Welcome to the MediaTek 2018 third quarter investors conference call. Your speakers today are David Ku, MediaTek's CFO and spokesman, and Jessie Wang, MediaTek's Manager of Investor Relations. Ms. Jessie Wang will report third quarter results first, and Mr. David Ku will provide prepared remarks. After that, we will open Q&A. Now, I would like to turn the call over to Ms. Jessie Wang. Ms. Wang, please go ahead.
Good afternoon, everyone. Welcome to MediaTek's third quarter 2018 conference call. As a reminder, all content provided on this teleconference is for informational purposes only, not intended for investment advice. Neither the issuer nor any of independent providers is liable for any action taken in reliance on content heard here. MediaTek provides non-GAAP financial measures as supplemental information. Earnings distribution is made in accordance with financial statements based on GAAP. Unauthorized recording or redistribution of the video, audio, text, and the presentation contents of this teleconference is truly prohibit. By participating in this teleconference, you agree to accept the foregoing terms and conditions. Now, let's start with the 2018 third quarter financial results. The currency here is in TWD. Revenue for the quarter was TWD 67 billion, up 10.8% sequentially, and up 5.3% year-over-year.
Gross margin of the quarter was 38.5%, up 0.3 percentage points sequentially, and up 2.1 percentage points year-over-year. Operating expenses for the quarter were TWD 19.5 billion, compared with TWD 19 billion in the previous quarter, and TWD 18.2 billion in the same period last year. Operating income for the quarter was TWD 6.3 billion, up 54.2% sequentially, and up 27.2% year-over-year. Operating margin for the quarter was 9.4%, compared with 6.8% in the previous quarter and 7.8% in the same period last year. Net income of the quarter was TWD 6.9 billion, compared with TWD 7.5 billion in the previous quarter and TWD 5.1 billion in the year-ago quarter. Net profit margin for the quarter was 10.3%, compared with 12.4% in the previous quarter and 8% in the year-ago quarter. EPS for the quarter was TWD 4.39, compared with TWD 4.75 in the previous quarter and TWD 3.26 in the same quarter last year.
Please note our net income, net profit margin, and EPS in the previous quarter include one-off non-operating disposal gains, which were not recurring this quarter. We also provide non-GAAP financial measures, which include share-based compensation, amortization of acquisition-related assets, and tax effects. Please refer to earnings press release and presentation for details. For the fourth quarter of 2018, we expect revenue to be in the range of TWD 59 billion-TWD 64.3 billion, down 12% to 4% sequentially, at a forecasted exchange rate of 30.8 TWD to one US dollar. We are forecasting the gross margin at 38.5%, ±1.5 percentage points, and the quarterly operating expense ratio to be at 32%, ±2 percentage points. For the shipment guidance, we expect shipments of smartphone together with tablet to be between 100 million and 110 million units in the fourth quarter.
Now, I would like to turn the call to CFO, Mr. David Ku, for prepared remarks.
Thank you, Jessie. Good afternoon, everyone. I think firstly, I want to talk about the three major business segments, the overall performance in the third quarters. The first one is mobile computing business, which includes smartphone and tablet. For third quarter, revenue coming from mobile computing account for around 30%-35%. I think specifically for smartphone, I think the new product, Helio P22 and A22. P22 is our mainstream product, and A22 is the entry-level product. Both products adopt pretty good customer feedback. I think we're making good inroads in market share gains with customers like Xiaomi and Vivo. Also, for Helio P60, which is the mid-to-high-end product, we also adopt by OPPO and Vivo and start to sell in overseas markets such as India and Southeast Asia.
In end of third quarter and beginning of fourth quarters, we also start introduce our new Helio series products called Helio P70. That's a mid-to-high-end product. Basically, that's the new product after P60. We have enhanced AI engine and improved overall performance in terms of power consumption and the AI capability in P60. I think the P60 is scheduled to be mass production in 4Q this year. I think other than the P60, P70 this year and also P22 and A22, the new product for first half 2019 is also well-prepared and on the way. I think we are currently expecting before end of this year, we will also announce the first half next year product, maybe in advance or probably launching them sometime in December. Other than the Helio product, I think we are also working very diligently and aggressively for our 5G product portfolio.
Like what we disclosed earlier this year, I think the first Helio M70, that's a modem product, will be ready in the first half of 2019, next year. Also, I think by end of next year, we will also have our first 5G SoC ready. I think that concludes the first business section about mobile's computing platform. The second business group is what we call the growth product business group, which includes IoT, power management IC, PMIC, and also custom ASIC. I think for this group of categories, account for a good 30%-35% of overall revenue in third quarter 2018. I think for third quarters, especially for the growth sector, we see a pretty strong seasonality, strong basically a more than double-digit growth in IoT, PMIC, and ASIC.
