Good day, ladies and gentlemen, and welcome to the 1st Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Ms. Mariah Shelton with Investor Relations.
Ms. Shelton, you may begin.
Thank you, Sherry. Welcome, everyone, and thank you for joining us today for QuickLogic's first quarter fiscal 2018 results conference call. With us today are Brian Faith, President and Chief Executive Officer and Doctor. Sue Chung, Chief Financial Officer. Before we begin, I will read a short Safe Harbor statement.
Some of the comments QuickLogic makes today are forward looking statements that involve risk and uncertainties, including, but not limited to, stated expectations relating to revenue from new and mature products, statements pertaining to QuickLogic future stock performance, design activity and its ability to convert new design opportunities into production shipments, timing and market acceptance of its customers' products, schedule changes and projected projection start dates that could impact the timing of shipments, the company's future evaluation systems, broadening the company's ecosystem partner, expected results, and financial expectations for revenue, gross margin, operating expenses, profitability and cash. These statements should be considered in conjunction with the cautionary statements that appear in QuickLogic's SEC filings. For additional information please refer to the company's SEC filings. Investors are cautioned that all forward looking statements in this call involve risks and uncertainties and that future events may differ materially from the statements made. For more details of the risks, uncertainties and assumptions, please refer to those discussed under the heading Risk Factors in the annual Form report on Form 10 K for the fiscal year ended December 31, 2017.
The company filed with the SEC on March 9, 2018, These forward looking statements are made as of today, the day of the conference call, and management undertakes no obligation to revise or publicly release any revisions or forward looking statements in light of any new information or future events. Please note, QuickLogic uses its website, the company blogs, QuickLogic Hotspots, its corporate Twitter account, Facebook page, and LinkedIn page, as channels about its products, its plans, financial and other announcements, its attendance at upcoming investor and industry conferences, and other matters Such information may be deemed material information and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD This conference call is open to all and is being webcast live. We will start today's call with the company's strategic update from QuickLogic's CEO, Brian space. Then CFO, Sue Chung will provide financial results and guidance. The company's CTO and SVP of Engineering dot Tim Sacks, who will join the Q And A portion of the call.
Brian will deliver closing remarks and open the call to questions. At this time, it is my pleasure to turn the call over to Brian Faith, President and CEO. Please go ahead, Brian.
Thank you, Mariah, and thank you all for joining that extends the reach of our core IP to enable the next generation of artificial intelligence and endpoint applications. The trademarked QuickAI solution that we presented with our 3 ecosystem partners leverages our EOS S3 SoC our Arctic Pro Embedded FPGAIP and is market ready. I have several other exciting updates to share today that bolster my confidence in our ability to grow revenue by more by a major OEM that incorporates our EOS S3 SOC. However, before I present the significant progress we have realized during the last quarter, want to take a minute to go over two items that will limit our revenue growth in Q2. First, Amazon has not released its close talk specification.
Closed Talk is the unofficial name for the specification that will cover all of the design wins we have that must be able to advertise compliance with Alexa voice services in conjunction with the product release. We have been engaged with Amazon since mid-twenty 17, And I believe the specification will be done in time for our customers to release their products during Q3. 2nd, due to supply constraints of QFP package devices, we are anticipating a delayed shipment of devices from our test and package some contract that will negatively impact our Q2 revenue by a few $100,000. While we have been assured these devices will be received in time to support our customer production schedule, we are forecasting we are forecasting enough growth from EOS S3 and other new products to more than offset the anticipated decline in mature product revenue and deliver revenue growth During Q4, we completed our test chip tape out for the GlobalFoundries 22 nanometer FDSOI process that is marketed as 22 FTX. While delays at GLOBALFOUNDRIES and its packaging partner pushed out the delivery of our qualification devices, They are scheduled to arrive on our dock later this month.
