Welcome to the MediaTek 2025 First Quarter Investors' Conference Call. Financial results and presentations for today's call are available on the Investors' Section of the company website at www.mediatek.com. I would like to turn the call over to Ms. Jessie Wang, Deputy Director of Investor Relations. Ms. Wang, please proceed.
Good afternoon, everyone. Joining us today are Dr. Rick Tsai, MediaTek CEO, and Mr. David Ku, MediaTek CFO. Mr. Ku will report our Q1 results, and then Dr. Tsai will provide our prepared remarks. After that, we will open for Q&A. As a reminder, today's presentation will provide forward-looking statements based on our current expectations. The statements are subject to various risks and factors, which may cause actual results materially different from the statements. The presentation materials supplement non-TIFRS financial measures. Earnings distribution will be made in accordance with financial statements based on TIFRS. For details, please refer to the safe harbor statement in our presentation slides. In addition, all contents provided in this teleconference are for your reference only, not intended for investment advice. Neither MediaTek nor any of the independent providers is responsible for any actions taken in reliance on contents provided in today's call.
Now, I would like to turn the call to our CFO, Mr. David Ku, for the first quarter financial results.
Thank you, Jessie. Now let's start with the 2025 Q1 financial results. The currency used here is NT dollars. Revenue for the quarter was NT$153.3 billion, up 11.1% quarterly, and up 14.9% year- over- year. Gross margin for the quarter was 48.1%, down 0.4 percentage points from the previous quarter, and down 4.3 percentage points from the year-ago quarter. Operating expense for the quarter was NT$43.8 billion, compared with NT$45.6 billion in the previous quarter and NT$37.7 billion in the year-ago quarter. Operating income for the quarter was NT$30.1 billion, up 40.4% quarterly, and down 6.6% year- over- year. Non-TIFRS operating income for the quarter was NT$31 billion. Operating margin for the quarter was 19.6%, up 4.1 percentage points in the previous quarter, and down 4.5 percentage points year- over- year. Non-TIFRS operating margin for the quarter was 20%.
Net income for the quarter was NT$29.5 billion, up 23.3% quarterly, and down 6.7% year- over- year. Non-TIFSR net income for the quarter was NT$30 billion. Net profit margin for the quarter was 19.3%, up 2 percentage points from the previous quarter, and down 4.4 percentage points year- over- year. Non-TIFSR net profit margin for the quarter was 19.6%. EPS for the quarter was NT$18.43, up from NT$14.95 in the previous quarter, and down from NT$19.85 in the year-ago quarter. Non-TIFSR EPS for the quarter was NT$18.74. Also, a reconciliation table for TIFSR and non-TIFSR financial measurement is attached in our press release for your information. That concludes my comments. Thank you.
Thank you, David. I would like to turn the call to our CEO, Dr. Rick Tsai, for prepared remarks.
Thank you. Good afternoon, everyone. MediaTek delivered solid Q1 results. Our Q1 revenues reflected the structured mix enhancements driven by increasing AI and Wi-Fi 7 adoptions, as well as better-than-expected demand, partially due to tariff uncertainties. Gross margin for the Q1 was above the midpoint of the guidance range. Before we discuss our business, I would like to talk about the recent market environment. The evolving tariff situation has created uncertainties to almost all markets around the world. For the short term, as trade negotiations continue to unfold, we are closely observing their impact on global economies and working with our global supply chain partners and customers to navigate the uncertainties. In the meantime, we are carefully monitoring our inventories and managing our operations. For the mid to long term, we believe the trend toward ubiquitous AI remains intact, and our growth prospects remain solid.
Supported by our robust balance sheet, we can continue focusing fully on the execution of new projects and investments in key technologies to further strengthen our competitive position. With the strategic values we created for our customers, we've continued to gain traction in several new areas by taking advantage of the AI megatrend. For enterprise ASICs, we are highly confident in our capabilities to design customer AI accelerators based on our key technologies and IPs, including the high-speed interconnect SerDes and others. Currently, we are engaging with more business opportunities as the industry continues to pursue highly customized solutions to enhance data center efficiency. Customers are reacting positively to our core value propositions, which include our capability to leverage the most advanced processing and packaging technologies to achieve the optimal performance, power, and area (PPA) entitlement.