Especially for IoT, the market share leading VAD, now we see there are lots of trending products or derived products from the VAD by our customers. For example, like the Amazon Echo Dot and Fire TV Stick, smart plug, and maybe even a microwave. Other than the VAD voice assistant device products, we continue to improve our wireless stack and also the AI audio integrations. For the machine-to-machine, we also started to ship Narrowband IoT products. We believe that will be another growth driver starting from fourth quarter and also extend to 2019. For power management IC business sectors, we see pretty good revenue growth through group synergy on top of PC segment, and now actually extend that into the smartphone SoC segment. We also expect more revenue contribution from PMIC on the smartphone side starting from second half 2019.
For the customer ASIC side, we see very strong seasonal sales in the third quarter, especially for gaming ASIC IC. Other than the gaming ASIC IC, our high-speed transmission SerDes IP product actually has been launched successfully. Now we're working with our customer, the product is getting out, and the whole system is validated. The overall progress actually looks smooth. We're expecting the product will start to ship basically second quarter next year. For the last one, the business segment is called the harvest product segment, which includes TV, feature phone, optical storage, and DVD. For our harvest product segment, accounting for 30%-35% of our overall revenue in third quarter 2018 as well. For third quarters, the final revenue is slightly better than expected due to strong seasonal demand, especially for TV.
We also see some early pull-in TV situations, basically the pull-in orders from fourth quarter to third quarters. For TV, now the integration with MStar is in progress. The full integration will happen on January 1st, 2019. We expect the combined synergy will provide us pretty good saving, plus will continue to enhance the market share and also the profitability. Other than the business segment updates, I also like to take this opportunity to talk about the 2019 recap. For 2019, overall, we see a pretty solid progress on product competitiveness improvement, especially for smartphone and also the market share gain for the Tier 1 customer. As you can see, we already see a pretty good operating margin dollar improvement, both from the quarter-over-quarter basis in third quarter or year-over-year basis for the first three quarters 2018.
We actually will continue that improvement on profitability in fourth quarter and hopefully first half 2019 as well. The overall strategy for 2018 and also to carry over to 2019, is we're trying to build a much more balanced and diversified strength fundamental among all three different business units. Basically, mobility , growth sectors, also the harvest sectors. For 2019, overall, we find the focus for the macroeconomy and also the industry cycles, the semi cycle, somewhat have higher uncertainty. For 2019, we will be a little bit more cautious based on the currently available information. Despite of the short-term volatilities, we will continue our investment in 5G, AI, ASIC, especially for data ASIC, and also related new areas to increase our product technology competitiveness and platform.
We believe actually continuing investing in those areas will lay down a good foundation for the mid- to long-term growth going forward. I think that concludes my comments. Thank you.
Thank you, David. We're now ready for Q&A session. May we have the first question, please, operator?
Yes, thank you. We are now in question and answer session. If you would like to ask questions, please press 01 on your telephone keypad. Please ask your question after your name is announced. To cancel your question, 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 really thank you for your cooperation. Now, please press 01 if you would like to ask questions. Thank you. The first one we're having here is Randy Abrams, Credit Suisse. Go ahead, please.
Okay. Yes, thank you, David, for the introduction. I wanted to ask the first question, just to follow up on the macro. I guess we can all see some of the pressures in the financial markets in some of the segments. I'm curious, though, from your business, if you're starting to see that slowdown in customer activity, whether the mobile, or if it's showing up in some of the consumer growth products. Both from a units, but also from pricing environment, as you look at the 2019 uncertainty, is part of that an ASP and maybe more uncertainty on being able to hold this margin gain that you've been able to achieve over the past year?
Hi, Randy. I think for 2019, overall, we don't have the detail visibilities all the way into 2019. Based on what we see, especially for the fourth quarter, we do start to feel, let me see what's the right word. I think the uncertainty and volatility, especially due to the macroeconomic situation and also in this cycle, somehow starts to building out a little bit. That doesn't mean we see any concrete evidence or signal yet, but just when we talk to our customer, when we talk to the channel, I think people just start to feel cautious about the 2019. I guess there's no surprise. Part of the reason is due to China and also the U.S., the trade war right now. We also understand this is going to be an ongoing process, whether or not there will be resolution in the near term. Maybe, maybe not.
