Good day, and welcome to the CEVA Inc. fourth quarter and full year 2019 earnings conference call. All participants will be in listen only mode. Should you need assistance today, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence and Investor and Public Relations. Please go ahead, sir.
Thank you, Rocco. Good morning, everyone, and welcome to CEVA's fourth quarter and full year 2019's earnings conference call. I'm joined today by Gideon Wertheizer, Chief Executive Officer, and Yaniv Arieli, Chief Financial Officer of CEVA. Gideon will cover the business aspects and highlights from the fourth quarter and full year 2019 and provide general qualitative data. Yaniv will then cover the financial results for the fourth quarter and full year 2019 and also provide qualitative data for the first quarter and full year 2020. I will start with the forward-looking statements. Please note that today's discussion contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions.
Forward-looking statements include our assessment of the overall licensing market in the first quarter of 2020, our annual 2020 and first quarter 2020 guidance, our anticipated pillars of growth and optimism about achieving such growth objectives, reaffirmation of our 2022 royalty goals, higher R&D expenses in 2020, and market data by Dell'Oro. For information on the factors that could cause a difference in our results, please refer to our filings with the Securities and Exchange Commission.
These include the ability of CEVA's IP for smarter connected devices to continue to be strong growth drivers for us, our success in penetrating new markets and maintaining our market position in existing markets, the ability of new products incorporating our technologies to achieve market acceptance, the speed and extent of the expansion of the 5G, Wi-Fi, contextual awareness, and IoT markets, our ability to execute more non-handset baseband license agreements, the effect of trade tariffs and political tensions, the effect of intense industry competition and consolidation, and global chip market trends. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. With that said, I'll now hand the call over to Gideon.
Thank you, Richard. Good morning, everyone, and thank you for joining us today. CEVA delivered an outstanding fourth quarter and overall excellent year, with revenues and EPS both surpassing Street expectations. Our strong performance, in particular on the licensing front, sets the stage for continued growth in 2020, as will be reflected in the annual guidance that Yaniv will share with you shortly. I will elaborate in my prepared remarks on the growth pillars and the underlying technology that are driving this performance. Total revenue for the fourth quarter of 2019 came in at $28.3 million, an all-time record high and significantly ahead of Street expectation. A brisk licensing environment, along with the strategic customer agreements, led to $14.8 million in licensing revenue, an all-time record high for quarterly licensing revenue.
We signed a record 21 new agreements, of which 15 were for connectivity and six were for smart sensing. 10 out of the 21 deals were with first-time customers. Target users for our technologies are baseband processing for 5G base stations, smartphone, and cellular IoT devices, AI and computer vision for consumer electronics, surveillance, and automotive, audio and Bluetooth connectivity for true wireless earbuds, sensor fusion for smart TV control, laptops, and PC peripherals, and Bluetooth and Wi-Fi connectivity for a wide variety of IoT devices. Of note, during the quarter, we signed a sizable and strategic agreement with a very large smartphone OEMs who license our technology for its in-house cellular modem chip development planned to be deployed in its future smartphone.
We are extremely excited and committed to this new engagement and looking forward to capitalize on this opportunity for greater market share expansion and royalties for future 5G smartphones. Royalty revenue for the fourth quarter was $13.5 million, an all-time record high. Seasonal strength and new production ramps led to 360 million CEVA-Power devices shipped in the quarter, also a record high. Royalty revenue for non- contributing a record $4.3 million and a record 164 million units in the quarter. For the full year of 2019, revenue came in at $87.2 million, up 12% from last year. Licensing and related revenue was a record $47.9 million, up 18% from last year. We continued to strengthen our customer base with a record 52 license agreements signed during the year, of which 23 were with first-time customer. Annual royalty revenue was $39.3 million, up 5% as compared to last year.
Shipment of CEVA-based product grew by 12% year- over- year to more than 1 billion units. Handset-based shipments were up 3% year over year with a strong second half of the year, driven by product launches across all phone tiers. Non-handset-based business continues to expand, with annual royalty revenue up 49% to $13 million, and units up 25% to a total of 469 million units. Looking ahead to fiscal year 2020, we are setting three key priorities. Priority one, capitalizing on our recent momentum in licensing to continue to grow our revenue and expand our customer base. Licensing agreement trigger a virtuous circuit, where new licensees drive royalties, which then free up additional R&D funds for further technology investment, which drive further growth in licensing and royalty momentum.