In addition, our flexible business model allows our customers to combine various approaches, including Spec- in design, RTL- in design, and GDSII- in design, flexible HBM arrangements, and advanced packaging integration to optimize their total cost of ownership (TCO). We are on track to register a sizable annual revenue starting in 2026 and aim to continue making progress in this fast-growing market. Another example demonstrating our advanced technology capabil ity is a collaboration with NVIDIA on Uncertain, which is designed to power NVIDIA's DGX Spark, a small, powerful AI supercomputer that is welcomed by AI researchers and developers. DGX Spark delivers 1,000 AI TOPS of AI performance, allowing developers to prototype, fine-tune, and inference the latest generation of reasoning AI models with up to 200 billion parameters locally.
With this proven record of our capability to design high-performance computing HPC chips, we're well positioned to explore various new applications in the future. For automotive, recently on our Dimensity Auto platform, we announced the 3-nanometer flagship cockpit solution, CX-1, and our latest telematics solution at the Shanghai Auto Show. Our cockpit solutions offer scalable hardware and software platforms with advanced AI capabilities. In addition, we are one of the few companies that can bring 5G technologies to cars. By leveraging these essential technologies for future connected cars and strong customer support, we are making very good progress in the auto market. We have established business relationships with the majority of Chinese auto OEMs and expanded our engagement with more global car makers. We continue to expect our auto revenue to grow quarter by quarter throughout 2025, with a growing number of product design wins that contribute to future revenue.
Furthermore, as AI applications continue to advance, we work closely with ecosystem partners to accelerate the proliferation of AI applications, especially for AI agents. The recently introduced standard protocols such as MCP, Model Context Protocol, and A2A agent-to-agent build seamless communications among AI agents, unleashing their potential. On top of that, with our recent upgrade of the GenAI tools, developers can more easily create AI applications for edge devices by simplifying development steps with easy-to-use interfaces. For example, edge AI agents with better privacy and security now can understand users' instant messages and automatically activate navigation service to direct users to their chosen destinations. With MCP, A2A, and MediaTek GenAI tools, we expect developers to create edge applications more efficiently for the market. We believe these AI innovations will enhance our product mix and shorten the smartphone replacement cycle.
With that, now let me talk about the recent business performance for our three revenue groups. Mobile phones accounted for 56% of total revenue in the first quarter, growing 6% year over year and also 6% quarter over quarter. The sequential revenue increase was primarily driven by better demand in the mainstream and entry segments, while flagship demand came off slightly. Following the successful launch of our flagship SoC, Dimensity 9400, we recently added Dimensity 9400 Plus to the flagship portfolio, which further strengthened AI performance. Dimensity 9400 Plus supports all the popular large language models and adopts the latest techniques for faster reasoning speeds. We expect several Dimensity 9400 Plus-powered smartphones to hit the market in the Q2 Moreover, in the second half of the year, we will launch our next-generation flagship SoC, which has gained better traction with more customers than the previous ones.
We expect our strong flagship product lineup to continue gaining shares and enhancing our blended ASP as AI becomes more pervasive. For the Q2 , thanks to more adoptions of our AI SoCs, Dimensity 9400 Plus, and Dimensity 8000 series, we will grow our business in the flagship and premium segments. However, as demand in mainstream and entry segments slowed down after the strong Q1 , we expect mobile revenue to be flat to down quarter over quarter. Now let me move on to smart edge platforms. In the Q1 of 2025, this group grew 32% year over year and grew 23% sequentially, accounting for 39% of total revenue. The sequential growth was mainly due to product mix enhancements in both connectivity and computing devices, as well as some pooling demand.