I would say that the macroeconomy probably just one of the factors. We also see some other factors as well.
Okay.
the input. Again, it doesn't mean we see any concrete evidence or signals. Just when we talk to our customer, I think people start to cautious about 2019, especially for the first half of 2019.
Okay. I did want to ask on the industry cycle. I guess we all know it's late stage 4G. We're coming off it in China two years, I guess, on the official or the MIIT, which show it down double digits. Are customers, I guess, factoring in the macro? Are they giving a base view that mobile market may still have a third down year next year? I guess circling back to the pricing, are you seeing signs that the pricing environment may get a bit more severe, or is it still ongoing, the same pressure you've seen, no real change in the pricing environment?
I would say both for third quarter and fourth quarter, generally, we see things, the pricing don't getting worse. I would say it's similar. It's competitive pricing environment out there.
On mobile, I guess on a base view, are your customers giving you a feel that we may have another down year for mobile shipments at this stage for next year?
I think right now, actually, most of our customers are planning for next year's shipment. In fact, quite on the opposite. I think most of them have a pretty aggressive targets next year. When you talk to supply chain, when you talk with other people, I guess, again, it doesn't mean that people feel negative or anything like that for next year, but just people talking about going to prepare for the best, but somehow the volatility, the uncertainty showing up. You get feeling that some of the negative feeling start building out a little bit.
Okay.
We are not worried it will create real impact 2019. I think that's extremely absurd.
I wanted to ask you on the high-end product mix, if you could give a flavor. I know you don't have the Helio expanded, but the way you used to think of the category P60, P70, P22, where are your unit volume now? A rough range where you're back to on unit volume. It looks like when Qualcomm moved a product into Snapdragon 700, it may have slowed the momentum on P60. If you could talk about maybe expectations for P70 regaining a bit of that mid to high-end share in the market.
I think this year we have a pretty good market share again through the P60. P70 basically just a follow-up product for P60. Basically, we upgraded a lot of features, both from performance and also the overall power consumption perspective. So far, I guess the design win, actually, the customer product will start shipping fourth quarter this year. Overall, we feel we not just secure more market share for the mid to high-end this year, but we maintain that market share, and hopefully, we can continue to expand both product P70 and also later on in early next year, P80's product.
The last question, shifting to networking, for now, you're getting the product finalized to go into production. Could you give us a flavor a bit on the ramp-up you're expecting and maybe if you've done some sizing on the type of market you're coming after as you start moving into this networking category?
I think this is only our first or second project win. Far, based on the schedule, I think most likely we'll start to see some early revenue, maybe after second quarter next year. So far, taking out the system validation going well, I still need some time to ramp it up. The good news is now, actually, with this successful trial record, we are getting a lot of activity going on. I won't categorize it as a design win yet, but obviously, the momentum looks very possible. In terms of the overall addressable market, we don't have the exact number yet. Given the fact, actually, the whole data generation, and I guess we do believe actually, addressable market is actually, the long-term growth is pretty solid, as long as our product is competitive.
Okay. Can you give flavor the scope, like what exact opportunities you're targeting? Is it more on the enterprise, like Ethernet networking or more into carrier networks? Can you give a little more flavor on the type of areas you want to go into here?
I think data switch is definitely on top of the list. It's obviously both for data center and also for the corporate's IT rooms, actually. I think that's definitely on top of the list. Also actually right now, there are lots of different customers applying that technology on new applications. For example, maybe for AI calculations, maybe for other calculations. I think in terms of high-speed SerDes and very fundamentals IP, you can apply that high-speed SerDes into other different areas on top of data switch business.
Okay, great. Thanks a lot, David.
Next, we're having Gokul Hariharan, J.P. Morgan. Go ahead, please.
Hi. Thanks, David and Jessie for taking the questions. Couple of things I had. One, could you talk a little bit about what you're seeing in terms of the next year's high-end products and what it means for ASP? Are you seeing pricing go up on a like-for-like basis for, let's say, P80 versus P60 or some of the other families? We have seen smartphone ASPs go up in most markets due to increasing features. Is there any chance that could see some ASP increase during the next year?
Well, I think based on the current product portfolio, especially if you couple with the potential 5G end of next year, I think overall from the product segmentation perspective, that should be positive from the ASP, a blended ASP perspective. By saying that, I would say, the ASP, I think product mix is one driver. Another driver should be competitive landscape. So far, I think for 2019, that's still something is under observations. For Q3, Q4, I think that looks okay. Okay doesn't mean good. Okay just means sales didn't really getting worse. For 2019, that's something we still need to observe. From product portfolio perspective, the answer is yes. We are continuing to enhance our portfolio, continue about something we call the segmentation expansion. Okay. Get into financial level to mid high-end, and continue to do that.