This is where our strategy to synergistically broaden our product portfolio through organic investment and M&A played out so well in the last few years. This was culminated in the step-up in licensing revenue and sustainable growth in royalties from non-handset-based band segment that we are experiencing. To this end, we anticipate three growth pillar. The first pillar is 5G. 5G present a greater growth opportunity than we had it with 4G LTE. To our CEVA-XC high-performance DSP family, we are set to benefit from the new 5G CapEx investment, which is forecasted to grow by 159% CAGR between 2018 through 2023, according to research published by Dell'Oro. Another growth opportunity we are addressing with regard to 5G is cellular IoT, which applies to massive connected devices for industrial automation, autonomous transportation, smart cities, medical, AR, and VR.
According to recent Ericsson Mobility Report, it is expected that there will be 5.4 billion cellular IoT connections by 2025. With our PentaG and Dragonfly modem platform, we are set to serve this demanding requirement in diverse markets. The third 5G opportunity is handsets. As I mentioned a few minutes ago, we have engaged in the last quarter with a top-tier smartphone vendor maker and have few others in our pipeline. This engagement reflects a de-consolidation in the cellular baseband supply landscape, where the large OEMs are looking to internalize SoC design that incorporate baseband processor to gain cost saving and differentiation. These customers are turning to us to take advantage of our broad portfolio of DSP and platform. The second pillar is Wi-Fi 6.
Wi-Fi 6 upgrade cycle represent a substantial opportunity due to the fast proliferation of connected IoT devices for smart home appliances such as smart TV, smart speaker, connected light bulbs, thermostats, and wearables. Our RivieraWaves 802.11ax IP is at the forefront of this upgrade cycle and used as the reference vehicle for certification by the Wi-Fi Alliance. With more than half a dozen licensee already designing Wi-Fi 6 product and low-power IP available for all different segments in the space, we are well positioned to capitalize on the upgrade cycle to Wi-Fi 6 to further expand our footprint. The third pillar is contextual awareness. Contextual awareness refers to the ability of IoT device to collect and process data from its surrounding and adapt its operation to the context. Today, IoT devices incorporate different classes of sensors such as camera, inertial measurement unit, microphone, time-of-flight sensors, and radars.
The data captured from sensor can then be fused to extract device context, such as activity type, intent, proximity, location, and a handful of other experiences. Context-aware features are quickly becoming a key differentiator for OEM in smartphones, PC, wearable, hearable, AR and VR headsets, robots, and other IoT devices. CEVA is in a unique position to be a one-stop shop for contextual awareness IP as a result of our recent organic R&D investment in voice, in DSP technology, and the acquisition of RivieraWaves and the Hillcrest Labs business. Priority two, royalty growth toward our 2022 goal of doubling our 2018 royalty level. We believe 2019 was a progressive year toward reaching this goal in terms of new customer development and new SKUs that entered to production.
While the push out of production rollout by one of our base stations customer and partial switch to a non-CEVA modem supplier by large smartphone OEM impact CEVA in the short term, we believe that by 2022, we will reach the customer scale and the CEVA power unit shipment aligned with our royalty target. The strong licensing performance and the contribution of Hillcrest Labs sensor fusion OEM business further reinforce our belief in reaching the target. We are closely monitoring and working side by side with our customers to deploy our technologies in their SoC or product and take it to production. Priority three, efficiently utilize R&D expenditure for new technology development and working closely with customer to expedite product development. We are choosing our R&D investment prudently and be agile and responsive to lucrative and strategic opportunities.
For this year, due to the step-up in licensing revenue and customer engagement, including engagement with a top-tier handset player, we plan to increase our R&D expenditure by approximately $6.7 million non-GAAP versus last year, which will also include a full year of R&D expenditure for our Hillcrest Labs team. In summary, I am very pleased with our achievement in 2019. We were determined and consistent with customer engagement and innovative with our product development, which resulted in an exceptional growth year in our annual licensing revenue, ahead of the target we set at our first Analyst Day in January 2019. We are on a solid path for this momentum to continue into 2020. This strong licensing performance and the strategic engagement we have formed with top-tier companies set the foundation for our royalty growth to our target in 2022.
