, we don't think that's the right way to describe this live business. But you took the confidence or the cap our categories that actually remain the same.
It's really just barely smart home plus, the feature phone and plus a little bit, actually, other products.
Next, thank
you for questions.
JPMorgan, Gokul Harishalan. Go ahead please.
First of all, on the gross margin, a great delivery on the margins. Could we talk a little bit about, what is our net gross margin milestone and, what are, is 40 around about 40% the best that we can do. I'm just asking that because, you mentioned earlier to Randy's question that, now the product portfolio margins are fairly similar across different segments, especially, growth segments of the smartphone. And you're also anticipating that 5G is probably going to come in at similar margins compared to a slightly better margins compared to your current smartphone portfolio. So what are what should we be doing to to see further margin upside, gross margin upside, from the current 40% levels in, let's say, a couple of years kind of trajectory.
Well, I think all of you is actually the near term near term the time, maybe just, 1 to 2 years. I think the goal will be trying to maintain the gross margins, with things, basically above 4%, but to a precise, maybe it's actually, in the low foot and wrench. And, not in the same time by building a new business portfolio, which including, but not limited to 5 g data switch asset of motive and, custom asset. And we do believe it actually is, for the DS without a splice flow, but new business getting in probably, turns, the best we can do, just gradually increase to I just say 40, 43. Hopefully, it's, on the high end of this range, but probably, you know, it depends on different quarters, different customer mix, different PG mix, all we think is our just caliber access, like go 40 range, probably would still need, give us somewhat high, say, 1 plus year, hopefully 2 years high, we can see a more structured change, a billings to a new product portfolio, which carries, a very gross margin.
I think that's how I do.
Okay. That's very clear. Secondly, on the operating expenses in R&D, especially How should we think about R and D for this year? I think previously you had said, we'll try to keep R and D pretty much flattish for our overall OpEx pretty much flattish for this year. Is it still the goal, given that it feels like you're accelerating 5G SOC pipeline a little bit.
I think previously you're expecting SOC shipments are going probably later in 2020, but looks like you're now more confident of hitting a 1st half twenty twenty goal. So does that mean that R and D and OpEx should be higher this year or is it still going to be in the same envelope?
Well, I think, the guidance remains similar. Basically, if you look at the 2 numbers, what is the absolute dollar turns on operating expense line? Again, on a year over year basis, we're looking for 0 to 5% growth. I think that's actually in line with what, we provide about the view earlier. This year.
But until the ratio, it depends on the revenue range. So, I would suggest, from a modeling perspective, maybe more focused on the absolute dollars. Again, year over year, we're trying to manage that from the 0 to, 5% range. So the goal is actually trying to see the profit growth outpace, the operating expense, gross. So far, I think for most of the 5G investment, what we did actually, we do a lot of internal reallocations.
We, reallocate lots of resource from 4 g, 4 g to 5 g. In this entire, actually, we also reallocate some of the, basically smartphone people to, non smartphone business. The overall headcount increased operating expense the increase is going to be a manageable and mild.
Okay. Okay. Understood. Just wanted to have some color on what do you expect, I think market share situation to be like. I think If I remember last year, especially in the middle of the year and in second half, I mean, it did have some meaningful market share gains, especially in the mid to low end category with some of your lower and heal your products like, P22, H22.
And I think it seems like you've carried some of that momentum through, in this year, first half as well. Could we talk a little bit about what do you feel the market share momentum is looking like when you talk to customers in second half of this year? Are we still going to see some, slow market share gains, or is it basically very balanced situation between MediaTech and Qualcomm when we get into the second half?
I would say last year, is slightly different because last year, as we come, we're starting from a relatively low market share due to some product portfolio issued back in 2017. So 2018, actually, we see a pretty strong, a much year weekend. For 2019, I think we still see somewhat this year again, but in terms of, the pace and scale is much mild, it's much mild. And, but more importantly, Actually, it's not just, on the market share, it's one of the market share, by the way. It's a 2, the, that information about the market share.