Based on this schedule, we anticipate completing our 22 FDX qualification this summer. We have ongoing engagements with potential IP customers that include several top tier semiconductor companies that are targeting 22 FTX for new SoC designs that I believe will close later this year. We also have ongoing engagements with top tier semiconductor companies for new SoC designs targeting our already qualified 40 nanometer processes at Global Foundries And SMIC, that I believe will close during 2018. These SoC designs are moving forward continue to target the integration of our embedded FPGA IP. In addition to these activities, we are also in the process of porting our EFPGA IP to more advanced fabrication notes We announced the support of our Arctic Pro embedded FPGA IP by AldEC, a world leader in electronic design automation tools.
With this, our customers can perform design verification using Aldex industry proven active HDL FPGA design and simulation software. And easily migrate designs to and from our Aurora tool suite. The combination of the 2 tool sets delivers a seamless development environment supporting a simple and complete design flow from RTL to simulation to bitstream for the embedded FPGA portion of an ASIC or SOC design. In March, we announced joining the RISC V Foundation. The RISC V Foundation is a non profit corporation controlled by its members that directs the future development and drives the adoption of the 5 instruction set architecture or ISA.
Founded in 2015, the foundation has more than 100 members representing hardware and soft innovators focused on building an open and collaborative community to deliver a free and extensible processor architecture along with its associated This is particularly significant for QuickLogic as there is strong synergy between our embedded FPGA initiative our membership in the GlobalFoundries FD Accelerator Partner Program to facilitate 22 FDXSOC designs and the risk 5 effort. With this, 22 FTX customers will be able to seamlessly integrate our embedded FPGA IP and the risk 5 open source processor technology on the same SoC. Given the increasing interest in our embedded FPGA IP and the impressive traction risk cloud is building with major semiconductor companies, This could prove to be a big deal for QuickLogic. Let's shift now to our AI initiative and how it leverages our embedded FPGA IP and our EOS S3 SOC to enable next generation AI and endpoint applications. Together with our ecosystem partners, General Vision, nepes Corporation, and SensiML, We introduced what we believe is the 1st comprehensive solution that unleashes the power of next generation AI in endpoint devices.
Our solution is trademarked as quick AI, which includes silicon, software, and our new quick AI development platform. With these resources and tools, OEMs can initiate next generation AI enabled endpoint designs today. The benefits of AI are indisputable. Virtually every cloud computing company in the world today is developing AI solutions as a high priority. However, the solutions available for cloud applications are too expensive and consume far too much power for endpoint applications As a result, prior to the introduction of QuickAI, endpoint product designers had to either piece together solutions and build their own development tools or compromise with a software solution running on a microcontroller or a digital signal processor.
QuickAI is a comprehensive solution that enables the the immediate development of next generation AI enabled endpoint devices. A market that ABI research predicts will ramp very sharply to exceed 70,000,000 devices in 2023. I'll take a minute now to introduce you to our ecosystem partners you can better understand where QuickLogic fits in the value proposition and why our EOS S3 SoC and embedded FPGA IP our key enabling technologies for next generation AI and endpoint devices. General vision is the inventor of narrow MEM, a scalable neural network technology on silicon and an essential enabler for the practical application of artificial vision and artificial intelligence. Niromem employs a radically different compute architecture and is vastly more efficient than running AI software on a microcontroller or DSP For example, a typical DSP for endpoint applications can only handle 32 simultaneous calculations, whereas the narrow mem IC in hand today handles 576 simultaneous calculations.
The result is an economical solution that delivers higher performance at significantly lower power consumption. Nepes Corporation is a leader in advanced semiconductor assembly and packaging NEMPHIS has developed and mass produces the NM500, a Neuromem based IC that enables artificial vision and artificial intelligence and endpoint solutions. The NM500, which Nepus uses in critical optical inspection application in its manufacturing processes is a focal point for the company's future intelligence business unit. Sensimall is a spin out from Intel and a developer of leading edge software tools that enable the quick and easy generation of application specific pattern recognition the QuickLogic contributes the enabling capability of our embedded FPGA IP and our EOS S3 SOC. With this patented FFE integrated arm cortex M4F microcontroller and embedded FPGA, EOS S3 supports critical pre and post processing capabilities, feature extraction, intelligent power management, and in some applications, host processing.