We will continue to come up with differentiated solution with an unmatched level of integration, like our SenslinQ contextual awareness platform or CDNN in NeuPro that expand our footprint in AI. Finally, I would like to take this opportunity to thank all of our employees for their hard work, innovation, and fantastic execution, which has made us a top industry name for connectivity and smart sensing technologies for the IoT industry. I would like also to extend my thanks to our partners, suppliers, and last but not least, our investors for their support. We wish you all a happy and prosperous year. With that said, I'll now turn the call over to Yaniv, who will outline the financials and the guidance.
Thank you, Gideon. I'll start by reviewing the results of our operations for the fourth quarter of 2019. Revenue for the third quarter was $28.3 million, up 32% as compared to $21.4 million for the same quarter last year. Revenue breakdown is as follows: licensing and related revenue was approximately $14.8 million, reflecting 52% our total revenue, 40% higher as compared to the fourth quarter of 2018, and up 31% sequentially. Royalty revenue was $13.5 million, reflecting 48% of total revenue, up 24% from $10.9 million for the same quarter last year, and up 11% sequentially. Non-handset baseband royalty revenue reached an all-time record high of $4.3 million in the quarter. Core net gross margins was 90% on GAAP basis and 91% on non-GAAP basis.
Total operating expenses for the fourth quarter were $22 million, $1 million above the high end of our guidance, mainly due to accrued compensation related benefits and commission expenses associated with higher 2019 revenues and some provision for doubtful debt. OpEx also included an aggregate equity-based compensation expense of approximately $2.7 million, amortization of the acquired intangibles associated with the acquisition of Hillcrest Labs and Immervision business of $0.7 million. We concluded during the quarter the amortization of the acquired intangibles of RivieraWaves, in which we invested in 2014. Total operating expenses for the fourth quarter, excluding these items, were $18.6 million, also above the high end of our guidance due to the same reason I just highlighted.
US GAAP net income for the quarter was $3.1 million, and diluted earnings per share were $0.14, compared to net income of $2.3 million and $0.10 for the fourth quarter of 2018. Non-GAAP net income and diluted EPS for the fourth quarter came up significantly 29% and 30% to $6.8 million and $0.30 respectively, from net income and EPS for the fourth quarter of 2018 of $5.2 million and $0.23 respectively. Other related data. Shipped units by CEVA licensees during the fourth quarter of 2019 were a record of 360 million units, up 23% sequentially and up 45% from the fourth quarter of 2018 reported shipments.
Of the 360 million units shipped, 196 million, just shy of 200, or 54%, were for handset baseband chips, reflecting a sequential increase of 16% from 169 million handset baseband shipped during the third quarter of 2019, and a 45% increase from 134 million units shipped a year ago. Our non-handset baseband shipments reached a new all-time record high of 164 million units, up 33% sequentially and 44% on a year-over-year basis. As for the year, our total shipments increased 12% year-over-year to over 1 billion units, up 5% from 2018, which equates to approximately 33 CEVA power devices sold every second in 2019. Annual shipments of handsets increased by 3% year-over-year due to a strong second half, with units up 21% year-over-year for that period.
Non-handset baseband royalty revenue continued to grow and reached an all-time record of $13 million, up from $8.7 million in 2018 and $8.1 million in 2017. In terms of units, non-handset baseband units shipments were up 25% year-over-year to a record 469 million units. As for the balance sheet items, as of December 31st, 2019, CEVA's cash and cash equivalent balances, marketable securities, bank deposits were $150 million. We continued our active buyback plan, repurchasing approximately 161,000 shares during the quarter for approximately $4.3 million. Overall, in 2019, we repurchased approximately 355,000 shares for about $9.1 million and fully utilized the share authorized by our repurchase plan from May 2018. Earlier this week, our board of directors approved a new expansion to the buyback plan by a total of 700,000 shares of common stock available for repurchase.
Last, our adjusted to ASC 606 DSOs for the fourth quarter continues to be low at 36 days. During the fourth quarter, we generated $8.3 million of net cash from operation. Depreciation and amortizations were $1.8 million, and purchase of fixed assets were $0.8 million. At the end of the year, our headcount was 382 people, of which 313 were engineers, up from a total of 341 people at the end of 2018. Now for the guidance. As Gideon described, our strong and broad IP portfolio highly correlates with the needs of the semiconductor companies and OEMs looking to expand into IoT and 5G. In 2019, we set a new record high in licensing of approximately $48 million, two years ahead of the target we set at our analyst day in January a year ago.