Why it's on a volume perspective? But not as on a real new perspective. I mean, on a phone perspective, just like I say, it's actually gonna be, mild starting more importantly, usually just the relative market share, because, if you look at our product portfolio, we obviously started to view the product portfolio from all the way from basic 17. Now it's been 90. And also during the early TriNet conference call, I mean, Rick's answering quite clearly about our 5 g product portfolio, what even getting into a higher segment.
So I mean, I mean, it's, instead of the only folks, the absolute market share again, I think more importantly right now, I'm not especially once you get into 5 g, I think we're trying to get into, all segments really and only focus on our mainstream and below saying that, like, what we did in 4 g. I mean, if you guys record, what what we can explain about the trend of strategies, I won't say change of strategy, it's actually overall strategies. The reason I was slow down on X Series on the 4 g is not doesn't mean I shouldn't been seen as a signal about we getting out of the hiring segment. It's really just we understand for 4 g, because we were late again and it's going to be a uphill battle. So, all from an ROI perspective, probably the most efficient way to still trying to get into 4 g.
I. M. What we should do, you know, back in 2 years ago, and actually, we make sure we catch the first wave of 5 g and starting from the hiring. I think that's what we did. So again, to make a all story show this year, I think on the absolute market share again, both from a shipment or from a brand new perspective, we do see, continue market share gain, but at a much smaller pace and scale compared to 2018, But more importantly, right now, it's actually we get into the all different segments, all the way financial level to mid high end.
Hopefully, through the 5 g, we can even get into the premium segment.
Okay. So just aaron question to that, David, Could you give us a bit more qualitative color on what, what what your clients are, giving you feedback on P90 and AI features, and what should we expect when it comes to? I think I know that P90 is not going to be the highest volume product given the price range in targeting, but what should we expect as we go through the year in terms of product pipeline, which is more like derivative of P90, do we actually have a lot of products coming towards the second half of this year that kind of fill that gap in a more lower end or more affordable price range?
Well, I just want you to say the pin ID is more on, the high end of the special premium range. So on the absolutely, shipment volumes, I think, will be a much smaller companies with online, the mainstream product and also very entry level. We only focus on quarter over quarter P90 revenue contributions, you'll be able to see is, solid by Q2, the P and I, you know, increased their revenue contribution on our overall smartphone revenue. And, hopefully, that will have provide some positive, you know, it will put us on the gross margin as well because I have to, you know, get curious at the higher ASP and also, it's, you know, Yep. That should help on gross margin.
Okay. How should we think about I think you guys have been ahead of the pack in terms of launching some of the AI functionality. How quickly does that migrate down to more main stream segments as we get in the second half of the year?
Actually, right now, all our segments, again, from the entry level demand stream, all have AI function, but we probably, like, you know, realize also AI function with different implementations. For the AI product right now, we're likely an ID, we have something called APU, which stands for AI process units. You know, the general idea is to think into our channel understand that it's actually in the past where CPU and also GPU. Now we actually have, you know, a new sort of processing call. If you like, embedded processing call, we call it APU.
So for all the AI functions, mainly will be performed by the APU. And but if we need more horsepower, we can also dynamically, you know, core, both for GPU and CPUs as ports, whereby in general, say maybe 80 or even 90% of the AI calculation will be carried and performed. By the APU, they'll be much more efficient, both from a performance perspective and also from a consumption perspective. For the Mailstream product, we also have the APU, but it's going to be the last powerful APU core. But for the engine product, we don't have a dedicated APU yet.
We're mainly using CPU GPS to perform the AI functions, plus a little bit of DSP. But going forward, I think when Titus ride, we will also consider to put certain AB due course, even eventually most will.
Okay. Thanks, David. One question on the ASIC side. Could you talk a little bit about, I think in the Chinese call, I think Rick mentioned, there are multiple new programs that you're ramping up on the ASIC side, especially non consumer ASICs. Could we have some color in terms of what kind of categories these are?
And, also, when we talk about ASIC and SiGe together, according for 10% of revenues, next year or 10,000 or more, the ASIC is, including consumer ASICs, or is it primarily looking at the new ASIC projects, which are mostly non consumer?