In use cases where it's applicable, the EOS S3's integrated LPSD enables always onalways list capability to detect voice or in some applications noise that may warrant further analysis. Let me share a quick example of how this could come together FFT filter in an industrial IoT device. Our embedded FPGA will consume 80% to 90% less power than a DSP or microcontroller. When this power savings is combined with a similar efficiency improvement that a narrow mem processor delivers, it presents many new opportunities for designers to employ the benefit of this next generation AI architecture in endpoint designs. With QuickAI software and development tools designers can turn these opportunities into real products starting now.
A point I want to emphasize is that QuickAI is perfectly aligned with our core business model and leverages and most importantly, our patented IP. Due to our high value contribution in next generation AI applications, We believe our gross margin potential for EOS S3 will be comfortably above our historical levels for devices For more color on QuickAI, our ecosystem partners, our strategy and the markets we are addressing, You can access a recording of last Friday's webinar on the Investor Relations page of our website. Let's shift now to In previous conference calls, we've discussed a wearable design win with a large app company. I'm very proud to announce that Neighbor Labs selected our EOS S3 for its first consumer product, the Aki Smartwatch. Aki was released earlier this week and is being marketed by Korea Telecom now known as KT.
With nearly 20,000,000 subscribers KT is South Korea's largest wireless carrier. Neighbor Labs is the highly sophisticated worldwide product development group that was spun off from neighbor. With a market cap approaching $25,000,000,000 neighbor is best known for its search engine, cloud computing, AI assistant, and its wide variety of apps that are used worldwide. I personally use NEVERA's LINE messaging app, which has over 500,000,000 downloads. The focus at Neighbor Labs is to develop technologies and products that provide what it calls ambient intelligence and leverage the various app resources and technologies developed throughout the neighbor organization.
The Anaki Smartwatch demonstrates the benefits of ambient intelligence by recognizing a user situation, anticipating needs and then providing information and services before they are requested. The Aki Smartwatch features an intuitive voice interface that is used to control functions, communicate person to person, and to access neighbors cloud based AI resources using the trigger word Okeydokey. Through the use of an integrated neighbor app, Aki also supports speech to text and text to speech. Aki also monitors and reports user activity, context and location. Aki augments its integrated GPS with Neighbor Labs WPS technology to provide precise location even when a user is indoors.
With these resources and its Bluetooth, Wi Fi, LTE and WCDMA connectivity, Aki can support any combination of always on always listening, always connected and always aware use cases. Since our last conference call, the tier 1 smartphone OEM that we discussed in the past has officially locked down its hardware and firmware design for its wearable that includes our EOS S3. With these important milestones completed, the OEM has initiated its audit of our package and test subcontractor to finalize our device qualification. In parallel with this, the customers in the process of completing software regression, quality and reliability testing and is working closely with its 3rd party app developers. We continue to work very closely with this customer and anticipate receipt of finished test units later this clear tangible progress towards the release of this new wearable due to the fact we do not have a schedule in hand at this time.
We are not including any revenue from this design win in our Q2 guidance. The second design opportunity with this customer for a new consumer wearable device is moving forward and we should know if EOS S3 makes the final cut later this quarter. Customer is able to use the new application processor it is targeting for the design, it will also use our EOS S3 for voice and sensor processing. The important point to note here The 3rd design opportunity we have with this customer is for a new consumer hearable device. Quarter that supports 2 microphone inputs beamforming and advanced noise cancellation.