For smart edge platforms, the trend of connectivity technology upgrade and higher AI adoption continue to benefit our major platforms such as Wi-Fi and tablet. Our efforts in global market expansions are also gradually bearing fruit. As we move to the Q2 , we see revenue growth in premium AI tablets, consumer ASICs, and automotive driven by share gain. These trends help us offset the effect of certain consumer products being pulled into the previous quarter. We therefore expect smart edge platforms' revenue to increase quarter over quarter. Now moving on to Power IC. This group accounted for 5% of total revenue in the first quarter, growing 7% year over year and declining 9% quarter over quarter due to seasonality. For the Q2, we expect our IC revenue to grow sequentially, mainly driven by share gains in certain consumer electronics, automotive, and data center.
For the Q2 of 2025, based on our current observations, overall supply chain inventory is still at a reasonably healthy level. Despite the market uncertainties, currently, there are no material order changes from customers, partly due to the long production cycle time. We expect our Q2 revenue to be flattish sequentially and to grow strongly year- over- year, driven by our structure mix enhancements across products. That said, uncertainty in the second half of the year remains high. With that, we expect our second quarter revenue to be in the range of TWD 147.2 billion-TWD 159.4 billion, down 4% to up 4% sequentially, and up 16%-25% year over year, at a forecasted exchange rate of 32.5 TWD to $1. Gross margin is forecasted at 47% plus or minus 1.5 percentage points.
Quarterly operating expense ratio to be at 29% plus or minus 2 percentage points. Finally, I would like to reiterate that we remain very positive on our mid to long-term growth opportunities despite the recent uncertainties. We believe the growth areas that we are investing in, such as AI data center and automotive, remain at their initial phases of market development. The market potential could increase significantly with ongoing innovations, and the growth potential will not be impacted by the near-term volatilities. Given our strong competitiveness and early-stage presence in those areas today, we believe there is ample room for us to grow, and our strong balance sheet can support our dedication to new growth drivers during this uncertain time. This concludes my prepared remarks. Thank you.
Thank you, Rick. Operator, we are now ready for the Q&A session. May we please have the first question?
Yes. Ladies and gentlemen, we are now in Q&A session. If you would like to ask questions, please press star key N1 on your telephone keypad. Please ask your questions after your name is announced, and please limit your questions to two at a time to allow more participants to join the discussion. After two questions, we will move to the next quarter. Should you have more questions, please press star key N1 to come back to the queue. In case you need to cancel your question, please press star key N2.
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 star key N1 if you would like to ask questions. Thank you. The first one to ask question, Gokul Hariharan from JP Morgan. Go ahead, please. Yeah, hi. Good afternoon.
Thanks for taking my question. My first question, I just wanted to understand. Usually, you give us some idea about how you think about the full-year growth in the April call. I just wanted to understand how you think about full-year growth for the company right now. First half, looking at the guidance and Q1, seems pretty strong. Second half, do recognize some of the uncertainties, but just wanted to get your thoughts on how should we think about full-year growth. And within that, if you see risks in second half, is there any particular area where you see more risk? Is it more on the smart edge side of the business, which is more US exposed, or you also are a little bit more conservative on the smartphone side of the equation?
Okay. Let me respond to the second question first. Our exposure in the U.S. directly is around 10% of our revenue. You can say that the direct impact from the U.S. potential U.S. tariffs is more limited. However, of course, we are certainly watching very closely the potential impact to the overall economy of the other markets, such as China, Japan, Korea, etc.
That is why we said, as many other CEOs have also, that we remain quite cautious about the second half of the year. The risks for us probably relied more in the consumer electronics, such as TVs or some of the home devices. Saying that, the first half is reasonably positive, as you know. The second half, again, because of uncertainty, we will not give, as we usually have, a full-year outlook this time. What I can say is, how should I say it? At least qualitatively, we are not overly pessimistic.
We strive to achieve, I think, still a good, positive 2025. Thank you.