Well, first of all, when Rick gave out the guidance earlier, so this year is when he talked about 10% is not just the asset. Issue is that the new business, which including 5g Automotive, and also customer assets. So I want to clarify that. It's not just asset. And all of the assets, which include everything, basically, it's a business and also a new business as well.
So through the asset business, 5G business, and also the more new business. I guess, we are hoping. Okay. And targeting, we're gonna have, see more in terms of revenue coming out from this new business. Again, the general idea is actually to keep.
We have new more new revenue from the Ubers. Hopefully, that would just provide us support, both from a revenue growth perspective and also from the gross margin support perspective. So that's point number 1. Point number 2 to answer your detailed questions. I think, When we talk about the the custom assets, I think the 2nd pillar or 2nd segment, we talked about solutions, that enterprise asset And I've I've been retrying to explain, actually, it's a fortified asset.
Maybe most people are only referring to something called a data switch. But you realize that in this scope that should be beyond all intents would definitely swap the large incentive right now because it's a sustained and also due to the data center and also the whole data phenomenal nowadays. Actually, it's, regardless you're using some small phones, PCs, even wearable, sometimes I would see the audio data is the unbelievable based. And, And that won't be the process. So I mean, I mean, the sector of success is number 1.
Now that means the enterprise apps is, it's definitely, data switch. And I I mean, we also mentioned some of our Q3. Our first products, on the data switch, actually, sub ship already. In Q3. And roughly this year, and we will be still very small, but I touched this, this is very meaningful milestone.
For us because that's, B2B, the customer's customer, and also the customer's global T Y customer, they have really high requirements both form formulas, quality, and also technology perspective. But on top of, data switch sectors, I mean, there's not a new sector, which is called, but the service sector and also, you know, AIS have service sector, but just one example, not the, not the only example. If nowadays, the losses, the AI functions need to form both on edge side and also on the server side. I mean, different people have different approach for the for the server AI, you know, the regiment. Some people using GPU, some people using, different process units.
Is, and all those processes you need will have requirements, sometimes what we call the high speed service, because I maybe have different call, and that will be, you know, being has been in between the call, they will all require high speed service, within the chipset and also, within a different system. So I think that's actually another, opportunity. Thirdly, I think, which including, but not limited to, because we do have a pretty, tough to be about potential 5 0 out. And in order for 5 gs, all these are also some base station opportunities for 5 gs as well. Again, within the 5 gs base station, they are also high speed service needs and also touch the ILDs, and we believe actually that could be another potential opportunity.
But again, doesn't mean we have that yet, would you say, I think on risk perspective, you shall explain, the, the better way to think about that is really should end the price asset which including not limited to data switch. I think that's the key word.
Okay, got it. Last question for me, David. I think You talked about growth segments starting to accelerate in Q2. Could we have some number that we are already in end of April? We have some idea about what you're expecting growth segments to grow this year?
Is it going to achieve double digit growth or is it going to be slightly falling short of that?
Well, I think the growth sector in general, actually, we do believe we should still able to see a double digit growth year over year.
Okay. Thank you very much.
Next one, we are taking Brett Simpson, Arity Research. Go ahead, please.
David, I just wanted to get your perspective on the Qualcomm Apple settlement. I mean, obviously, it's a big event for the industry and also the subsequent exit of of Intel and the Modem business. Any thoughts just in terms of how that's my impact media tech sort of on the medium to long term just be interested in your thoughts, sir?
For the near terms, obviously, when you really see any material impact, both for 4 g and potential 5 g business. At least right now, a little bit more color on 5 g, I've been, I've been all players, basically, it's not only, it's, competitors and also, it's a MediaTek. I've been super aggressive in promoting 5G solution, SLG solution, to try that customer. And, so far, we feel, this is actually the pretty positive feedbacks out there, and we feel fairly comfortable in terms of market shares and also in terms of timing. And so, we talked with other settlements, so far, we didn't see any material change from the Costco side or in the marketplace.
For the near mid to long terms, maybe that's something we still need to observe. But so far, the the the the new settlement case, if you like, they really changed our view about, what's our business plan, also, so what's the feedback we got from the customer on the 5G types of funds. For 4 g, I think this is a a little to to no impact at all.