We expect the evaluation will be completed later this quarter And if our technology is approved we believe the design will target EOS S3 and move forward rapidly. In our last conference call, I mentioned a design win with a European company that has developed a wearable targeting B2B health and fitness applications. This design uses virtually all of the EOS S3 resources to support host processing, sensor processing, and its embedded FPGA as a display driver. In line with the forecast I shared last quarter, we have received an initial order to ship production volume later this quarter. We expect this product will ramp into mass production during the second half of twenty eighteen.
We have added a second engagement with the European fitness company that I have mentioned in past conference calls. The second engagement will fully leverage the resources of our EOS S3, including its embedded FPGA. We believe I'm very pleased to announce that Marotta has selected our EOS S3 for a new voice enabled Wi Fi solution that is demonstrating this week at the IoT M2M show in Japan. As many of you know, Marotta is the worldwide market leader for Wi Fi modules. In this new solution, Marotta leverages our EOS S3 SOC to expand its market to include voice enabled battery powered applications like smart speakers, and other IoT devices that connect to WiFi networks.
In this solution EOS S3 enables always listening at less than 100 Microatts power consumption recognizes trigger words and minimizes system power consumption via its intelligent power management. OEMs selecting this Mirata solution can differentiate their end product designs further without adding recurring costs by using quick logic development tools to leverage EOS S3 resources such as its embedded FPGA and patented FFE. In line with the target we provided in our last conference call, we introduced The LV stands for low voltage. With this version of the device, designers benefit from a 33% reduction in power consumption, but are limited to a 48 Megahertz clock speed. However, when you combine the resources of our patented FFE and embedded FPGA, the total compute power is still more than enough for many applications that benefit from the lowest possible power consumption.
We have made very solid progress in We are in the final stages smartphone designs using EOS S3. This concept smartphone design using our EOS S3 that I mentioned during our February conference call was not completed in time for Mobile World Congress, but is currently scheduled for demonstration with the OEM's lead carrier later this month. Last quarter, Our OEM customer for this design is Chinese based Booguau educational electronics. With 18,000 kiosks in 600 Cities across China and 50 flagship stores in major cities, BBK was founded in 1995 and is a very well recognized brand in China. The primary application for EOS S3 and our current design win are to enable voice recognition and provide intelligent power management.
With a voice interface that tablet enables the educational process to start as soon as a child learns to talk. In addition to developing a full curriculum that runs from when a child learns to talk, all the way through primary school, the tablet also provides an early introduction to English. In addition to the educational curriculum, BDK has a cooperative agreement with AI speech that enables users to access its cloud based AI resources. Given the scope and scale of BBK and the interest in early childhood education in China, I think this tablet has solid volume potential that will begin ramping in Q3. During I would now like to turn the call over to Sue for
Thank you, Brian. Good afternoon, and thanks to everyone for joining us today. Please note we are reporting our non GAAP results. You may refer to the press release we issued today for a detailed reconciliation of our GAAP to non GAAP results and other financial statements. We have also posted an updated financial table on our IR webpage that provides current and a historical non GAAP data.
For the first quarter of 2018, total revenue was $2,800,000 and within our guidance range. Our new product revenue was 1 $300,000 and the mature product revenue was $1,500,000. Samsung accounted for 10% of total revenue during the first quarter consistent with the previous quarter. As we continue to diversify our customer base. Our Q1 2018 gross margin was 51.5%.
This was above our forecast in the range due to a favorable mix of new product revenue. Operating expenses for Q1 round up to $4,900,000 and work within our forecasted range. R and D expenses were $2,500,000, and SG and A expenses were $2,300,000. The increase in R&D was driven mostly by the associated with embedded FPGA. The net total for other income expense impacted in Q1 twenty eighteen was $99,000 a charge, which was above our forecast.
Due to foreign tax expense and currency exchange loss. This resulted in a net loss of approximately 3 point $5,000,000 or $0.04 per share, essentially at the midpoint of our forecasted EPS range. We ended the 1st quarter with approximately $12,600,000 in cash. Net cash usage during the first quarter was $4,000,000 and within the forecasted range. Turning to the second quarter 2018 outlook.