While licensing revenue tends to be lumpy, we believe this momentum continues into 2020. We expect another step up in licensing revenue in the range of $2 million-$4 million. On royalties, we are expecting annual royalty growth in the range of 10%-14%, to approximately $44 million for the full year. Our projections take into consideration the lower share at the flagship smartphone OEM. The lower share will be more than sufficiently offset by new production ramps and growing shipments from non-handset-based products, including our Hillcrest Labs sensor fusion business. With regards to the recent coronavirus outbreak, we are closely monitoring developments with our royalty customers in China who may be temporarily affected. Our annual guidance assume a return to normal business and catching up on the yearly basis of this disruption that may take place in the first quarter.
On licensing, we do not see any issues and are expecting a healthy and solid licensing environment in the first quarter of the year. On cost of goods, we expect higher non-GAAP expenses of approximately $1.4 million due to a full year of Hillcrest Labs on board and R&D customization work-related expenses from two known projects that will be allocated from R&D to custom goods. On OpEx, with our strong licensing execution in 2019 and even stronger expectations for 2020, we will continue to support these new customers and reinforce our leadership with disciplined investment in R&D. Hillcrest Labs will also contribute its share to the 2020 OpEx on a full year basis. Overall, our non-GAAP OpEx increase will be approximately $7.1 million. Equity-based compensation expenses are forecasted to be about $1 million higher than 2019 and just shy of $12 million.
Annual gross margin forecasted to be in the region of 88%-90%. Interest income is forecasted to be slightly lower than 2019 at $0.75 million per quarter. Taxes are expected to be approximately $1 million on GAAP basis and 15% of pre-tax income on non-GAAP basis. Share count for is expected to be in the range of 23 million-23.5 million shares. Specifically for the first quarter of 2020, gross margin expected to be approximately 88% on GAAP basis and 89% on non-GAAP basis, excluding an aggregated $0.2 million of equity-based compensation expenses and $0.1 million of amortizations of other assets associated with the Immervision investments. OpEx for the first and second quarter of 2020 should be quite flat and higher than the third quarter due to the timing of R&D grant payments, is expected to be in the range of $21.4 million-$22.4 million.
Of our anticipated total OpEx for the first quarter, $2.6 million is anticipated to be attributable to equity-based compensation and $0.7 million is to the amortization of acquired intangibles. non-GAAP OpEx is expected to be in the range of $18.1 million-$19.1 million, also quite similar to the second and fourth quarters of the year. Interest income is expected to be approximately $0.75 million for the quarter. Taxes for the first quarter, $0.2 million, both on GAAP and non-GAAP basis. Share count for the first quarter, approximately 23 million shares. Hey, Rocco, with that, you could open the Q&A session. Thank you.
Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause for just a moment to assemble our roster. Today's first question comes from Mike Walkley of Canaccord Genuity. Please go ahead.
Hi, this is Anthony in for Mike. Thanks for taking the question, and congrats on strong results and the new deals signed. With the 21 new deals, including the large strategic agreement with the handset OEM, any color you can provide specifically on the size of the large licensing agreement? Any sense for how we should think about the timing of these new deals ramping this year and towards your royalty outlook for 2022?
Sure. Usually we don't break down the size of the deals. In our business, we have two flavors of licensing deals. It could be for a single use, we call it, one use on a chip for a specific product in a specific market, and a multi-use, which covers the same type of technology but for a wider use. These wider, bigger deals usually are term-based, it could be three to five years, then you have no limitation of the number of use that you are allowed to use our technology. In a single use, the customer comes back every six months to a year year, or year and a half, when it wants to design its next chip. These deals tend to be smaller in size, the bigger deals are the time-based, which are in the millions of dollars per deal.
Usually, we have a combination. Every year, we have a few of these larger deals, or sometimes we have renewals. It could be one, two, three high deals like that a year. It depends. For sure, we had one larger deal in this quarter and then many other, half of the deals are newcomers. They're using CEVA for the first time ever. I didn't answer your question specifically on that specific customer, of course, but overall, we had larger deals and smaller deals in the quarter. On the royalty front, what's interesting is that we expanded our business model. If you remember, we talked about Hillcrest Labs and adding a different flavor of royalties and deals to CEVA. We signed three deals for the first time using our sensor fusion technology.
These deals tend to have less or no upfront license fee. Because we're dealing with OEMs and not chip vendors, their chips, a deal that we closed in October, is now already in production in the beginning of this year. Within few months, half year that we could see revenue coming from royalties in a very quick ROI for this type of technology. That also helps us with our guidance for growth in 2020 royalty basis.