Would you say double digit is still kind of within the realm of your possibility? I know that you do not have a numerical guidance, but I think that seems to be where a lot of people are shooting for a couple of months before the Liberation Day tariffs were announced.
You are right. We would be a bit more positive before the Liberation Day. Now, I would not use double digit now, but I would not definitely go down much either.
Understood. That is a good range that most of us can work with. Thank you very much, Rick. My second question is, your longer-term ASIC preparation looks like you are getting more engagements. Could you talk a little bit about how you are? What are the nature of these engagements?
I think you've talked about high-speed service, your strong partnership with ARM as a couple of the important building blocks. During GTC, you also kind of alluded to some partnership on the IP side with your core partner, NVIDIA, as well. Could you talk a little bit about how these engagements are evolving right now? Are they mostly dealing with AI accelerator-related projects, or you also are expanding into other data center ASIC kind of opportunities also, if we think about the engagement level?
Okay. I would first say, again, your latter part of the question, we are definitely focused on the AI accelerators, or in some other people call that XPUs, and customized AI accelerators. Saying that, the other, I think, concept, maybe concept is the right word for this business, is it is a very fluid business to be in. What do I mean by that?
That means the major potential customers, the requirements for quote-unquote customized AI accelerators can vary quite a lot among different ones. The way we, I believe what we are being quite, I would not say successful yet, but the need for data. I believe we are being quite good in that we can combine our technology capability, our manufacturing capability—by manufacturing, I mean the really real advanced process packaging side—and our system architecture level of knowledge and the capability to engage with customers directly, plus, as I said in my remarks, a rather flexible business model approach. I think that makes us, you see, customize. By definition, you need to customize for different customers' specific requirements. I think we are doing that quite well from both a technical and a business point of view. Thank you.
Got it. Just one follow-up, Rick. You talked about spec in, RTL in, and GDSII in models as one of the flexible approaches. Is there any area which is more favorable to? Are you seeing anything in terms of these designs happening in the ASIC world, which is kind of a more favorable trend to MediaTek, or are there? It seems like the latter two are probably more favorable to MediaTek compared to full spec in, which used to be the kind of ASIC world for a long time.
I would say, I think Gokul, you're quite right that the latter two, the RTL in and the GDSII in, are probably more favorable to us from a business model point of view. However, again, it depends on the customer and the complexity of the chips they are pursuing. The first approach, we do have at least a discussion and engagement also. Thank you.
Got it. Thank you.
Next one to ask question, Laura Chen from Citi.
Hello. Hi. Good afternoon. Can you hear me?
Yes. Yes
. Yes. Hi. Thank you. Thank you, Rick, for taking my questions. My question is also related to the AI ASIC development, probably also following what Gokul just mentioned that we know that during GTC, we announced to cooperate with NVIDIA on the NVLink IP. Does that mean that going forward, our ASIC or AI accelerator can also, aside from our service technology, we can also leverage NVLink to connect other GPU or accelerator?
Yes. We did have a good discussion engagement also with our partner, NVIDIA. The work is in its early stage, I would say. I would prefer to defer further discussion probably in another time. We are still in the process of kind of getting to more execution details. Thank you.
Yeah. Certainly. Also, following that, just wondering, our current AI ASIC or accelerator projects, we are aiming for next year ramping up, it's only based on our own service solution. Is that correct? It is correct. Yes. Okay. Can you give us more update about the current progress, any difficulties we may have, or in terms of the progress and ramping up schedule? Can you give us more color?
I would say in general, it's moving, progressing quite well. We're meeting all the milestones as required. In general, I foresee good progress also going forward. Please also understand, basically, these are very challenging technical projects. We certainly expect all kinds of challenges going forward. We do have the confidence that our team and our customers, we're working really closely and really well together, and we'll overcome any of them. I'm quite confident. Thank you.
Sure. Certainly. My second question, if I may, is that, again, it's also related to the AI ASIC. As we know that when it moves to more advanced nodes, like N2, for example, in the next two, three years, our customers may also want to consider the silicon photonics or CPO solutions. From MediaTek's perspective, do we have any plan or what's our roadmap to consider that from?