For the competitive landscape, I mean, competitive pricing, that's something we still need to observe next year.
Hello, Gokul, are you still online?
Yeah. Hi, sorry, I was on mute. Thanks, David, for the answer. If I could check on the ASP for this year for smartphone products, how much are the ASPs up on a year-on-year basis in 2018, roughly?
I think for the full year, I would say pretty much it is flattish to maybe 0%-5%. Yeah.
Flattish. Okay. Secondly, on the gross margin side, David, could you talk about what is your thinking about gross margins? I know that in the Mandarin call, you guys did not want to guide about whether it'll upside to gross margin. Could you talk about what are the kind of variables that go into your gross margin expectation going into next year, given that product portfolio is still getting better, some of your growth segments are still accelerating?
Well, I think for 2019 gross margin, we probably will not be able to provide guidance on Q here. It may be too soon to talk about that. I think we will definitely provide some visibility by first quarter next year. Right now, it's actually a little too early to talk about that.
Okay. On the TV product, you had some gross margin drags in Q2 and Q3. Is it already coming back in Q4, or is that something that comes back in first half of next year?
I think with digital TV, we do basically facing some market pressure this year. It's mainly due to the embedded DRAM. There's no good KGD, I think. The good news is actually the price has started softening and coming back a little bit, starting from Q4, but we probably won't see that reflecting to our cost until first half next year because we still have some inventory issue we need to resolve that. This year, the gross margins on the digital TV side for third quarter and fourth quarter, I would say probably just flattish. Hopefully starting from next year, after we get past about the DRAM issue, memory issues, we should see some slightly better gross margin next year.
Okay. Lastly, you mentioned that some of your 5G early products is starting to sample with customers. Can you talk a little bit about what the feedback on your standalone 5G modem has been from customers? Could you also remind us on the timeline? I think I missed that on both standalone modem as well as embedded SoC for 5G.
Well, I think for next year, the 5G modem, the Helio M70 will be ready first half next year. I think that modem, why we have the standalone modem, is actually next year, even from the operating perspective, they call the 5G as a pre-commercial launch, which means that we need to do a lot of work to ensure the IOT with operators works smoothly. Having the standalone mode is working on that is actually much easier and more efficient. In the same time, I think we will also have the 5G SoC product starting aiming for 2020 product cycle. Obviously, actually starting from 2020, 5G product most likely will start from mid to high end, and we'll start from there and start to expand the 5G product portfolios from top to maybe mid band in 2021.
Okay. Are you seeing anything changing in terms of the pace of adoption that you expect on 5G? I think previously you were expecting more like end of 2020 or 2021?
Not really. I think we, again, the idea is that 2019 will be, from operator perspective, we are laying out the foundations. Which means start to kick in the CapEx on the base station side chain. We'll also start working with phone maker and also chip maker to pre-commercial launch for the 5G, make sure the network is ready for the testing, IoT testing, the stress test. Probably the real year, the first year for the meaningful or small meaningful shipments for 5G, will be the way for 2020. If you judge it on an order basis, maybe by end of 2020, we'll see some more meaningful volume shipment. Basically, 2019 will be pre-commercial launch. 2020, we start to see some shipment for 5G.
Okay, got it. Thank you very much.
Right now we are having Brett Simpson from Arete. Go ahead please.
Yeah, thanks very much. David, just regarding the rising import tariffs into the U.S. I'm just wondering what effect that's having on your business right now. A lot of talk about pull-ins, customers pulling in and shipping earlier to avoid the rising tariff in Q1. Is that something you're seeing? Is Q4 demand sort of inflated because of this tariff hike? Maybe you can talk about what that might mean for Q1. Do we see a bigger than seasonal decline in Q1? Thanks.
Well, I think the pull-in effect we talked about earlier is actually mainly on the digital TV side. Maybe, or might be one of the reasons, for the TV pull-in is actually due to the U.S. import tariff. In reality, I guess, I would say the U.S. import tariff probably has little impact to the pull-in because lots of digital TV manufacturers or companies, they do have manufacturing facilities outside China, which will just help them to reduce the impact from tariffs. On the other hand, for other line of our business actually, especially for the smartphone, I think most of the smartphone are either being sold in China or in emerging countries. The impact due to the cost by the import tariff is actually somewhat minimal as well. Overall, I would say, the fourth quarter's demand, I would say it's actually normal.