Our revenue guidance for is approximately $3,100,000, plus or minus 10%. Total revenue is expected to be comprised of approximately $1,700,000 of new product revenue $1,400,000 of mature product revenue. The increase in new product revenue is expected to be driven mostly by the growth in sensor processing and the continued diversification of our display bridge business. On a non GAAP basis, we expect our gross margin to be approximately 50% plus or -3 percent. We expect our gross margin will come continue to benefit from a favorable mix of new product revenue and the ongoing diversification of our customer base and end markets.
We're currently forecasting non GAAP operating expenses at approximately $4,800,000, plus or minus $300,000. We expect non GAAP R and D expenses to be approximately $2,500,000 and non GAAP SG and A expenses to be approximately $2,300,000 Our R and D expense forecast includes anticipated charges associated with porting or embedded FPGA IP to more advanced the fabrication nodes at a TSMC. We expect other income expense and taxes will be a charge of approximately $60,000. At the midpoint of our forecast, our non GAAP loss is expected to be approximately $3,300,000 or $0.04 per share. As was the case in prior quarters, The main difference between our GAAP to non GAAP results is our stock based compensation expense, which we expected to be a $480,000 for the second quarter.
In Q2, we expected to use between $3,000,003,500,000 in cash. With that, let me now turn the call back over to Brian for his closing remarks.
Thank you, Sue. I realize today's call ran longer than usual, but our priority is to provide you with as much transparency as our NDAs will allow and the detail you deserve. It has been a long road longer than I had imagined. However, we are poised to enter the second half of twenty eighteen with numerous EOS S3 designs waiting only for Amazon's approval before they move into mass production. Caused by the delay from our test and packaging subcontractor.
Much more important than the jump start these push outs will give us for the second half is the fact the designs we've been working with large OEMs are beginning to move into production. Small Chinese companies are quick to take risk. They saw us and often measure a dozen times before making a commitment to a new proprietary solution. Neighbor is well known and highly respected across Asia and for it to use EOS S3 SoC at heart of its first consumer product is a very strong validation for QuickLogic. Others, including the BBK design I mentioned earlier, are following close behind.
In the world of semiconductor design wins, momentum is very important and design validation by well the mentor and LDAC and the seamless integration of these tools with our Aurora Development platform, I believe we are very close to establishing momentum for our ARPC Pro embedded FPGA business too. QuickAI adds a very exciting new layer of opportunity for our EOS S3 SoC and our Arctic Pro embedded FPG IP on top of the momentum we are building in our core markets. We believe QuickAI has the potential to substantially expand the applications, use cases and customer base served by QuickLogic and through its leverage of our patented technologies enable us to build a more diversified and sustainable high margin business. Sure you have a lot of questions about the new developments we covered today. So I'll close now and turn the floor back to the operator.
Thank you.
Our first question comes from Suji Desilva with Roth Capital.
Hi, Brian. Hi, Sue. So a lot to ask about. Let me start maybe with the EOS S3, the constellation of products that are waiting the Amazon close talk. What's the size of that sort of group of products in terms of unit revenue opportunity for you guys when that turns on?
Good question. So just for clarity, the majority of the products that we had on our CES suite are ones that are waiting for this specification to go through the approval process. I would say that individually each of those designs, because they're going to be high tens of 1000 or a to, I would say, high 100 of 1000 depending on which ODM it is and how they bring that to market. And then for modeling purposes, I think we said publicly use $1.50 at the midpoint for EOS S3 in those types of solutions. In certain cases, there are more than 2 certain cases are under 1, but if you use 1.5, you can get a good modeling for that revenue potential.
And Brian, if I recall, it's about 10 roughly plus or minus design wins. Is that right?