Absolutely correct. CPO, basically, a co-packaged solution, first with the copper and then with the optics on the roadmap. It is, again, technically very challenging. We are, again, always two fronts of one is your customers, the other one being the partner from the technology suppliers. MediaTek, yes, we are investing, as I said in my remarks, we are continuing to invest. If anything, we are aggressively investing in those technology areas. We have all the means to do that. Thank you.
Okay. Thank you very much.
Next one, we have Brett Simpson from Arete. Go ahead, please.
Yeah. Thanks very much. I also had a question on the AI ASIC developments, Rick. You mentioned in your prepared remarks that there's a sizable annual revenue opportunity in 2026. Can you maybe just elaborate what that means? Are we talking about kind of billion-dollar type levels? Have I got completely the wrong baseline? Any help there would be really, really helpful. I mean, it sounds like you are building more customers. I think previously you've said you've got a customer that will land next year. Can you maybe update us on the customer win? What wins you have today? Are you building off that single win that you've talked about previously? In terms of the business model, is this attractive enough from a margin perspective?
Is it accretive to gross margins or operating margins? Any help would be great there. Thank you.
Yes. David.
Okay. Hey, Brad. First things first. I think right now, whatever we talk about for the next year, we expect a $1 billion revenue from the AI ASIC side. Right now, the target is not changed. I think the first thing first. The second part is actually talking about the customer. We probably won't be able to comment about anything about customer. We do actually have several deciding and decide wins. It's actually an ongoing process. That's my quick response. By the way, what's your third question? You're talking about?
Margin.
Margin. Okay. I think margins overall, again, because we have a different business model, overall, probably the best way to think about that is actually on the operating margin side will be accretive on the operating margin side.
Okay. Yeah. Great. Maybe just to follow up on the ASIC side, I guess when you look at the next two or three years, the industry is going through tremendous changes. Most companies are not just developing ASICs, but they're building rack solutions, including switching. I mean, I think there was a previous question on silicon photonics and optics. CPU as well is needed. To what extent is MediaTek planning to build system solutions? If that is the case, I mean, your investments here must be pretty significant. Can you maybe just share with us what sort of portion of your optics might be going towards AI ASICs? Thank you.
Brad, the investment certainly is now focused on the AI ASIC, AI accelerators, with the associated IPs and the technologies by IPs. The most obvious one, of course, is high-speed interconnect, including service and going forward, CPC and CPO. Of course, then all the DTCO capability using the N2 process. No, we call that STCO. It is advanced packaging technology from maybe different kinds of packaging technologies. The investment in those is already certainly quite extensive. I am again very confident that we will achieve quite well in them. On top of that, I would not say we will provide the system solutions. After all, that is not in our business model. What we certainly can do and will do is to already that we have the system knowledge and understanding and the capability of system architecture we have.
Ashky. Your passcode has been confirmed. Please wait while you are joined to the conference.
ARM's CSS platform for flagship devices. I think Xiaomi is one that's pretty well understood coming towards the end of this year. Can you talk a bit about how you see this trend evolving and what impact do you think it has on MediaTek's business? Do you still feel the flagship opportunities for sheer gains is as material as it has been? Thank you.
Yes. Certainly. I mean, we've been working with our customers in your example, actually, to provide them so that they can have a system they can make and sell. The world is always evolving. MediaTek must adapt to the changing world as certainly our customers' requirements. We adapt. We provide our values. I'm totally confident. It's just kind of similar to our ASIC discussion just now. I have no question in my mind that we will provide invaluable values to our smartphone customers in China.
Despite all the other people do different things, but MediaTek, at the end of the day, because of our focus, our resources, our talents, I think we will be successful in that particular segment, flagship SoC. Thank you.
Thank you. Thank you, Rick. Thanks, David.
Right now, we have Sunny Lin from UBS. Go ahead, please.