I wouldn't say it is actually inflated due to the pull-in.
Okay, that's helpful. Anything you can sort of share with us on inventory, channel inventories across the businesses that you service? Anything unusual you're seeing on the inventory side?
From our perspective, especially some emerging market in the smartphone channel, overall, I think the channel inventory level from our perspective is actually pretty normal. We don't think there's an overstocking, nor is too low. I would say it's normal. It's all on a pretty normal level.
Interesting. Okay. That's helpful. David, just on 5G. You haven't announced any design wins per se yet. Can you maybe talk about sort of customer engagements, the level of customer engagements you're having today? Do you think this is an area where we're going to see some significant government handset subsidies, as we start to get into the ramp phase, the meaningful ramp phase, probably more like 2020. Can you share with us what you think on the subsidy side, because we've seen subsidies get cut consistently over the last couple of years in China, smartphone subsidies. Is that likely to reverse when 5G starts ramping? Thank you.
I think currently, to be honest, actually, we don't really see any aggressive subsidy program ready yet because, from my perspective, maybe it's a little bit too early, too mature to talk about that. After all, even for 2019, from the operating perspective, especially in China, probably the main goal or the major task will be start to build out the network. Even if there's going to be anything on 5G smartphones, I think most likely will be very small volumes on trial basis for China Mobile. In terms of the subsidy program, probably we need to wait second half next year to understand more about all three major operators view or plan about subsidy program for next year.
Okay. In terms of customer wins for 5G, how many customers are you engaging on 5G today?
I think all the leading customer in China right now are planning about 5G product portfolio from the smartphone perspective, and we're in discussion with most of them
Just shifting gears to AI, David, we're seeing guys like Google come out with some standalone dedicated AI chips for the handset, the Google Visual, the Visual Core. Most guys like MediaTek are putting AI cores into the SoC today. How is this going to develop? Because I guess looking at camera specs, we're going to see a lot more AI processing requirements in the next couple of years. Do you expect to see dedicated standalone AI processors to emerge? Is that something that you think is inevitable in smartphones over the next one or two years?
From our perspective, especially for mainstream and maybe even to mainstream high-end, if we don't come in on a flagship product yet, we do believe actually embedding the AI processor. From our perspective, we have something called MDLA, the machine deep learning accelerators, probably make more sense, both from the cost and also from the performance perspective. For example, for our current P70 and also for our next generation product, P80, we will all include pretty powerful MDLA in theirs. After talking to different customer and also a lot of developers, they are all happy about that performance. Whether or not they will have the requirement for a standalone, separate AI processors, unless these are the super high-end flagship products. Overall view, specifically on the smartphone side for the mainstream, maybe mainstream high-end, I think the embedded processor should be cheap enough.
And then just for-
Unless when we are getting into the next phase of AI, people truly go crazy about trying to leverage more AI calculation capability. From our perspective, at least for the first batch, taking pictures, object recognition, all those front AI functions can be served well already for the MDLA. Whether or not that's just become the first batch of the AI application and then going forward, people find more AI application, they will find more computing power that will lead to a separate chipset, might be. At least for next year then, that's not what we see.
Just maybe final question on AI ASICs going into data centers. I guess you have a lot of the IP that's needed to develop these AI ASICs, you mentioned SerDes, 112 gigs, 56 gig SerDes is something you're offering today. Are you guys developing any AI ASICs for the cloud, either on behalf of customers or independently for yourselves?
No. Actually, currently, I think the major AI building block we're doing right now is actually the MDLA, the basic AI portion we embedded into our CPU. For our ASIC business right now, we didn't release an AI ASIC for our customer.
Okay. Thanks very much.
Next one to ask questions is Michael Joe from Deutsche Bank. Go ahead, please.
Hi, David. Just quick question. Regarding the smartphone GP, what is the trending Q3 and the Q4 this year?
I think for smartphone for Q2 and Q3, in general, it's actually flattish. I would say pretty flattish.
Q3 flattish. Q4 is as well, right?
Q4, yeah.
Oh, thank you so much. I have no question. Thank you so much. Thank you.
Ladies and gentlemen, we are now in question and answer session. Please press zero one on your keypad if you would like to ask questions. Thank you. We are having Charlie Chan, Morgan Stanley. Go ahead and ask your questions.
Hi, David. Just I want to make sure for the auto chips disposal gain, is that going to happen again in next quarter? What is the amount?