Got it. Great. Thank you. With Nokia showing some progress on its ReefShark execution and you, I believe, mentioning working closer with them on the development, how has that changed, if anything, your expectations or on the clarity or the timing of how they will ramp this year into 2021?
We leave it to them. We are following them, as you are probably, and as soon as they have the silicon part of their business set up and in mass production, we should be enjoying that. We have another customer, ZTE, that is using us and is in production with 4G, ramping up now its 5G solution. We are waiting for another one to be hopefully more aggressive this year, probably towards the later part, as much as we know. We also get our inputs publicly from their announcements and follow their development. They have a lot of very interesting designs, and we are waiting to see the royalty reports come in.
Got it. Great. Thanks again.
Thank you.
Our next question today comes from Tavy Rosner of Barclays. Please go ahead.
Hi, this is Peter Zdebski on for Tavy. Congratulations on the quarter. I just wanted to ask about Hillcrest and Immervision, taking those two together. Are royalties in the back half of the year still tracking at what you had previously expected? Has there been any licensing contribution from those two businesses? As a follow-up, if you could maybe provide an update on some of the traction you had last quarter in the automotive space.
Yeah. Okay. Hi, it's Gideon. Let me take, first of all, the sensor fusion, the Hillcrest Labs contribution. You need just answer before, there is a distinction between the Hillcrest business, which is OEM-centric, meaning addressing to the end customer, and the CEVA other business, which is hardware that goes to semiconductors. The usual impact of the sensor fusion business is in the royalty and less on the licensing. When we said we licensed three agreements in the first quarter, that's very good news for the royalties. In terms of royalties, the sensor fusion business tracking, according to our expectation and to some extent, a bit better.
This group of Hillcrest Labs give us very good access to companies in the robot vacuum cleaner, which is a very fast-growing market, in PC, in BTV, remotes, and many other segments that we will not expose it with our DSP/other platform connectivity platform. The integration with our sales force going smoothly, and we are very happy. You mentioned Immervision. Immervision is investment that we made in a very small companies. We are engaging with customer, but these are early days in this front. You had another question, which I forgot, if you can remind me.
It was just on the traction that you saw last quarter in the automotive space. If you could give us an update on that industry.
Yeah. I'm very happy of our traction in automotive space. I have to admit that it came faster than I anticipated because this is, as you know, very high entry barrier market and with lot of conservatism. We are engaged with a very large OEM in automotive. They took our AI technology. Last quarter, we talked about one of the largest semiconductor player there that also adopted our AI technology. Usually, these deals are extremely comprehensive and different clock speed than consumer. If I try to understand your question, I think that by 2022, 2023, we will have our product in cars.
Okay. Thank you for the color.
Our next question comes from-
Sure. Thank you.
Our next question comes from Matt Ramsay of Cowen. Please go ahead.
Thank you very much. Good morning, guys. I think long term, Gideon, I was interested that you called out Wi-Fi 6 as sort of one of the big pillars of longer term growth for the company. I'm sure you guys saw that recently, the guys at Broadcom sort of deemed their smartphone Wi-Fi business as non-core to the company, and it's interesting that that's a place where it seems like you guys are leaning in. Gideon, maybe you could step back and talk about your Wi-Fi business and particularly Wi-Fi 6, the traction of licensing, the breadth of it, who potentially the partners are, and give a little bit of update as to how big of a piece of the royalty growth over the next three or four years that could potentially be. Thank you.
Yeah. Wi-Fi 6 is now a new cycle from Wi-Fi 5, which used to be called 802.11ac. Our focus, since you mentioned Broadcom, has not been the smartphone. I think in the smartphone, it's pretty consolidated there. We do have customer asking us about it, but our play is in the IoT. IoT, it's a big collection, and I mentioned in my prepared remark, the smart home. All those smart speaker, that by itself, it's more than 100 million units so far and growing fast. All smart TV going to adopt the 8s because there is a clear trend of going over the top, and things that are going into the kitchen, the appliances. We are seeing also people are taking our Wi-Fi 6 and Wants to modify for lower latency for AR.
We see also the AR angle, which in my opinion will be big, coming to our Wi-Fi 6. We have now six deals with six customers that are working in those markets. Our pipeline is full with customers that wants to do it. We in the Wi-Fi 6 have different product line. We have for the very low bitrate, the lower inside of it, and up to access point, where you start speaking about residential gateway, enterprise gateway with 8 by 8, and stuff like this. That's a 1 billion units opportunity for us.