Good afternoon. Thank you very much for taking my questions. My first point, I'll just start from the macro and also longer-term outlook. Now, with the escalating trade tensions, obviously, between China and the U.S., I know things are maybe in early stage. Are you seeing any signs of Chinese OEMs potentially hoping to adjust the procurement strategy just to reduce the exposure to the U.S. suppliers? Is that may benefit MediaTek? Anything you could share at this point will be very helpful.
Certainly, certainly, I think we did not really observe any of those you mentioned. I think for the formal year, they are still being purchased at chips basically from globally, from U.S., from Taiwan. There is nothing changed out there yet.
Got it. I have a question on the smartphone AI pursuity. Obviously, from 2024, you have been getting more mix from flagship and also higher silicon content. Dimensity 9400, the price is up quite a bit by 30-40% according to my estimate, in late 2024. I think you also get to pass through the TSMC cost inflation maybe this quarter by about mid-single digit. How should we think about the further upside for your Dimensity 9500? I also wonder for the flagship like D98000, would you expect maybe the silicon content to also go up anytime soon?
I think for the flagship segment, what we're seeing right now this year, we're talking about the fourth generation of the smartphone. ASP is still continuing to go up. That should really help about the overall revenue growth and also the product mix growth. Other than the flagship, we talk about the mainstream because the 8000 series, you talk about, we see the ASP probably will be flattish year- over- year, maybe even down a little bit. I think with the exception of the flagship, all other segments probably just maintain the flagship ASP rather than increasing.
Got it. If I could squeeze in one question on automotive. Would you be able to share a bit more updates on your engagement with the car makers, how many order backlogs that we have on hand, and what kind of adjustment market that you are expecting in the coming three or four years, and what kind of revenue contribution that we could expect maybe by 2026 or 2027, just like your disclosure for your cloud ASIC business ramping up to $1 billion in 2026?
I think from the number of customers we're engaging or deciding to decide win, if you like, if this turn, it's actually growing really well, specifically in China and also globally as well. China currently is still the big part of our automotive business. From year-over-year growth perspective, we do expect very strong % growth.
In terms of the absolute dollar, due to the SOP cycle on the automotive side, I think the revenue rate will be much slower in terms of the absolute dollar compared to the ASIC side. I think the revenue growth is a percentage. We're looking for very strong year-over-year growth both for this year.
Thank you very much. Got it. Thank you very much.
Now, questions from Jason CLSA.
Hello. Can you hear me?
Yes. Hello.
Thank you for taking my questions. My question is in terms of your long-term goals in the data center area. We found that you currently have AI ASIC or service technology. I think Airoha also announced 400G DSP. Also, Airoha has Ethernet switch or fi product. Can we integrate those kind of, no matter AI ASIC or those kind of connectors or high-speed product?
Hi. This is Arete. May I have name, please? Joining the Ximing Shi. Hi. Hello. This is Arete. Anyone there? Joining the Ximing Shi. Waiting. How? Joining the Ximing Shi. 你是参加会议的还是你们还是你是直播那边的？ 那请问是哪一家公司？ 好。 好。谢谢.
Percentage gap. For MediaTek AI ASIC, we're pretty much only focused on AI accelerators. That is the focus. The second part, we talked a bit about the China slash the opportunity. I think currently, we are looking for a global opportunity, which definitely including China as well.
Okay. Got it. Got it. My second question is in terms of the market shares in high-end smartphone. I think we already gained a lot of market shares in China brands. I wonder if we can further gain some of the design wins in Korea brands in the future, especially in the high-end sectors. How should we look at this kind of opportunity probably in second half or in next years?
It's our policy. We won't come with specific customers. So we will not be able to comment on this question.
Okay. Got it. Got it. Yeah, I have no more questions. Thank you very much.
Next one to ask question, Brad Lin from Bank of America.