Yes. We had 9 CES that were hearable based. And so the majority of those are Amazon based. Are new ones that have come into the funnel since CES. So it actually is a higher number than what we had at CES, but that's I would use that as the of number to model from.
Great. Very helpful color there. And on the constraint, the test and packaging subcons, I wasn't clear Which segment that impacts whether that's new or mature products and the magnitude of the impact in the 2Q guidance?
The packaging type is QFP, which we have in both mature and new products. It tends to be more of a mature product for us, but in this case, there is new product being affected by it. And I think it's on the order of a few $100,000. To be clear, by the way, this is not in any way affecting EOS S3 were the display bridge products, which do not use QFE Packaging. This is the other devices that we have.
Got it. Good to know that. And then for the Tier 1 smartphone opportunity, it feels like it's tantalizing the close here. Can you help us size the opportunity and guess not just this one opportunity, but it sounds like 2 or 3 opportunities you might be in as a kind of a platform into this Tier 1 smartphone vendor. Any color there would be very helpful.
Thanks.
Yes. So all three of them would be in the would be over the 1,000,000 unit threshold. I would say probably all three are low single digit millions of units. I won't say the ASP because should just use the average that we've been talking about from a modeling point of view. But that's what I would use.
Now a couple of these products are already products at this OEM. So they have sort of an established track record of that. The one that we've been talking about for the longest amount of time, this wearable design win that we're wrapping into this next stage of productization with them, that's a new category for this customer. So you have to think about it in those terms. New market for this customer, but it's a I think the way they talk about it, it's still going to be in the millions of units range based on how they're planning to take it to market.
Okay. And then I had a bunch of questions on the AI, but I'll just kind of stick to one for now. The which end markets do you think would be the first ones to leverage this AI capability you have? Thanks. Yes.
So let me address that question our CGM SVP of Engineering Tim is in the room, but I think we'll save him for some more technical questions in that area. So for the initial markets that we've launched with the ecosystem that we did in our webinar. That is initially going to go after the IoT broadly that category. More narrowly industrial IoT because that's where a lot of the intel cork was used. That's what SensiML has seen some traction in where they work with customers.
And that's also if you think about what nephysis is talking about using a forward optical pattern recognition and manufacturing floor, it's the closest to revenue will be where they see opportunity today. That being said, AI is a very broad term. And so even today, Tim and I were meeting a customer here at QuickLogic, their CEO came in and he's talking about wearables and hearables in consumer market what they're trying to do from an AI point of view. And you can see that we can actually enable some of the core elements of AI with our embedded FPGA and S3 today in the consumer space. It's actually it's fairly broad.
We can see maybe consumer revenue faster because the markets tend to move faster, but the real target behind that initiative that we pulled together those particular ecosystem partners was more IoT and industrial IoT.
Okay, great. Helpful. I'll leave it at that. Thank you guys.
Thanks, Digi.
Thank you.
Thank you. Our next question comes from Richard Shannon with Craig Hallum.
Hi, Brian and Sue. Thanks for taking my questions as well. I thought I had a long list of questions prepared before the call and I certainly added quite a bit to those. So, I'll try to restrain myself at least the first time through the queue here. Maybe just a quick housekeeping question for Sue, any way you can quantify or describe the S3 revenues in the first quarter as well as display bridge revenues?
Okay. So we normally do not break down to that level of detail. So for from the quarter Q1, I would say, I would say the $100,000 in terms of EOs, display bridge will be under $1,000,000.
Okay. That is helpful. Wanted to ask quickly on the second quarter guidance. You had a lot of moving parts there. I think Suji asked some questions that kind of break down some of the pieces.
Wondering maybe, Brian, if you want to characterize how much loss revenues might be because of the various issues here, the Amazon Alexa delay in qualification, the packaging issue and other things there. Any way you can quantify how much all that adds up to in any way?