Got it. Thanks for the color there. Understood on the IoT focus. As my follow-up, I wanted to ask, obviously, there's the fluid and unfortunate situation with the coronavirus. Near term, I think we're all trying to sort of understand impacts to companies. I noticed in your fourth quarter results, the non-smartphone business for royalty units was up significantly. I know there's been some fits and starts over the last two or three years with Spreadtrum and Tsinghua gaining and losing share, and on their roadmap. If you guys could just give us an update as to the 3G and 4G non-smartphone business in China, royalty opportunity in the near term, and what drove that big upside in the fourth quarter, and is it something that's sustainable, and how should we think about that in the context of the coronavirus situation? Thanks, guys.
When it comes to cellular, let's say, end devices, we don't make officially distinction between machine-to-machine, let's call it, and handsets. You mentioned Spreadtrum or Unisoc, they have a play, and we see the progress, and we believe that they will continue to make progress. They lost a key customer, but there are many other ODMs in China, targeting India and other areas. We see the volume up. If you ask me what we expect this year in the handset space, 4G will be substantial, and I would say growing, and it will be for the coming year. In 5G, we'll get our shot. Spreadtrum is advancing this respect, and we signed a deal now in 5G that will materialize sometime. We will be in 5G as well. To give you more color, in Q4, this was maybe pre-virus.
This is one of the strongest seasonal quarters we have, both in handsets and in the consumer stuff. This is coming from very strong sensor fusion. This is coming from very strong vision, Bluetooth, AI royalties. It's a strong quarter for us, and all the different markets worked out well for us in Q4. I still don't think that that piece is associated with the virus. Q1, and many companies, including us, will probably see both the typical seasonality of post-Christmas, post-Chinese New Year, and with the virus kicking in, with people working from home and not in full utilization. That's where you see more. With that said, our licensing, because it's not coming only from China, is still looking very healthy on a worldwide basis.
Got it. Thanks very much, guys.
Thank you, Matt
Our next question today comes from Suji De Silva of Roth Capital. Please go ahead.
Hi, Gideon. Congratulations on the strong results here. The Tier 1 as well. Yeah, baseband. Along those lines, the smartphones, the remaining Tier 1 OEMs, what's the trend here in terms of their own baseband versus merchant? When a guy like the one you just won ramps up their own baseband, what kind of in-house versus merchant baseband should we expect, half-half, or is there a different strategy and dynamic playing here?
In terms of merchants versus in-house, it's hard to know. We speak with companies, the big ones, eventually, and they see what other people are doing and how they benefit from there. They all want to do it. With that said, it's a complex stuff, and you need to do substantial investment. It does give you the advantages of controlling, especially when it comes to 5G, that you can come out with all sorts of different flavors of it.
Okay. Some more control of the pipeline there. Okay, great. For the royalty guidance, more generally in 2020, the growth guidance you have, what are the drivers of visibility? How much of it is Hillcrest layering on versus other segments? What kind of mix of baseband, non-baseband would you expect exiting 2020, just to understand how the two ramp?
Yeah. On the handset side, we have seen over the last couple of years, there are many moving parts, hard to control. Sometimes OEMs change vendors along the way, sometimes different segments, high-end, low-end, is the key driver of the industry. Overall, the replacement cycle is a bit longer, and the market is more mature in handsets.
One of the bigger OEMs changing vendors in 5G, we're not accounting for growth in our handset baseband for this year. It may go up in a few years from different aspects, but for 2020, that's where we've seen the last couple of years, the gradual decline but control of that market. The positive side, which we have seen over the last couple of years, started off from 2016, I believe, 2017, when our first non-handset baseband became more significant. We started at the time with 10%, at $4 million, I recall, and then went up to eight and doubled it. This year, another 50% growth to 13. I envision us exiting 2020 with north of $20 million coming from non-handset baseband. This is one of the key drivers we talked about a year ago in our Analyst Day.
This is the way to double the 2018 royalty level that Gideon mentioned in our prepared remarks. This coming from a lot of these newer markets. Bear in mind, we were asked about this later, we still don't have all the customers, not in the base station reporting to us royalties, not in Bluetooth with 20 deals that we signed just last year. These guys need to get into production. Hillcrest is just for the first time contributing to us royalties for a full year, not only for five and a half months. We're seeing more and more progress and, as Gideon said, faster than we anticipated coming from that portion. All these are the positive aspects of the royalties growing at 10%-14% for this year.