Oh, thank you for taking the question. I have two questions. My first question would be also on the GB10. Versus three months ago, what is the expectation on the GB10 in terms of the demand and contribution? What would be the revenue or, well, gross margin implication for MediaTek if these projects go well? Thank you.
The GB10 is a collaborative product by NVIDIA and MediaTek. I think we had said before that NVIDIA is responsible for the products and the go-to-market. From that point of view, what we can say is the demand is very good, quite very strong with the targeted audience. I think the detailed outlook is better to refer to NVIDIA to answer. Thank you.
Got it. Got it. My second question would be on, an interesting product that they introduced by MediaTek recently, which is the, Chromebook processor, which is based on 3 nanometer. I can help by thinking what's the market position of such a product. It's 3 nanometer-based SoC, but competing in a lower-cost segment like Chromebook. Does that market, does that product potentially eye on the market share gain potentially from, x86 camp or, Qualcomm's current dominant ARM-based PC cap? Thank you.
I think for the Chromebook, basically, one of the biggest segments will be on the education sector. We are actually getting the input from the customer. They are still looking for the high-end Chromebook. That is why we also have the 3 nanometer process. Whether or not they are actually competing, I am assuming you are assuming something called the Windows ARM. I do not think that is directly competing on that. It is more of an existing segment, but actually looking for the product upgrade.
Got it. Got it. With this kind of similar trend and also a broader strategy to bring the best nodes into, so-called, relatively mainstream or low-cost kind of a segment, could we expect similar transition maybe also in other segments like IoT?
Sorry, I cannot hear your question very clearly. What segment? Your last sentence?
I mean, as we have seen, MediaTek is introducing very advanced kind of technologies like a 3 nanometer into low-cost segments like Chromebook. Could we also expect similar kind of transition or upgrade in other key businesses of MediaTek like IoT?
As for IoT, we'll see the same trend as well because normally internal, we're using a core AP-based IoT, application processor-based IoT.
Got it. Thank you very much.
Yes. Maybe I can add one word. I cannot say it is definitely a trend, but in multiple fronts, by that I mean on the edge side, from smartphone, we just discussed Chromebook, IoT, but also tablets. The requirement for the high-end kind of premium models in those different segments, I mean, it's quite clear compared to, say, two years ago. Because of a very strong flagship SoC portfolio, we have been able to provide good solutions to those various high-end premium needs from various customers too. We're quite happy about it. Thank you.
Next one to ask question, Charlie Chan from Morgan Stanley.
Hi. Good afternoon, Rick. And also, David, hope you can recover soon. My first question is about the AI smartphone development. I think, Rick, you mentioned about NCP being introduced, the accelerator, and GenAI. How soon do you think this kind of NCP can be adopted in the China smartphone ecosystem? I think it is developed by Anthropic. Yeah, just want to get a sense about how soon that can happen. I think privacy, I mean, it is a very important factor for HAI. Do you see any kind of killer apps or kind of privacy demand that is accelerating or, as you said, right, shorten the smartphone recruitment cycle in China?
I do not claim myself to be an expert in agentic AI, but what we do observe pretty firsthand is that China's ecosystem in the agentic AI is blossoming. Many startups, plus these big, huge super app companies, are all in. When things happen this way, usually it will take a while to kind of settle, to take some time to settle. What we can tell from previous other experiences, in China, things will settle rather quickly. We have a very strong and a good relationship with many of those ecosystem players and the applications developers. We are providing the tools and the environment that they can build upon. I cannot say for sure, but I am sure you have also China for a long time. We can all expect things will happen very quickly over there.
What we are doing is just to be there when they need it, to be actually ahead of them for all those tools so we can then gain our share of the business. Thank you. Yeah.
Thank you. Yeah. We look forward to that development. We believe that MediaTek will play a very important role for this ecosystem. My second question is really way back to your comments about ASIC. You sort of focused me on the required milestones, but there are some interchanges kind of sharing what we're saying, right? There are always some technical challenges to overcome. Rick, are you still confident that first half, you can still produce these major customers' projects, or you will buffer some time given those technical challenges? For the 2 nanometer project, do you have any visibility for the potential win? Thank you.