Yeah. If we look back to the last call that we had and where we thought we would be with Q2 revenue, we were assuming the Amazon spec would be out by then these customers would actually be taking product from us in Q2. So I think if you add up the net of those 2, I would say it's over 500,000 probably slightly less than a $1,000,000 in terms of revenue impact somewhere in
that range
from what we were thinking at the beginning of the year.
For Q2.
Okay, perfect. That's very helpful. Before we get to a quick AI, I did want to ask one question. I think you mentioned that you're I don't want to put words in your mouth, so please correct me here. You're working with TSMC on embedded FPGA.
Can you talk a little bit about what's going on there? I think you said you're qualified at some older nodes and getting some more leading edge ones I know that they have at least one other embedded FPGA partners, so maybe you can couch it in terms of what they might be bringing you in for relative to what they already have.
Sure. So to be clear, what we said is we're porting our FPGA into a TSMC process. How closely we work with TSMC directly, we don't really discuss, and it's probably not appropriate for this call, given we have NDAs with our partners. That being said, we do want to port into TSMC for a more aggressive note because they are the largest in the world by terms of market share and it just makes sense that we would go do that, which just augments our what I feel is a nice offering foundries where our competitors don't really exist. You asked a question about where we run a TSMC today.
We actually have devices and architecture that runs at TSMC with our FPGAs on, 0.35 micron. We have the ability to do quarter micron. So this would be an additional note to those that's more recent than those.
Okay, perfect. Let's hear maybe 1 or two questions here on QuickAI. Maybe I'll just ask a very simple high level question, especially Brian relative to your commentary about easing entry into market here. Any way you can discuss what timeframe you could expect to see, revenues emerging here, maybe discuss if you have any examples or early test cases of people or partners trying to move in move through design in and production. What could we expect there over the next few to several quarters?
Yes, it's a good question. So a lot of the knowledge that we have about these markets is coming from our ecosystem partners at this point as we just start to put together the go to market strategy in detail with them. From what we know these types of markets can generally do a design in around 6 months to get to the point where you're actually at that data collection stage where you can start collecting data and building the models by which you're going to deploy the AI. So I think from a revenue point of view for us, you can imagine that you can start to see design wins being announced from us towards the end of the year. If you look at that 6 month horizon, and then it would be a revenue contributor starting from 2019.
And that's what we're planning on internally.
Okay. Do you have design wins in process right now?
We don't have design wins in process, but we do have some early engagements, again, on behalf of the partners that were already in the space that we are engaging with.
Okay. Maybe last question for me and I'll jump out of line here. As I was doing research related to QuickAI after you announced it last Friday morning, I noticed that general vision has had partnered with, to some degree with STMicro is obviously a very large microcontroller company. Looks like they have elected to work with you, presumably having a lower power product to work there. Maybe if you can discuss the partnership and why you've reached out to all these players specifically and maybe why they've chosen you as well, understand kind of the fit and fit to each other as well as to the end applications?
Sure. So first I won't speak directly for general vision, but I'll just give you what the ecosystem in general has talked about and what we see moving forward. And I think I'll answer your question related to ST. So if you go back in time from before Friday, The way people would put together these types of endpoint applications is they would choose a microcontroller. They choose a software operating system, some sensors.
And then they'd have to pick how they go to market with AI. That could be from hiring data scientists. You could contract business to SensiML or these types of people. What we know in the case of the general vision neurons and in particular, the implementation with the NEPAZ Chip is that you need a programmable logic device to connect the NEVUS chip into the system with the microcontroller. So that means if you want to deploy neurons, you also need to buy a market finchiller and an FPGA.
So the other thing I'll say is that we found this out just by virtue of having these technical press briefings on our launch. One of the guys that we were talking to said, wow, this is amazing. You guys are actually doing this on the same ship because I just got done talking to NXP. Their AI strategy is to run software on an MCU. You've actually got some hardware blocks that you can optimize for lower power to offload the MCU.