Okay, super. And maybe just switching gears a little bit to 5G, and comparing the opportunity that you in front of you versus 4G. I mean, just being interested in your perspective, like, we've obviously seen Huawei go more captive or it looks like they're going to go more captive in 5G. They're a big customer for you in 4G. So when you look out at that sort of 5G opportunity from a market share perspective, do you still think mediatex position can be do you think mediatex market position and in 5G could be larger in terms of market share than 4G.
Are you focusing on a small, handful of customers because it seems like there's a lot of consolidation in the China hands the market, Oppo Vivo Xiaomi, but maybe there's not a lot of big opportunities outside of that. I'd just be interested in your perspective on how you sort of look at that 5G market share opportunity for MediaTek in the years ahead.
Overall, our view is 5 g adjustable market should be bigger than 4 g, mainly due to a much higher ASP. I guess what we're talking about, earlier, actually, the intramivations or CAPTek solutions, but bear in mind, 5 g, the list for the first year or 2. Most sizes from our 5 gs would be too high in product. Probably, you're not gonna see, like, a $1000 5 gs. But for most of the mid to high end products, for like you're going by Huawei, they're pretty much is a, currently, as we speak right now, it's a pretty high percentage of the solution that I use internal solution anyway.
So you can consider those documents actually is not in the markets already. 5 g getting it's gonna be similar. Unless you believe it going forward, even for the entry level, we're gonna use the internal solution. Otherwise, I would say for the near term, unless I know, from the volume perspective, the impact should be mild, okay, if this is any. But on the other hand, don't forget actually it's right now.
It's with 5G ASP. We're talking about a multiple times higher compared to the 4G blended ASP. So, if if I do the math, I'll I'll assume the 5 g mark, it should be much higher, unless, people believe they're gonna see more centralized solution. Because right now, it's not people who are having a solution, maybe just Huawei and also Samsung. But unless you believe it, it's with new people coming out and provide, become the Internet solution.
Otherwise, the overall view is mainly due to the much higher speed, and also from media perspective, because we right now, we're getting something called the segmentation expansion. Our trips are gonna become bigger as well. Overall, I guess, we still feel positive about that.
Okay, super. And then just maybe a bit more near term, just on the P70 to P90, looking at 2019, do you think the scope, because I think you were sort of suggesting this year there may be some modest market share gains or maybe you'd relatively flat flat market share. Is that still the case, or do you think with some of the advances in your guidance for Q2, you think there's scope for more share gains this year for MediaTek since market
I think I think overall it's a 5 digit value in market share gains. It's for 5 digit value up in terms of market share.
Okay. Got it. Got it. And then also maybe just switching gears to the ASIC business. I mean, there's not many guys doing advanced ASX today, maybe broad comment, one of the sort of dominant guys.
And obviously, their margin structure is, you know, significantly higher than your gross margin structure. But then normally when you get into this ASIC business, you have very large backlogs. You can see multiple years ahead of you. And it's not so much this is obviously building up for MediaTek. But can you maybe just talk a little bit about the backlog you have today the pipeline of business we see today and where you really see the biggest opportunities for, for ASIC, And to what extent you can build Tier 1 relationships, particularly networking and autos with your ASIC capability?
Unfortunately, we would not be able to talk about the outlook situation, but I think just like you say, when we get into the enterprise, actually, in general, it's a longer term, stable business once we get in, that's why we say, I think more importantly, probably just understand starting from 3rd quarter this year's, our first product, stop the ship on our customer side after, I think maybe it's, you know, almost more, it's probably more than years of deciding and if I win, process and also manufacturing process. And, also on top of that right now is that we're just winning more projects, from, the new customer and also from the new customer and also from new customer as well. But until the backlog, we probably will not be providing permission right now.
Okay. And just building on that then, David, I guess, I mean, we've always known MediaTek as more of a consumer, consumer semiconductor play. This is a very different business. In terms of the product cycles for ASIC, I mean, typically when you win some of these enterprise ASIC businesses or other things that you're doing around 30s, how long are these engagements? Are they sort of 2, 3 years in nature and you have that sort of locked in?