I think for this year, we recognize in Q2 already. That's all for this year. We might have a much smaller portion for maybe Q1 and Q2 next year. I think the overall amount probably will be around slightly less than TWD 1 billion, maybe first quarter next year or second quarter next year. I think for the exact timing of those amount, it depends on their final performance this year. That's still something we're evaluating. For this year, that's all basically. They've all been recognized in reporting Q2 financials, in Q2 non-operating income already.
Yeah. 2Q it was around TWD 3.5 billion, right? Are you saying 1Q next year will be around TWD 1 billion only?
Probably slightly less than TWD 1 billion. Again, that's a forward number. Basically, we need to see their final performance for this year.
Okay. It is not something due to the accounting rule change, right? It's just the timing you book the disposal gain.
Right.
Okay. Secondly, can I get some breakdown for your smartphone shipment by region today? Yeah, I just want to get a sense, your exposure to different end markets, China, India, Africa, et cetera. Thanks.
Charlie, we actually didn't provide that level of details. Maybe just export versus China. I think for this year, exporting is around 60%-70%. China is about 30%-40%. In terms of non-China area, I would say India is definitely on top of the internal market shares.
Okay. Lastly, several investors ask about the pricing competition. Do you see more competition now using middle high-end, like P series, or coming from those low-end 4G segment?
I would say both, because if we based on what we see for the pricing environment, both for Q2 and Q3, I think both for entry-level and also for mainstream, which is usually P series, are all facing pretty strong pushback from our competitors. As you know, if you look at the market shares, first half versus second half. When I say market shares, I am referring to our market share for the top four, top five guy. Overall, we do see our market share continue to expand. That actually put a lot of pressures on our competitors. You can assume it definitely comes back with pretty aggressive pricing competition. This is, like I said, as I reiterated earlier during this call. I think the competition, especially for the pricing competition, it's only stabilizing. It actually stand.
The good news is actually, we don't really see it getting worse, yet.
Okay. You just said that blended ASP seems to be quite flattish in the recent quarters, right? If we want to take a look at apple-to-apple ASP erosion this year, how much it would be for this year ASP erosion?
I think it's on a like basis. I think it's still coming down. I would say it's 5% plus, minus.
Okay.
Maybe even 10%. The reason we have a slightly less of our [Inaudible] goes to the product niche enhancement.
Okay, it is around 5% to 10%.
Yeah, correct.
Okay. I think for full year. That sounds quite reasonable, healthy, I would say. Okay. That's all my questions. Thank you.
As a reminder, please press 01 if you would like to ask question. Now we're having Gokul Hariharan, J.P. Morgan. Go ahead, please.
Yeah, thanks.
Gokul, I'm sorry, we are not able to hear you clearly. Got a lot of statics.
Hello? Can you hear me?
Yeah, now it's better. Go ahead, please.
Sorry about that. On the growth segments, David, could you talk a little bit about what is your growth outlook for next year, given some of the macro uncertainty? Are you still looking at double-digit growth next year? Within the growth segments, maybe you could rank which are the areas where you see the most promise going into 2019. Thanks.
Sorry. Can you repeat the question again? I'm probably not sure. I'm having some problem hearing you clearly.
Yeah. Hi. My question was, could you talk about what is the expectation for the growth engine segments in terms of growth next year? Are we still at double-digit, maybe closer to 20% kind of growth? Second, within the growth segment, what are the areas where you see the most promise from a growth perspective next year?
Okay. I think for the growth sectors for next year, again, it may be a little bit too early to talk about the detailed growth rate, but just in general, based on the sort of diversification of the product line underneath the growth sectors and also the strategy, especially from the PMIC side. Overall feel is still have the chance to keep up this growth next year.
Okay. What would be the two or three areas where you have the most confidence? Is it PMIC and NB-IoT, or is it going to be mixed for by next year?
No, I think for next year, the NB-IoT definitely would be one of the drivers. In general, it's actually the IoT, especially Wi-Fi for next year. We still see both from the product upgrade and also the market share gain on the Wi-Fi side. PMIC, we'll see more and more PMICs on our smartphones, on some PMIC, and also for the PMIC organic growth, which is on the PC and the monitor side. I think that's what we see for the potential growth drivers on these growth sectors.
Okay. Got it. Thank you.
Thank you for all your questions. Now I'll hand it over to Ms. Jessie Wang for closing comment. Jessie, please go ahead.
Ladies and gentlemen, this concludes MediaTek's 2018 third quarter conference call. We would like to thank you for your participation, and thank you. You may now disconnect.