And accelerate the function. And he was dead right. So if you think about it now your question, why would somebody use QuickLogic or what value does the ecosystem C with QuickLogic. They can see that if you want to deploy hard neurons using that approach, you need ANFPJ, you need to be a microcontroller. S3 gives you that in the same chip.
Annie gives it to you a lower power and we have hardware accelerators for certain functions like feature extraction or sensor data acquisition through our FPGA and through our FFE. So it's a really nice tie into our core value proposition that we can grow from together. And the fact that we have the M4 MCU means that if people are used to writing software for general purpose microcontroller, be it NXP or SP or whoever, imagine SensiML porting that down into our S3. That's a very straightforward way to do that because it's leveraging all of the developments we've done on S3 with our open platform. So now we're starting to see the fruits of that labor where initially we were designing it for the consumer market.
Now we can actually take that into other markets and have other people put their soft on the platform as well. Hope it answers your question.
That was very helpful. I've asked a lot enough questions. I think I'll bottom line, but thanks for all the detail. I appreciate it, Brandon.
Our next question comes from Rick Meaton with River Shore Investment.
Hi, Brian. Hi, Sue. I have one question. For the last 2 midyear conference calls. You've stated confidence that you'll have a strong second half what's different about this year?
What data point can you again share with us that make your confidence in a strong second half and meeting or exceeding your CAGR goal more probable this year than in the past, too? Thank you.
Sure, Rick. So let's compare this quarter to a year ago to answer that question. If we look at where we were with mass production shipments of EOS S3. I think today is the first time that I can say that a brand company neighbor, the Google of South Korea, has actually shipped a product to an end consumer with an EOS S3. Not only is that revenue, that's validation from a big company that they bet their product on QuickLogic.
And I think that once we've gotten out over that threshold of a brand new guy taking a product two market, not just the design win, but actually shipping in production to the end consumer. Now we've arrived from an EOS S3 point of view. And we're building out that momentum. And as far as the funnel goes, we see our funnel now is way more diverse than it was a year ago. Last year, it was very heavily concentrated on this Tier 1 smartphone, doing the wearable and a couple of smartphone designs.
This year, it's very diverse to the extent that I don't think there's a single opportunity that's close to 10% of that total revenue target. So it's way more diversified than it was in the past. The fact that we actually could talk now about smartphone win and revenue with this MOU with this Japanese company, we weren't talking about you with that company last year, where it's been bringing up with that company and trying to prove that this actually does what we say it does. And now we're there. And then the last thing say is we've talked publicly about last year being this year of building out the tool and the infrastructure for the embedded FPGIP licensing.
This year, we have provided that tool to people and we can take that that discussion to the next level where they're actually evaluating to make a decision, not waiting for a tool to run. And then layering on top of all that, we talked about AI and how it's probably going to be a revenue contributor in 2019. That's from a device point of view. But I can guarantee you that as we learn more about the FPGA use cases in those systems, we can now take that as messaging back into of these other companies that were interested in licensing E and PGA and how that could enable and bring more value to them. So it's a very fulfilling reverse of a cycle that we're now going through with these engagements.
And that all of that in total is what gives me this confidence on the growth.
Okay. Thank you, Brian. I appreciate it.
Thanks, Rick.
Conclude the question and answer portion of today's call. I would now like to turn the call back over to management for any closing remarks.
Thank you, operator. We will be participating at the following investor and industry events. The 15th annual Craig Hallum institutional investor conference in Minneapolis, Minnesota on May 30th. Cowen's 46th annual TMT Conference in New York on May 31st, the Roth London Conference on June 20th. The Design Automation Conference or DAC in San Francisco, June 24th to 28th.
And the Sensors Expo And Conference in San Jose, June 26 to 28. Our next conference call is scheduled for Wednesday, August 8th, at 2:30 pm Pacific Time. Thank you for your continued support and goodbye.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect and have a wonderful day.