And you can see that the the forecast quite clearly. I mean, just give us a sense for some of the deals you're signing, how long do they spread for? As well,
I think the general idea is actually from deciding and if I win to first time revenue, what's on file? Maybe 12 to 18 months type in general, okay, different products on that, maybe it's quicker, some may be even longer, but in general, on average, after 12, 18 months time from deciding if I went to 1st time revenue. Okay. And But, the good news is once you see the first time we'll do it in general, that should be on the other end. It also depends on how the end customer products are shipment going.
But in general, that should be pretty long tail to the growth or demand to solve it.
Okay. And can you provide any sort of number of design wins you have in just to get a sense for how many engagements we're talking about here?
I think for this year, like I say, for the shipment perspectives that we have a 1, one project shift. But from this, I mean, perspective, I would say probably that's, 4 to 5 projects ongoing.
Okay. Super. That's very helpful. And then just maybe on switching gears on Wi Fi, because this is obviously the largest part of of your of your growth segment today, and we have a transition to 802.11ax or Wi Fi Six. What what what where is MediaTek with that product?
Both in the sort of router space, but also in the device side, TV side or whatever client side, And anything, when do you start shipping it to 11ax and how does the pipeline look for this and the ASP opportunity look for this for media effect?
I think for the AI, it's basically turning out this year, the customer, scholarship with our product maybe earlier this year, first quarter next year. So this year, we didn't really foresee any, didn't really include NAEX revenues on the Wi Fi side, but we, for the longer term, we do foresee, actually, it's going to be a pretty strong events out there, for the, again, from our perspective, that's not an example about segmentation expansion because in the past, traditionally, we are not in that sectors, but now we're there to actually get into, the hiring sectors.
Okay, super. And is WiFi a $1,000,000,000 business for MediaTek today, excluding smartphones, just looking at the the Wi Fi IO, the the the gross the gross division?
We will not be able to we didn't really disclose Wi Fi only, but for the IO is a 15% of our out of our $8,000,000 revenue. So it's close to the limit. Yeah. For the whole IoT, which is including, but not only the Wi Fi.
Okay, super, super. And then maybe just a last question on the balance sheet. I mean, you have one of the more healthy balance sheets and semis, you know, of helping that cash position. Any thoughts or any recent thoughts or changes in thinking at management level in terms of how to either change the way you return cash to shareholders or, whether there's whether you think there's more appetite to look at maybe M and A, for example, to help boost the non smartphone side. Any any thoughts there on use of cash?
I'll be able to use of cash is, on top of that, which is cash dividends. I think we've been I've been, maintained this with the cash in the policy for the last 10 years. In general, we paid out, in the range of 60 to 70% of our, free cash flow, such, EPS, back to our shareholders. I think we will, for this year, I think we will continue to do that as well. On top of that, the remaining cash, if you take a look at the cash flow, in the last few years, we do spend quite a little, quite a bit on the M and A as well.
So going forward in a base, it's gonna be, it's a one of our, important strategy in building our necessary business portfolio. You look at our business portfolio, again, it's because it's a small home, the growth sector, which is the IODP mix and also asset and also the small home. Actually, it's a big portion of that, actually, through the, the range of M and A. So going forward, actually, we do we'll continue to leverage to them as a tool to build a much more balance and diversify and also more importantly stable and profitable. Personal portfolio.
I mean, that's something we'll continue to do. And on top of that, actually, if, if we continue to improve our operations and also if we continue to improve our prostability, I think when the, when the tire drive, I think the the whole world considers about, a different policy on the on the catch they all, which include, but not limited to, touch them and also, basically, have to return to share with the policy.
Great. That's it for me. Thanks so much, David.
We are now in question Next, we're having Charlie Chan, Morgan Stanley. Go ahead, please.
Hi. Hi, David. Thanks for taking my follow-up question. So, you kind of reiterated your full year revenue guidance, right, even with, first quarter at the high end of the revenue guidance 2Q, brand new brand new cadence also really strong. Right?
So so, do you see any kind of, risks in second half because if you guys implies a second half, you know, headcount, high growth could be delivery miles. Can you comment on on their products?