Okay. Again, number one, I'm confident in getting the project accomplished next year. By that, I mean we, so it's probably most practical to say we'll get those revenues late 2026. I think that's the most important thing at the end of the day. I think from a technology capability and all those things, it's really very complicated. We are not only on the right track, I think we're ready for those challenges. All right. Thank you.
Okay. Sure, sure, sure. The worst case is late 2026 that you're keeping your targets to see some measure of health data, right?
Charlie, I think you're right, but I don't quite understand what you mean by the worst case. I think that's how you're—
Okay. Got you. Okay. Thank you.
Next one, we have Unknown from Goldman Sachs. Go ahead, please.
Yeah. Thank you for taking my question. Again, sorry, my question is for the ASIC business. When we do the analysis for ASIC business, there are two things always bother me. Number one is that you're working with customers. What if the project delay is caused by your customer, i.e., your customer fails to deliver the project, they have to complete it on time, which causes the delay, causes your revenue projection fall behind? How can we be confident that your customer can deliver the stuff on time? The second thing will be more longer term is that the ASIC chips, how does the competition with the merchant chips? How do you believe your customers are able to design a future chip which is able to compete with the merchant chips? Which merchant chip can have multiple chips with networking, with accelerator? It can be a total system performance thing.
Working with one customer with one ASIC project might not be competitive in the longer term. How do you see these two factors in the ASIC business? How do you do the business plan in your ASIC business, though?
Actually, your question in a way to us is a generic one. ASIC being a business model, but the customers, whether customer can deliver on time or will, well, that is the same thing actually for our ASSP customer too. That is just a reflection. In our specific business currently, the thing to do and the thing that we are doing, just like other business, we work transparently, collaboratively, really closely with our customers. We know what they are doing. We know where they are. In any of the large-sized projects, I have not seen anyone without glitches. It is this mutual understanding and the trust we have built.
The glitches happen on both sides. The thing I said just now is we are confident that we have the building capability to overcome those glitches and deliver. Your number two question is, smaller. GPU versus ASIC. Oh, okay. This is more kind of a more really data center, accelerator specific question. I'm sure you guys all observe and understand what the large CSPs are doing, not just thinking, are doing. There are obviously pros and cons for doing different kinds of models. I do not intend to jump into that debate myself, but it suffices to say that both models will work. I'm sure the merchant chips will continue to do well. The important thing really is to have the data center capacity to grow based on the demand. That growth will continue.
It is a matter of the proportion of that growth, of where they come from. I do not think there is any doubt about the need, the demand from the ASIC type of accelerator. I would not say I worry. What we work on, we strive basically to deliver. The business is there. Thank you.
Thank you. I just had a quick follow-up for the profitability because a lot of investors do ask that. We have a lot of negative factors for the margins, such as wafer price increase, ARM architecture license increase, or you are adopting more CSS model from ARM, which are all the negative factors for your gross margin. Are we still comfortable with our mid to long-term gross margin guidance, even with all the negative factors?
Yes. We are confident. Number one, look, from the wafer price and all those things, there's an equal playing field. We are comfortable. I mean, I'm not saying I like the price increase, but we can comfortably deal with it. Other ARM and all those things, we have our capabilities, and we have our service model. We have a huge track record. Again, we focus on delivering what we committed. Then we will win more and more projects going forward.
Okay. Thank you. Okay.
Thank you, ladies and gentlemen. And thank you for all your questions. I'll hand it over now to Mr. Jessie Wang for a closing comment. Ms. Wang, please go ahead.
Ladies and gentlemen, this concludes MediaTek 2025 first quarter conference call. An audio replay will be available in one hour after the call at the investor session of MediaTek's website. We would like to thank you for your participation, and you may now disconnect. .
Thank you, Jessie. Thank you, ladies and gentlemen, for your participation in today's conference. You may disconnect now. Thank you, and goodbye.