There are more drivers to come, but we don't have exactly the timing and the magnitude of all these other deals.
Very helpful colors. Thank you, guys.
Thanks, Suji.
Our next question comes from David O'Connor at Exane BNP Paribas. Please go ahead.
Great. Good morning, gents. Thanks for taking my question. Maybe firstly, just to follow up on the last question. What's the expectation for the royalty weighting H1 versus H2 in 2020? That's my first question. I have a follow-up. Thanks.
Yeah, good question. Thanks for asking. I don't think we gave too much color about that yet. If you look at the last two years at CEVA, we had a relatively low first half, seasonal-wise, both on the handset side and on the consumer, that's typical that the second half is stronger. This year, for the first time, although we have the coronavirus hitting stronger in Q1, nobody yet knows the effects in the second quarter. With that said, we believe that we'll have a positive year-over-year comparison on top line in royalties and in licensing, by the way, as well, and bottom line as well. We are starting the year with a positive momentum, with some macro concerns, mainly around the virus.
The second half of the year, we will see what new products like we saw in this second half, especially in the fourth quarter, what other customers get into production, in what magnitude, a little bit more moving pieces, and overall, still growth both on licensing and royalties for the year.
David, let me just add. This is Gideon. Last year, we came out with 5% year-over-year growth in royalties. This year, we forecast 10%-14% year-over-year growth. It's more than double than it was last year, and this is still without not all the filling, the firing, like Yoni mentioned, base stations, 5G base stations, and all those deals that we signed last year, and they still need to gradually get into production. What we like about 2020, our forecast, is there is this diversification and more resiliency to specific customer or specific segment.
Great. That's helpful. Thank you. Maybe as my follow-up, you mentioned the release of license for baseband processing for 5G base station. Just wondering, is this one of your existing base station customers renewing their license or taking some different IP? If you could give some detail on that, it would be very helpful. Thanks, guys.
David, say that again.
You saw, yeah.
The quality of your voice is not that good.
Licensing on base station, is that the question?
Yeah, the question was around, you mentioned in the release, 5G base station, one of the licenses there. Just wondering if that's the existing base station customers renewing maybe their existing licenses or just if you can give some color around that. Thanks.
About the base station customer, you mean?
Yeah.
Okay. We have, I would say, two very active customers. One of them is already in production in LP. This is China-based. The other one is from Europe. They are pretty open about their status, and we are following what they are saying. We do have other base stations customer that I would consider them tier 2. They are progressing in their market. The two main customer are, totally can go up to 30% of the market. Specifically about the deal that you are asking about, Q4 was a new customer. Maybe 2nd tier, as Gideon said, but a new customer that has never worked with CEVA with any of its technologies, ever.
Got it. That's very helpful. Thanks, guys.
Thank you.
Our next question comes from Gus Richard in Northland. Please go ahead.
Yes. Congratulations on the quarter and the outlook, and thank you for taking my questions. Is there a geographic breakdown to the licensing in the current quarter?
Yeah, we usually give it. Let me see, open the press release first second. Yeah, here we are. 10 deals were in China, five in the U.S., very strong quarter for our U.S. team. two in Europe, four in APAC, including Japan. Pretty nice spread all over the world.
Got it. In terms of the strategic deal with the large handset OEM, when would you expect that to result in royalty? Is that a 2021 or 2022? Do you have any sense as to how long that would take to get into production?
I wish I could buy the crystal ball on this one. We have seen different examples that sometimes things take longer than you anticipate. It's a complex technology, it's a complex market. I would probably say a few years. Hopefully not five, but probably three years is very reasonable.
Got it. All right. That's very helpful. Thank you.
If we could do anything to expedite, this is part of the R&D investment that we are continuing to invest over the years, and we are trying to help our customers do it faster, but it's never that simple in some of these more difficult markets.
Thank you. This concludes the question and answer session. I'd like to turn the conference back over to Richard Kingston for any final remarks.
Thank you, Rocco. Thank you all for joining us today and for your continued interest in and support of CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current report on Form 8-K and accessible through the investors section of our website. With regards to upcoming events we will be attending, these include the Susquehanna Technology Conference on March 12th in New York, and the Roth Annual Conference March 15-17 in Orange County, California. Please visit the investors section of our website for further information on these events and other events we will be attending. Thank you and goodbye.
Thank you, sir. Today's conference has now concluded. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.