We we don't have a clear view for second half yet, Charlie. But, but based on the 1st quarter and second quarter, I have to say it's actually somewhat slightly better. Than our original expectation for the full year 2019. Okay. Currently, we didn't really change our view for the second half, the second half year because of a different business line have different, implications in a consideration, if you like, taking smartphone, for example, even though we see a pretty strong quarter over quarter growth in Q2, but we're still kind of, like, expecting getting ready for, you know, the 4 g 5 gs transition.
But in terms of how fast or how size flow, that way, the transition will impact The second half of the smartphone, especially for 4 g smartphone demand. That's something I guess we need to monitor closely. I think that's point on one. One of the two is actually when we look at from the macro perspective, even though our business actually pretty diversified. Just from a macro perspective, I mean, recently, I see, both from the intels, or TIs, early announcement, we we I think we shared a similar view.
We didn't really see any sector that has a stronger, very strong year over year growth. It's actually holding out well for the whole 7, something like your obvious, maybe your gross at low single digits in 2 to 3%. I guess that's why I'll be actually for the full year, this year's, biggest power perspective, we really see, at the new products, picking and contribute sizable revenue, gas, that would give you a next year, but this year's, it's pretty much the existing product. The the best thing we can do is actually is to improve the profitability. So that's why, when we give out a full year view, well, especially on the top line side, we kind of still sort of be conservative, say, is only flattish to slide up.
But, you know, I go home with the answer. The question is, We we don't have a solid view for the second half, but if you do the math, it it does mean the second half may be softening a little bit if we're trying to, you know, walk out the math. With an organization, your views, we don't know yet, actually. So we still need to see more data points coming in, when time is approaching.
Yeah. That's that's a fair enough, I think. Yeah, so we're we're also kind of concerned about, you know, where is the strength coming from? For example, 2nd quarter, your smartphone business is still grow quite rapidly, right? But, I think according to, the market research, it seems to be only one OEM, which is Huawei.
So, in terms of your customer or where do you see the growth, except for the single customer? So can you give us some color, you know, maybe domestic versus overseas markets and also how are those other OEM customers are doing in second quarter?
We probably would probably would not be able to comment teams, on Vision NAND, let me try to answer your question from a slightly different perspective. Again, from the overall demand perspective, our view is actually for China this year is on the swap I'm talking about is really just year over year probably down 10% to 50% from volume perspective. And, from the overseas market, especially if the emerging market is still growing. On the global scale, obviously, the smartphone will still grow, a very low single digit. And, and and if you use that number, it'll fluctuate our smartphone revenue flag, I think for 4 years, I'll be using smartphone year over year when we flattish to maybe sign up.
So nearly 4 CEO forecast, a strong smartphone growth this year. K. And likewise, for the full years on the whole company, I think we shared it to some of you.
Okay. Okay. And that's the, maybe, on the blended SBI. I know, you no longer disclose smartphone shipments and and and SP But for 1Q and 2Q, what's the trend of the blended SP? And what what is it going to be in in second half?
I think for Q1, Q over Q is trending up a little bit, for Q2, we foresee going to be trending up a little bit as well, mainly due to the, the product segmentation migrations, into the higher end, mainly P90. And for second half, I guess we still need to, see what's the final, sort of product base looks like. I think for Q1, Q2, we'll see a side sharing hub on the SCC side.
Okay. Okay. And lastly, yes, and lastly, maybe some preliminary assumption for your kind of 5 g, chipset s v versus 4 g. Do you have that that number?
Unfortunately, I don't have any numbers to today, but, again, it is still a moving target right now because all major players are in discussion with our customer. Customer have different view plus the competitive dynamic. But in general, I guess, we're still looking for you know, multiple tires or the highest of, 4 gsLC selected SP.
Okay. Okay. Got it. Thank you very much.
There appears to be no further question at this point. I'm going to hand it over to Mr. Zheng for closing comments. Mr. Zheng, please go ahead.
Ladies and gentlemen, this concludes MediaTek 2019 First Quarter Conference Call. We'd like to thank you for your participation, and you may now disconnect.
Ladies and gentlemen, we Thank you for your participation in today's conference.